Kaminak Gold Corporation (TSX VENTURE:KAM) is pleased to announce the results of
a Preliminary Economic Assessment (PEA) prepared pursuant to National Instrument
43-101 (NI 43-101) on the Company's 100% owned Coffee Gold Project (Coffee),
located 130km south of Dawson City, Yukon. The study indicates that Coffee
represents a robust, high margin, rapid pay-back, 11-year open pit mining
project at current gold prices. The study was prepared by JDS Energy & Mining
Inc., an established Yukon mine builder, under the direction of Fred Lightner
(Director of Mine Development, Kaminak) with contributions from Kappes Cassiday
and Associates, Knight Piesold and Co. and SIM Geological Inc. At a gold-price
of US$1250/oz and using an exchange rate of C$1.00 equal US$0.95, Coffee
generates a pre-tax net present value (NPV) at a 5% discount rate of more than
$500 million and an Internal Rate of Return (IRR) of 33%. Further, the mine
could become a significant Yukon gold producer, yielding close to 450,000 ounces
in the first two years and producing an average of 167,000 ounces annually over
the life of mine at an all-in sustaining cash cost of US$688 per ounce of gold.
Kaminak will be hosting a live video webcast presentation at 10:30am Eastern
Time (7:30am Pacific Time) on June 11, 2014 to discuss the results of the PEA.
To participate in the live webcast, please click the following link:
http://kaminak.com/investors/register/. For those who cannot participate, the
video webcast will be archived on Kaminak's website (www.kaminak.com) within 24
hours of the presentation.
The PEA envisages an owner-operated, approximately 11-year open-pit mine
targeting 53 million tonnes of primarily oxide facies material at an average
diluted grade of 1.23 grams/tonne gold (g/t Au). The study incorporates a
three-stage crushing circuit and a valley fill heap leach facility designed by
Knight Piesold and Co., along with a standard carbon adsorption gold recovery
plant to produce 1,859,000 ounces of gold dore over life of mine (LOM). It
should be noted that the study outlines several opportunities to further enhance
economics (see below) and the current resource remains open along strike and to
depth. Further, more than 20km of untested gold in soil anomalies remain to be
evaluated and Kaminak remains confident that additional near surface oxide
resources can be identified in the near term; drilling is ongoing.
Highlights (all amounts are in Canadian dollars unless otherwise indicated; base
case is stated using a gold price of US$ 1,250 per ounce and an exchange rate of
C$1.00 equal US$0.95):
-- NPV of $522 million at a 5% discount rate and an IRR of 32.8% before
taxes and mining duties, and an NPV of $330 million and an IRR of 26.2%
after taxes and mining duties
-- Mine life of 11 years with peak production of 231,000 ounces per annum
(Year 1) and average LOM production of 167,000 ounces of gold
-- Average metallurgical recoveries of 88% gold
-- 1,859,000 ounces LOM gold production at an average diluted grade of 1.23
g/t Au
-- All-in sustaining costs(i) of US $688/oz (including royalties) for LOM,
generating an Operating margin of over US $560/oz or 42%
-- Initial capital costs of $305 million (including a 15% contingency)
-- Payback of 1.8 years pre-tax and 2.0 years post-tax
-- Gross Revenue of $2.4 Billion and Operating Cash-flow of $1.24 Billion
(i) All-in Sustaining Costs are presented as defined by the World Gold
Council ("WGC") less Corporate G&A.
Eira Thomas, CEO commented: "The recently completed Coffee PEA has delivered a
high value, high margin, low risk gold project in one of the World's safest,
pro-mining jurisdictions, Yukon Canada, and marks a significant milestone for
our Company. At a US $1250 gold-price, Coffee will generate more than $2 billion
in gross revenue, deliver total life of mine, pre-tax, free cash of $800 million
and payback capital in under 2 years. Further upside to this evaluation is
anticipated through optimization studies and continued exploration. All of the
deposits in the current resource remain open along strike and to depth."
Fred Lightner, Kaminak's Director of Mine Development, stated: "With the
completion of the PEA, we now have an initial look at the economic potential of
the Coffee Project. The grade of the deposit and strip ratio, metallurgical
response, and relatively low operating costs are strong factors which create
value. We believe that with additional exploration, delineation drilling, and
project engineering the project will be further enhanced."
JDS Energy & Mining Inc. (JDS) was engaged by Kaminak Gold Corporation in 2013,
under the direction of Fred Lightner (Director of Mine Development, Kaminak) to
produce an independent Preliminary Economic Assessment (PEA) for the Coffee Gold
Project. A technical report following the guidelines of the Canadian Securities
Administrators' National Instrument 43-101 will be filed on SEDAR and on the
Company website within 45 days.
