ROYAL GOLD, INC. (NASDAQ:RGLD) (together with its
subsidiaries, “Royal Gold” or the “Company”) is pleased to report
that the Peak Gold, LLC joint venture (“Peak Gold”), of which our
Royal Alaska, LLC subsidiary ("Royal Alaska") owns a 40% interest,
has completed a Preliminary Economic Assessment (“PEA”)1 on the
Peak Gold Project (the “Project”) located near Tok, Alaska. The PEA
presents a robust open pit mining operation with attractive
economics at base case gold and silver prices. All results
presented herein are on a 100% Peak Gold basis.
PEA Highlights
Highlights of the PEA results, assuming base case metal price
parameters of US$ 1,250 per ounce of gold and US$ 17.00 per ounce
of silver, include:
- Pre-tax NPV5% of US$ 393 million and
IRR of 37.0%;
- After-tax NPV5% of US$ 283 million and
IRR of 29.1%;
- Mine life of 8 years with a 24-month
pre-production period;
- 9.3 million tonnes processed at an
average grade of 3.99 g/t gold and 11.7 g/t silver;
- Average metallurgical recoveries of
91.6% for gold and 57.0% for silver;
- Life of mine recovered gold of 1.093
million ounces and 1.996 million ounces of silver;
- Life of mine strip ratio of 3.9 tonnes
of waste to tonnes of material processed;
- Life of mine total cash cost of US$ 428
per ounce of gold recovered, and US$ 470 per ounce of gold
recovered including sustaining capital;
- Life of mine capital cost of US$ 340
million, consisting of US$ 294 million of initial development
capital, and sustaining capital and closure costs of US$ 46
million; and
- After-tax payback period for initial
development capital of approximately 2 years.
The PEA was prepared by JDS Energy and Mining Inc. (“JDS”) of
Vancouver, British Columbia, Canada.
“The results of the PEA are a significant milestone and show
that the Peak Gold Project is one of the most interesting emerging
gold projects in the United States,” commented Tony Jensen,
President and CEO of Royal Gold. “The combination of robust grade,
near-surface open-pit resource, and a large and prospective land
package located close to existing infrastructure, makes the Peak
Gold Project unique. Royal Gold is committed to this exciting
Project over the long term and will focus on opportunities to
realize the value of our interest in a manner more closely aligned
with our core business model.”
PEA Overview
The PEA considers a conventional truck and shovel open-pit
mining operation covering the North, Main and West Peak deposits,
feeding a 3,500 tonne per day processing plant with two-stage
crushing, grinding and a carbon in leach (“CIL”) recovery circuit,
with production of gold-silver doré bullion on site. The PEA is
based on an update of the mineral resource2 estimate for the Peak
and North Peak deposits previously announced by Royal Gold in our
June 2, 2017 press release.3
PEA Parameters and Economic Results
The main parameters and results of the PEA are summarized in the
following table:
Assumptions Gold price $/ounce $1,250 Silver
price $/ounce $17.00 Production Profile Mine life
years 8 Total tonnes milled million tonnes
9.3 Diluted gold grade g/t 3.99 Diluted silver
grade g/t 11.7 Mill throughput t/day
3,500 Gold recovery % 91.6 Silver recovery %
57.0 Recovered gold million ounces 1.093
Recovered silver million ounces 1.996 Average annual
gold production ounces/year 136,700 Average annual
silver production ounces/year 249,500 Operating Costs
Life of mine average total cash cost $/oz gold 428
Life of mine cash cost + sustaining cost $/oz gold
470 Capital Costs Pre-production capital cost $ million
294 Sustaining capital cost + Closure $ million
46 Project Economics Royalties % of NSR 5.75
Alaska State Tax / Federal Tax % 9.4% / 21% Pre-Tax:
NPV5% $ million 393 IRR % 37.0 Payback
period years 1.5 Post-Tax: NPV5% $ million
283 IRR % 29.1 Payback period years
2.0
Economic Sensitivities
Sensitivity of the estimated post-tax NPV5% to changes to
significant value drivers is shown below:
Parameter
varied:
Post-Tax NPV5% ($ million) -20%
-10%
PEA BaseCase
+10% +20% Gold price 129 206
283 358 433 Capital cost 348
315 283 250 217 Operating cost
327 305 283 260 236
Mineral Resource
The PEA is based on the resource estimate prepared by
Independent Mining Consultants, Inc. and reported by Royal Gold on
June 2, 2017. The resource estimate was updated using operating
costs, pit slope estimates and metal recoveries consistent with the
PEA parameters in September of 2018, resulting in a revised
resource estimate, which is summarized in the table below:
ResourceClassification
Tonnes Grade Contained Metal (000)
Gold(g/t)
Silver(g/t)
Copper(%)
Gold
(000ounces)
Silver(000ounces)
Copper(M lb)
Measured (M) 473 6.39 16.71 .148
97.1 254.0 1.5 Indicated (I) 8,728 3.96
14.06 .153 1,110.9 3,944.8 29.5
Total M + I 9,201 4.08 14.19 .153
1,208.1 4,198.8 31.0 Inferred 1,344
2.69 16.06 .151 116.4 694.1
4.5
The estimates of measured and indicated resources assumed metal
prices of $1,400 per ounce gold and $20.00 per ounce silver for
development of the pit shell. The cutoff grades used to define
resources were 0.74 g/t gold equivalent for the Main Peak deposit
and 0.66 g/t gold equivalent for the North Peak deposit.
