In the news release, "OceanaGold announces robust economics from
Haile Preliminary Underground Study" disseminated earlier today at
04:00e, please note that changes were made in the release. Below is
the updated and final version . The complete, corrected release
follows:
OceanaGold announces robust economics from Haile Preliminary
Underground Study
/NOT FOR DISSEMINATION OR DISTRIBUTION IN THE UNITED STATES AND NOT FOR DISTRIBUTION TO
US NEWSWIRE SERVICES./
(All financial figures in US Dollars unless otherwise
stated)
MELBOURNE, Sept. 6, 2016
/CNW/ - OceanaGold Corporation (TSX/ASX/NZX: OGC) (the
"Company") is pleased to announce the results of its recently
completed Preliminary Economic Assessment ("PEA") on a potential
underground operation at the Haile Gold Mine.
Key Highlights of the Haile Underground PEA
1
- After-tax, undiscounted cash flows of US$861 million based on an open pit with
incremental underground cash flows beginning in 2019.
- After-tax IRR improvement of approximately 40%, based on
previous NI 43-101 Technical Report economics and incremental
impact of the underground at a $1,250
per ounce gold price.
- Payback period of 3 years on underground capital
expenditure.
- Average annual production of 80,000 to 100,000 ounces of gold
from the underground (2019 to 2025) to complement approximately
150,000 ounces of annual gold production from the open pit (2017 to
2030).
- Estimated LOM All-In Sustaining Costs of US$554 per ounce with open pit and incremental
impact from underground.
"I am pleased to report the results of the Haile underground PEA
that demonstrates the technical viability of an underground
operation with strong economics that has the potential to
complement the current plan for the Haile Gold Mine," said
Mick Wilkes, President and CEO. "We
are now working on the optimisation study which will incorporate
the results of the Haile underground PEA and the extensive drilling
data that we have collected this year. The optimisation study will
determine the optimal mine design for both the open pit and
underground while utilising updated commodity assumptions for
reserves. We expect this study to be completed by the middle of
next year."
The purpose of the Haile underground PEA was to determine
whether an underground mining operation at Haile is viable, and can
be done concurrently with the existing open pit life of mine plan,
which is based on existing mineral reserves. The PEA is modelled on
mineralisation located beneath the open pit reserves (Figure 1),
almost all of which is included within the open pit resources
reported by the Company in the Haile NI 43-101 Technical Report
dated October 13, 2015 ("2015
Technical Report").
The open pit resources in Horseshoe, Mustang and Mill Zone Deeps
areas have all been re-evaluated as underground targets (Figure 1),
representing 95% of the underground mineralisation evaluated in the
PEA. Their individual resource contributions are presented in Table
1. The remaining 5%, totalling approximately 45,000 ounces of gold
and located beneath the Horseshoe open pit resource, is in addition
to the open pit resources presented in the 2015 Technical
Report.
The results of the Company's extensive drill program at Haile in
2016 have not been included in the PEA.
Table 1 – Inferred
Resource above cut-off grade
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kt
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g/t
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koz
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Horseshoe
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3,680
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5.45
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645
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Mustang
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768
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4.49
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111
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Mill Zone
Deep
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306
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5.02
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49
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Total
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4,755
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5.27
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805
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Notes:
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- Resources constrained to volumes expanded around
underground design volumes.
- Based on an underground cut-off grade of 1.3 g/t
Au.
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The focus of the Haile underground PEA has been on identifying
potential mining methods, a high-level capital and operation cost
estimate and potential cash flow generation. In addition, the
Company has included a high-level review of plant modifications
required to increase throughput rates from 6,350 to 8,274 tonnes
per day (7,000 to 9,120 short tons per day).
Open stoping with rock backfill was chosen as the most
appropriate mining method, on the basis of relatively high recovery
and productivity and low cost. Mining has been assumed to progress
bottom-up with the design including a sill pillar at the mid-point
of the Horseshoe resource and two concurrent mining phases at
Horseshoe. The upper limit of the Horseshoe deposit is
approximately 150 metres below surface and has a vertical extent of
about 280 metres (Figure 2). For Mustang, mining (not including
declining for access) commences 300 metres below surface and
extends 80 metres vertically, while for Mill Zone Deeps, mining
commences 150 metres below surface, at the base of the Mill Zone
pit, and extends 55 metres vertically. Importantly, mining of
the underground mineralisation as stipulated by the PEA, would not
impact mining of the open pit reserves as set out in the 2015
Technical Report.