The reader is advised that the PEA summarized in this press release is intended
to provide only an initial, high-level review of the project potential and
design options. The PEA mine plan and economic model include the use of Inferred
resources. Inferred resources are considered to be too speculative to be used in
an economic analysis except as allowed for by Canadian Securities
Administrators' National Instrument 43-101 (NI 43-101) in PEA studies. There is
no guarantee that Inferred resources can be converted to Indicated or Measured
resources, and as such, there is no guarantee the project economics described
herein will be achieved.
PEA Summary (Reported in 2014 Canadian $, except where noted)
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Total Heap Leach Material Mined (tonnes) 53,400,000
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Average Diluted Grade of Heap Leach Material (g/t Au) 1.23
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Total Waste (tonnes) 212,000,000
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Strip Ratio (Waste : Heap Leach Material) 4.0
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Total Gold Contained (oz.) 2,111,000
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Total Au Produced (oz.) 1,859,000
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Gold Recovery (%) 88%
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Average Gold Production of Year 1 and 2 (oz. per year) 224,000
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Total Initial Capital Cost (including 15% contingency) $304,800,000
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Sustaining Capital (including 15% contingency) $145,500,000
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Total Life of Mine Capital (including 15% contingency) $450,300,000
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Unit Operating Costs (per tonne leached)
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Mining $11.86
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Processing $6.67
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General & Administrative $4.00
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Total Operating Costs $22.53
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Summary Economics at US$1250/oz. Gold:
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Total LOM Operating Cash Flow (C$M) $1246.3
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Total LOM Pre-Tax Free Cash Flow (C$M) $796.0
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Average Annual Pre-Tax Free Cash Flow (C$M) $72.0
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LOM Income Taxes (C$M) $280.8
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Total LOM After-Tax Free Cash Flow (C$M) $515.2
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Average Annual After-Tax Free Cash Flow (C$M) $46.6
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Discount Rate 5%
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Pre-Tax NPV (C$M) $522.4
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Pre-Tax IRR 32.8%
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Pre-Tax Payback (Yrs) 1.8
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After-Tax NPV (C$M) $330.4
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After-Tax IRR 26.2%
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After-Tax Payback (Yrs) 2.0
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US $(i) C $
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Cash Cost ($/oz) $613.15 $645.43
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Cash Cost Incl. Sustaining CAPEX ($/oz)(ii) $687.50 $723.69
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(i) Exchange rate of C$1.00 equal US$0.95 was used.
(ii) All-in Sustaining Costs are presented as defined by the World Gold
Council ("WGC") less Corporate G&A.
All in Cash Costs Including Sustaining Capex
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On-Site Mining & Rehandle (C$M) $610.0
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On-Site Processing (C$M) $343.2
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On-Site G&A (C$M) $205.8
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Refining (C$M) $14.7
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Royalties (C$M) $26.3
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Sustaining (C$M) $99.5
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Closure (C$M) $46.0
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Total (C$M) $1,345.5
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All-in Cash + Sustaining Cost (C$/oz)(i) $723.69
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All-in Cash + Sustaining Cost (US$/oz)(i) $687.50
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(i) All-in Sustaining Costs are presented as defined by the World Gold
Council ("WGC") less Corporate G&A. Exchange rate of C$1.00 equal US$0.95
was used.
The Base Case summarized above was selected and reported to take advantage of
the economies of scale that are realized with high production rates and to
demonstrate the project potential from the known resources. The base case
assumed an owner operated open pit mine, three-stage crushing circuit to nominal
12.5 mm, a valley fill heap leach facility, and a carbon adsorption gold
recovery plant to produce gold dore. Other assumptions include access to site
via an all-season road and power generation using diesel. Total installed power,
including process equipment and other site infrastructure is estimated to be 5.0
megawatts (MW). The average operating power demand is 3.6 MW. With additional
exploration and based on past performance, the possibility to expand the near
surface oxide resources exists.
Sensitivities:
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Gold Price US$/oz $1,000 $1,100 $1,200 $1,250 $1,300 $1,400 $1,500
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Pre-Tax NPV 5% C$M $165 $308 $451 $522 $594 $737 $880
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After-Tax NPV 5% C$M $99 $194 $285 $330 $375 $465 $553
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Pre-Tax IRR 15% 23% 30% 33% 36% 42% 48%
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After-Tax IRR 12% 18% 24% 26% 29% 33% 38%
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Pre-Tax Payback 4.4 3.2 2 1.8 1.6 1.4 1.2
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After-Tax Payback Yrs 4.7 3.5 2.5 2 1.8 1.6 1.4
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Opportunities to Enhance Value
Although Kaminak considers the PEA results for the base case excellent, future
trade off studies are anticipated to evaluate alternate development scenarios
that would be used to reduce the initial capital requirements. Such items as
coarser crushing or run-of-mine leaching coupled with high fragmentation
blasting in the mine, contract mining or mine equipment leasing, liquefied
natural gas (LNG) as a potential power generation fuel source and a staged
development of a smaller project followed by expansion, are a few of the
scenarios being considered. Moreover, Coffee has high potential for resource
expansion; the deposits in the current resource remain open along strike and to
depth, and more than 20 km of priority gold in soil anomalies outside of the
current resource area remain to be drill-tested.