Capital Costs
The PEA is based on a capital cost summary with an estimated
accuracy of +/- 30%, which is shown in the table below:
Capital Item Pre-Production
($ million)
Sustaining
($ million)
Total
($ million)
Mining 28.8 9.1 37.9 Site Development
4.9 - 4.9 Crushing and Reclaim 8.5 0.5
9.0 Tailings Management 8.9 20.3 29.2
Processing Plant 54.8 2.5 57.3 Infrastructure
56.3 5.0 61.3 Project Indirects 45.0
0.1 45.1 Engineering and Project Management
16.1 - 16.1 Owner’s Costs 21.5 -
21.5
Subtotal 244.8 37.4
282.2 Contingency 49.0 - 49.0 Closure
- 8.4 8.4
Total Capital
293.8 45.8 339.6
Pre-production capital reflects the required investment to
develop the Project through to production. Sustaining capital is
for the entire life of mine and includes equipment, spare parts,
expansion of the tailings management facility, water management and
closure costs.
Mining
The PEA assumes conventional open pit truck and shovel mining,
and production designed to achieve a processing rate of 3,500
tonnes per day. The average mining rate assumed by the PEA is
15,000 tonnes per day of total material mined, with a maximum of
22,000 tonnes per day occurring in years 3 through 6.
The mine design assumed by the PEA will consist of two pits,
with a mining sequence intended to maximize grade in the early
years, reduce stripping requirements and maintain the processing
facility at full production capacity. Operations would begin at the
North Peak deposit and transition in year three to a single pit
comprising the Main and West Peak deposits for the remainder of the
mine life.
The primary owner-operated diesel mine fleet is designed to
consist of 64 tonne capacity haul trucks, 7.0 m3 front shovels, a
7.0 m3 front end loader and 127 mm diameter drills. The ancillary
mine fleet would consist of track dozers, graders, wheel dozers and
water trucks.
Processing
The PEA assumes mineralized material would be processed using a
two-stage crushing circuit, a two-stage grinding circuit, and a CIL
circuit. Run of mine material would be fed to a primary jaw
crusher, after which oversize material would be fed to a secondary
cone crusher. Fine mill feed would report to a primary rod mill to
be mixed with cyanide, cement and milk of lime. The feed mixture
would then proceed to a secondary ball mill, after which it would
enter a grinding thickener followed by a five-stage
leach/adsorption circuit. Gold and silver would be recovered from
the leach solution and smelted in an induction furnace to produce
doré bullion.
The PEA assumes CIL tailings would be pumped to a tailings
thickener to remove process water and recover free cyanide for
reuse in the plant. Thickened tailings would be detoxified and then
pumped to the tailings management facility (“TMF”) for storage. The
TMF would be lined with a synthetic geomembrane liner and would
have foundation and underdrain systems to minimize and control
potential seepage. The tailings embankment would be raised
continuously over the mine life and would be designed to allow
capacity for future expansion, if required.
Project Infrastructure
The PEA assumes general infrastructure for the Project would
support operations on a 24 hour per day, seven day per week basis.
Major infrastructure items would include:
- Site access road connecting to the
Tetlin Village road and the Alaska Highway, with upgrades to the
existing site access road over a 10-kilometer distance;
- Haul roads for waste and mill feed
materials sized to accommodate 65 tonne trucks;
- Maintenance, warehouse, administration,
laboratory, security and first aid buildings;
- Plant facilities, including the
crushing and grinding circuit, conveying equipment, and
refinery;
- Ancillary facilities, including a truck
shop, explosives storage and fuel storage;
- Power line from Delta Junction to a
site substation (approximately 160 kilometers) to supply a total
connected load of 8 MW;
- Camp accommodations in Tok for the
portion of the workforce that does not come from Tok, Tetlin and
the surrounding areas;
- Water supply and management system to
minimize water discharge from the site;
- Lined TMF, constructed with an initial
capacity for two years of tailings, with staged construction in
subsequent years to increase storage capacity as required; and
- Waste rock storage areas to allow
segregation of waste depending on its characteristics.