The Company expects that mill feed will be a blend of open pit
and underground material and would require a plant expansion from
6,350 to 8,274 tonnes per day (7,000 to 9,120 short tons per day).
The incremental mill feed of 1,924 tonnes (2,120 short tons) would
be sourced predominately from underground ore.
The Company expects that a modification to Haile's mining permit
would be required before commencement of underground
operations.
The Haile underground PEA is based on inferred resources only
and as such, the economic analysis which assumes the start of the
underground development in the first quarter of 2018 is only
preliminary. Nevertheless, the PEA demonstrates robust economics
that support further investigation of an underground operation to
complement the open pit. The Company has commenced an optimisation
study to determine an optimised plan for combined open pit and
underground mines at Haile.
Based on the PEA, the total pre-production capital expenditure
required for underground development and the procurement of
underground equipment would be approximately $53 million with life of mine sustaining capital
cost requirements of approximately $45
million (Table 2).
Table 2 – Capital
Cost Estimates – Underground
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USDm
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Pre-Production
Capex
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LoM Sustaining
Capex
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Total
Capex
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Mining
Equipment/Assets
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33.0
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8.7
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41.7
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Mine
Development
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20.1
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26.3
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46.4
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Equipment
Rebuilds
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–
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9.5
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9.5
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Capital
Costs
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53.1
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44.5
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97.6
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Table 3 –
Operating Costs - Underground
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Description
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US$/t UG
Processed
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LoM
(USDm)
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Mining Costs
including Sustaining Capex
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30.80
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133.5
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Processing Costs (UG
tons only)
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10.58
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45.8
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G&A
Costs
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7.89
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34.2
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Total
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49.27
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213.5
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With the completion of the PEA, the Company will update its 2015
Technical Report to include the results of the PEA in a new section
24 named "Other Relevant Data and Information". The Company
expects the updated technical report to be released within 45
days.
In the meantime, the optimisation study will focus on enhancing
the Net Present Value of the entire Haile project through potential
modifications to the open pit design, incorporation of an
underground mine and upgrade to the Reserves and Resources based on
the extensive drilling carried out in 2016 coupled with the use of
higher gold price assumptions to reflect current market conditions.
Upon completion of the optimisation study, which is expected in the
middle of 2017, the Company expects to provide a more comprehensive
technical update on the Haile Gold Mine.
Competent / Qualified Persons Statement
This release was prepared in accordance with the standards set
out in the 2012 Edition of the 'Australasian Code for Reporting of
Exploration Results, Mineral Resources and Ore Reserves' ("JORC
Code") and in accordance with National Instrument 43-101 –
Standards of Disclosure for Mineral Projects of the Canadian
Securities Administrators ("NI 43-101"). The JORC Code is the
accepted reporting standard for the Australian Stock Exchange
Limited ("ASX") and the New Zealand Stock Exchange Limited
("NZX").
Information relating to Haile underground PEA in this document
has been verified by, is based and fairly represents information
compiled by or prepared under the supervision of Joanna Poeck, a Registered Member of the Society
for Mining, Metallurgy and Exploration and an employee of SRK
Consulting (U.S.) Inc., as well as Jonathan
Moore, a Member and Chartered professional with the
Australasian Institute of Mining and Metallurgy and an employee of
OceanaGold. Both J. Poeck and J. Moore have sufficient experience
that is relevant to the style of mineralisation and type of deposit
under consideration and to the activity being undertaken to qualify
as a Competent Person as defined in the JORC Code and both are
Qualified Persons for the purposes of the NI 43-101. Ms. Poeck and
Mr. Moore consent to the inclusion in this release of the matters
based on their information in the form and context in which it
appears.
Assumptions relating to Production Targets and Forecast
Financial Information derived from Production Targets
The production targets appearing in this release are based on
the rate assumptions shown in table below:
Production Rates (1)
Activity
Type
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Dimensions
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Rate
(1)
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Main Ramps –
1st year of mining (single headings)
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16 ft x 18
ft
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18.1 ft/d
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Main Ramps –
subsequent years (single headings)
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16 ft x 18
ft
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21.4 ft/d
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Level Development
(single headings)
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16 ft x 18
ft
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21.6 ft/d
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Drifting top/bottom
stope accesses (multiple headings)
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15 ft x 15
ft
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43.4 ft/d
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Stoping
(2)
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-
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2,864 st/d
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Raisebored
Raise
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16 ft
diameter
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13.3 ft/d
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Slot
Raises
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13 ft x 13
ft
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32.8 ft/d
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Other mass
excavations
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-
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9,464
ft3/d
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Backfilling
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-
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52,972
ft3/d
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(1)
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All rates are
per face. Multiple areas/faces are mined together to generate the
production schedule.