PEA DETAILS
Mineral Resources:
The PEA is based on an Indicated and Inferred mineral resource estimate
completed by independent Qualified Person Robert Sim, P.Geo., of SIM Geological
Inc. and was derived from 961 diamond core and reverse circulation drill holes
completed from 2010 to 2013 for a total of 185,000 metres. This estimate
consists of 719,000 ounces Indicated (14 Mt grading at 1.56g/t Au), and
3,434,000 ounces Inferred (79 Mt grading at 1.36g/t Au) using base case cut-off
of 0.5 grams per tonne gold ("g/t Au") for Oxide and Transitional material and a
1g/t Au cut-off for Sulphide material. For further details, please see Company
press release of January 28, 2014
(http://kaminak.com/investors/news_releases/index.php?&content_id=539) and the
NI 43-101 Technical Report released March 12, 2014.
Capital and Operating Costs Summary:
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Pre-Prod Sust/Clsr
Capital Costs (C$M) (C$M) Total (C$M)
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Capitalized Mining $50.3 $0.0 $50.3
Pre-Prod Operating Costs $16.7 $0.0 $16.7
Site $57.1 $4.8 $61.9
Mining Equipment $46.3 $64.5 $110.8
Leach Facility $43.7 $17.2 $60.9
Crushing & Conveying $12.4 $0.0 $12.4
Camp $10.3 $0.0 $10.3
Indirects $37.0 $0.0 $37.0
Closure $0.0 $40.0 $40.0
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Subtotal $273.8 $126.5 $400.3
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Contingency 15% $31.0 $19.0 $50.0
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Total Capital Costs $304.8 $145.5 $450.3
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Operating Costs $/t Processed
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Mining $11.86
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Processing $6.67
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G&A $4.00
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Total Operating Costs(i) $22.53
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(i) The operating costs above are for the operational period only and do not
include capitalized operating costs during pre-production.
Mining
Coffee is amenable to development as an open pit (OP) mine as all mineralized
lodes commence at surface in all pits and pre-strip is limited to 1-2m of soil.
Mining of the deposit is planned to produce a total of 53.4 Mt of heap leach
feed and 212.4 Mt of waste (4.0:1 overall strip ratio) over a 13-year project
production life which includes two years of pre-production. The current LOM plan
focuses on achieving consistent heap leach production rates, and mining of
higher grade material early in the production schedule. The tonnage and
distribution of mined material is summarized below:
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Material Type Heap Leach Tonnage Mined Distribution (%)
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Supremo Oxide 39,100,000 73
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Supremo Upper Transition 1,200,000 2
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Latte Oxide 10,500,000 20
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Latte Upper Transition 700,000 1
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Double Double Oxide 1,200,000 2
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Kona Oxide 700,000 1
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Total 53,400,000 100.0
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Mine planning for Coffee was conducted using a combination of Mintec Inc.,
MineSight(TM) software and CAE NPV Scheduler (NPVS) software. Pit slopes range
from 37 degrees to 50 degrees as derived from a preliminary geotechnical
assessment completed by SRK Consulting (U.S.) Inc. A series of optimized shells
were generated for each of Supremo, Double Double, Latte and Kona deposits based
on varying revenue factors. Selected pits range from 75m depth (Kona) to 200m
depth (Supremo). Cut off grades for Oxide mineralization is 0.31g/t Au for
Supremo, Double Double and Kona, and 0.32g/t Au for Latte.
The proposed heap leach processing rate of 5.0 Mtpa was used, along with deposit
and pit geometry constraints, to estimate the mining equipment fleet needed. The
fleet has an estimated maximum capacity of 90,000 t/d total material, which
would be sufficient for the LOM plan.
The total capital cost of the mining equipment of $110.8 million has been based
on a detailed equipment list and budget cost quotations from a major equipment
supplier. The initial pre-production capital cost of the mine is estimated at
$46.3 million and the remaining cost of $64.5 million will be spent after the
pre-production period as sustaining capital. It should be noted that the $304.8
million of initial capital in the economic model includes $50.3 million of
mining costs that have been capitalized in the pre-production period.
The open pit mine operations require a total average of 100 personnel, mine
maintenance requires 35 personnel, and supervision/technical needs a total of 30
personnel, for a total of 165 open pit personnel.
Open pit mining costs were calculated from first principles based on equipment
required and include pit and dump operations, road maintenance, mine supervision
and technical services cost.