Operating Costs
The PEA is based on assumed life of mine operating costs by
activity area, as shown in the table below.
Operating Costs $/tonne
Processed $/ounce Gold Mining 14.91
127 Processing 21.58 184
G&A 7.73 66 Royalties
8.58 73 Refining 1.10 9
By-product Credits (3.64) (31)
Total
Cash Cost 50.26 428
Sustaining Capital + Closure 4.92 42
Cash Cost + Sustaining Capital 55.18
470
Under the mineral lease for the Project, Peak Gold would pay a
production royalty based on net returns of mineral production from
the lease area. The production payment rates under the lease for
precious metals are currently 2.25% of net returns for the first
four years of production, 3.25% of net returns for years five
through seven inclusive, and 4.25% of net returns for year eight
and any following years. These royalty rates can be increased at
the option of the royalty holder to 3.0%, 4.0% and 5.0%,
respectively, with the payment of an additional $150,000, $300,000
and $400,000 to Peak Gold for each respective royalty period,
before July 15, 2020.
In addition, Peak Gold would pay a royalty to Royal Gold at a
rate of 3.0% of net smelter returns on mineral production from the
lease area underlying the project considered in the PEA.
Permitting
Peak Gold holds the required permits and approvals to continue
exploring the areas comprising the Project. The collection of
baseline water quality data, material characterization analysis and
wetlands determination has progressed since 2012. A more
comprehensive baseline data collection program is being
contemplated for 2019.
Project Enhancement Opportunities
Several opportunities have been identified that could enhance
the project considered by the PEA, including:
- Expansion of the mine through
delineation or development of additional mineral resources;
- Pit slope steepening to improve the
assumed waste to mill feed strip ratio;
- Optimization of the assumed mine plan
and development schedule; and
- Potential recovery of copper.
About Peak Gold
Peak Gold is a joint venture between Royal Alaska and CORE
Alaska, LLC (“CORE Alaska”), a wholly-owned subsidiary of Contango
ORE, Inc. Peak Gold holds a 675,000 acre lease with the Native
Village of Tetlin and an additional 175,000 acres of State of
Alaska mining claims, all located near Tok, Alaska, on which Peak
Gold explores for minerals. Royal Alaska holds a 40% membership
interest in Peak Gold and is the manager of the joint venture. CORE
Alaska holds a 60% membership interest in Peak Gold. Royal Gold
also holds a 13.2% equity interest in Contango ORE, Inc., and
royalties of 3.0% of net smelter returns on mineral production from
the lease and certain State of Alaska mining claims held by Peak
Gold and 2.0% of net smelter returns from certain other State of
Alaska mining claims held by Peak Gold.
About Royal Gold
Royal Gold is a precious metals stream and royalty company
engaged in the acquisition and management of precious metal
streams, royalties, and similar production-based interests. As of
September 1, 2018, the Company owns interests on 191 properties on
six continents, including interests on 40 producing mines and 18
development stage projects. Royal Gold is publicly traded on the
Nasdaq Global Select Market under the symbol “RGLD.” The Company’s
website is located at www.royalgold.com.