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(2)
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Includes slot,
drilling, blasting, and mucking.
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Source: SRK,
2016
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A delay of seven days was used prior to driving on cemented rock
fill ("CRF") and a 14-day delay prior to mining adjacent to a CRF
filled stope. The mining operation schedule is based on 365
days/year, 7 days/week, with two 12 hour shifts each day. A
production rate of 2,120 st/d was targeted with ramp-up to full
production as quickly as possible.
The indicative economic results shown in this release are based
on the following market prices:
Gold (US$/oz) $1,250
Silver (US$/oz) $20
About OceanaGold
OceanaGold Corporation is a mid-tier, low-cost, multinational
gold producer with assets located in the
Philippines, New Zealand
and the United States. The
Company's assets encompass its flagship operation, the Didipio
Gold-Copper Mine located on the island of Luzon in the Philippines. On the north island of
New Zealand, the Company operates
the high-grade Waihi Gold Mine while on the south island of
New Zealand, the Company operates
the largest gold mine in the country at the Macraes Goldfield which
is made up of a series of open pit mines and the Frasers
underground mine. In the United
States, the Company is currently constructing the Haile Gold
Mine, a top-tier asset located in South
Carolina along the Carolina Terrane. The Company expects the
Haile Gold Mine to commence commercial production in early 2017.
OceanaGold also has a significant pipeline of organic growth and
exploration opportunities in the Australasia and Americas
regions.
OceanaGold has operated sustainably over the past 25 years with
a proven track record for environmental management and community
and social engagement. The Company has a strong social license to
operate and works collaboratively with its valued stakeholders to
identify and invest in social programs that are designed to build
capacity and not dependency.
In 2016, the Company expects to produce 385,000 to 425,000
ounces of gold from the combined New
Zealand and Didipio operations and 19,000 to 21,000 tonnes
of copper from the Didipio operation at All-In Sustaining Costs of
US$700 to US$750 per ounce.
Cautionary Statement for Public Release
Certain information contained in this public release may be
deemed "forward-looking" within the meaning of applicable
securities laws. Forward-looking statements and information relate
to future performance and reflect the Company's expectations
regarding the feasibility of an underground operation at Haile Gold
Mine Project, the generation of free cash flow, execution of
business strategy, future growth, future production, estimated
costs, results of operations, business prospects and opportunities
of OceanaGold Corporation and its related subsidiaries. Any
statements that express or involve discussions with respect to
predictions, expectations, beliefs, plans, projections, objectives,
assumptions or future events or performance (often, but not always,
using words or phrases such as "expects" or "does not expect", "is
expected", "anticipates" or "does not anticipate", "plans",
"estimates" or "intends", or stating that certain actions, events
or results "may", "could", "would", "might" or "will" be taken,
occur or be achieved) are not statements of historical fact and may
be forward-looking statements. Forward-looking statements are
subject to a variety of risks and uncertainties which could cause
actual events or results to differ materially from those expressed
in the forward-looking statements and information. They include,
among others, the accuracy of mineral reserve and resource
estimates and related assumptions, inherent operating risks and
those risk factors identified in the Company's most recent Annual
Information Form prepared and filed with securities regulators
which is available on SEDAR at www.sedar.com under the Company's
name. There are no assurances the Company can fulfil
forward-looking statements and information. Such forward-looking
statements and information are only predictions based on current
information available to management as of the date that such
predictions are made; actual events or results may differ
materially as a result of risks facing the Company, some of which
are beyond the Company's control. Although the Company
believes that any forward-looking statements and information
contained in this press release is based on reasonable assumptions,
readers cannot be assured that actual outcomes or results will be
consistent with such statements. Accordingly, readers should not
place undue reliance on forward-looking statements and information.
The Company expressly disclaims any intention or obligation to
update or revise any forward-looking statements and information,
whether as a result of new information, events or otherwise, except
as required by applicable securities laws. The information
contained in this release is not investment or financial product
advice.
SOURCE OceanaGold Corporation