Cautionary “Safe Harbor” Statement Under the Private
Securities Litigation Reform Act of 1995: With the exception of
historical matters, the matters discussed in this press release are
forward-looking statements that involve risks and uncertainties
that could cause actual results to differ materially from
projections or estimates contained herein. Such forward-looking
statements include: statements about the PEA presenting a robust
open pit mining operation with attractive economics at base case
gold and silver prices; statements about highlights of the PEA
results summarized in this press release regarding assumed gold and
silver prices, after tax NPV, mine life, tonnage, grade, average
metallurgical recoveries for gold and silver, life of mine
recovered gold and silver, life of mine operating cash cost per
ounce of gold recovered, per ounce of gold recovered including
sustaining capital, life of mine capital cost, consisting of
initial development capital, sustaining capital and closure costs,
and after-tax payback period for initial development capital;
statements about the PEA results being a significant milestone and
showing that the Peak Gold Project is one of the most interesting
emerging gold projects in the United States; statements about
robust grade, near-surface open-pit resource, and a large and
prospective land package located close to existing infrastructure,
making the Peak Gold Project unique; statements about Royal Gold
being committed to this exciting Project over the long term and
focusing on opportunities to realize the value of our interest in a
manner more closely aligned with our core business model;
statements about the main parameters and results of the PEA
summarized in this press release regarding assumed gold and silver
prices, production profile, mine life, total tonnes milled, diluted
gold and silver grade, mill throughput, gold and silver recovery,
recovered gold and silver, average annual gold and silver
production, operating costs, life of mine average total cash cost,
life of mine cash cost plus sustaining cost, pre-production capital
cost, sustaining capital cost plus closure cost, project economics,
royalties, Alaska State tax and Federal tax, pre-tax NPV, IRR and
payback period, post-tax NPV, IRR and payback period; statements
about sensitivity of estimated post-tax NPV to changes to
significant value drivers, including gold price, capital cost and
operating cost; Estimates of measured, indicated and inferred
resources for the Peak Gold Project and assumed metal prices for
gold and silver used to develop the pit shell, and cut off grades
used to define the resource for the Main Peak and North Peak
deposits; and statements about the PEA being based on a capital
cost summary with an estimated accuracy of +/- 30%; and statements
about mining, processing, project infrastructure, operating costs,
permitting and project enhancement opportunities. Like any joint
venture or other interest on a non-producing or
not-yet-in-development project, our interests in the Peak Gold
Project and the results in the PEA and related statements are
subject to numerous and substantial risks, such as the ability of
an operator to progress the project successfully to feasibility,
develop the project into a mine and bring the project into
production and operate in accordance with feasibility studies, and
the ability of Royal Gold to obtain value for its interest in the
Peak Gold Project. Additional factors that could cause actual
results to differ materially include, among others, precious metals
and copper prices; the ability to find an operator to develop the
project and finance project construction to completion and bring
the project into production as expected; operator’s delays in
securing or inability to secure necessary governmental permits;
decisions and activities of the operator of the project;
unanticipated grade, environmental, geological, seismic,
metallurgical, processing, liquidity or other problems the operator
may encounter; completion of feasibility studies; changes in the
operator’s project parameters as plans continue to be refined;
changes in estimates of reserves and mineralization by the
operator; risks associated with conducting business on Tribal lands
; changes in laws governing the project; and other subsequent
events; as well as other factors described in the Company’s Annual
Report on Form 10-K, Quarterly Report on Form 10-Q, and other
filings with the Securities and Exchange Commission. Most of these
factors are beyond the Company’s ability to predict or control. The
Company disclaims any obligation to update any forward-looking
statement made herein. Readers are cautioned not to put undue
reliance on forward-looking statements.
1 The results of the PEA are preliminary in nature
and are based on various assumptions. These assumptions may be
affected by environmental, permitting, geological, metallurgical,
legal, title, taxation, socio-political, market or other relevant
factors, including changes in metal prices. In addition, no
decision has been made by Peak Gold to proceed with the mine plan
described in the PEA. A decision to proceed with the mine plan
would require further economic and resource study. No decision has
been made by Peak Gold to proceed with a further economic and/or
resource study. Accordingly, there is no certainty that the results
of the PEA will be realized even if Peak Gold decides to proceed
with the mine plan described in the PEA at any point in the future.
2 The PEA was prepared in accordance with Canadian National
Instrument 43-101 (NI 43-101). The terms “mineral resource”,
“measured mineral resource”, “indicated mineral resource” and
“inferred mineral resource” as used in the resource estimate, the
PEA and this press release are Canadian mining terms as defined in
accordance with NI 43-101. The U.S. Securities and Exchange
Commission (SEC) does not recognize these terms. “Resources” are
not reserves under the SEC’s regulations but are categorized under
the securities laws regulations of various foreign jurisdictions
(including NI 43-101), in order of increasing geological confidence
into “inferred resources”, “indicated resources”, and “measured
resources”. Investors are cautioned that resources cannot be
classified as mineral reserves unless and until further drilling
and metallurgical work is completed, until other economic and
technical feasibility factors based upon such work have been
resolved and it is demonstrated that they may be legally and
economically extracted and produced, and, as a result, investors
should not assume that all or any part of the mineralized material
in any of these categories referred to in the resource estimate,
the PEA and this press release will ever be converted into mineral
reserves. In addition, the SEC normally only permits issuers to
report mineralization that does not constitute mineral reserves as
in-place tonnage of mineralized material and grade without
reference to unit amounts of metal. 3 The “Main Peak” and
“West Peak” deposits were previously referred to as the “Peak”
deposit in the June 2, 2017 resource estimate.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20180924005241/en/
Royal GoldAlistair Baker, 647-749-8204Director, Business
Development
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