The average open pit operating costs for the LOM plan (which includes
pre-production mining) are listed below:
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Function Average Cost (C$)/Tonne Mined
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Drilling $0.28
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Blasting $0.39
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Loading $0.36
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Hauling $0.71
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Roads & Dumps $0.35
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General Mine/Maintenance $0.17
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Supervision & Technical $0.22
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Total Open Pit Operating Cost $2.48
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Processing
The process flowsheet includes a three-stage crushing plant followed by a heap
leach operation. Gold is extracted by an Adsorption-Desorption-Recovery (ADR)
carbon plant. The process flowsheet is based on a processing rate of 5.0 million
dry tonnes per year.
The design particle crush size is minus 16 mm (80% passing 12.5 mm) however,
rock types found to leach adequately at coarser sizes could bypass the tertiary
crushing circuit. Based on experience gained during actual operations, the crush
size for each rock type may be modified as conditions permit.
The estimates for ultimate gold recovery and major reagent consumptions for
various rock types were based on the results of laboratory column leach tests
conducted by Kappes Cassiday & Associates, industry leading experts in heap
leach processing and consultants to Kinross for the development of the
successful Ft. Knox Heap Leach mine in Alaska.
A summary of the ultimate recoveries and reagent consumptions used for each
deposit facies is summarized below:
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Ultimate Au
Recovery
Deposit Facies % Reagent Consumptions
------------------------------
NaCN kg/t CaO kg/t
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Supremo Oxide 90 0.20 1.50
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Supremo Upper Transition 70 0.20 1.50
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Latte Oxide 88 0.20 1.50
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Latte Upper Transition 44 0.20 1.50
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Double Double Oxide 90 0.20 1.50
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Kona Oxide 90 0.20 1.50
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Column leach test work was conducted under simulated cold climate conditions.
Agglomeration was not required and low reagent consumption was reported.
The total capital cost of the process facilities of $73.3 million has been based
on budget cost quotations from major equipment suppliers. The initial
pre-production capital cost of the process facilities mine is estimated at $56.1
million and the remaining cost of $17.2 million will be spent after the
pre-production period as sustaining capital. For the heap leach facility (HLF),
Knight Piesold and Co. conducted a two phased conceptual study to first evaluate
alternate locations for the siting of the HLF, followed by completion of design,
scheduling and cost estimation to construct the HLF. Again it should be noted
that the $304.8 million of initial capital in the economic model includes $8.7
million of processing costs that have been capitalized in the pre-production
period.
Process operating costs were estimated to include all crushing, heap loading,
and gold recovery activities to produce unrefined gold bullion (dore). Process
manpower requirements were estimated to require 126 personnel. All reagents cost
estimates were calculated by projected consumptions and estimated prices. All
power is supplied by diesel generators and power costs are estimated at $0.35
per kilowatt hour.
The LOM process operating costs (which include pre-production processing) are
summarized below:
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$CDN / Year $CDN / tonne leached
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Crushing & Conveying $11,608,000 $2.32
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Leach & Plant $18,503,000 $3.70
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Refine & Laboratory $3,228,000 $0.65
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Total Processing Cost $33,339,000 $6.67
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Project Infrastructure and Indirects
The project envisions the construction of the following key infrastructure items
to support the mine and process facilities:
-- Approximately 250 km all-season access road from the Klondike Highway at
Carmacks to the project site; includes upgrading 74 km of existing road
and building 179 km of new road
-- Approximately 7 km of new on-site access roads for light vehicles to by-
pass the active mining areas
-- New airstrip
-- Truck shop, warehouse and camp
-- Fresh water supply developed from groundwater
-- Bulk explosives storage and magazines
-- Power plant and bulk fuel storage
-- Potable, fire and sewage water systems
-- Camp and administrative office
The total capital cost of the project infrastructure and development indirect
costs is $109.2 million based on a budget quotation to construct the access
road, JDS' northern operating experience, and more specifically, their Yukon
project experience. The all-season access road will be constructed to connect
the project site to Carmacks, Yukon Territory, Canada. The conceptual design for
the road includes upgrading approximately 74 km of existing public road and 179
km of new road construction (250 km total). The road will be designed as a
single-lane (5m width), mine access road with intermittent turnouts and traffic
will be radio controlled. The road will be suitable for semi-trailer trucks and
will eliminate the need to supply the site by barge, ice-road or by air. The
mine will own and operate a fleet of snow plows and graders used to maintain the
road through the winter.
The initial pre-production capital cost of the infrastructure and indirects is
$104.4 million and the sustaining cost is $4.8 million to be spent after the
pre-production period. The General and Administrative operating costs for the
operation are estimated to be approximately $20 million per year or $4.00 per
tonne leached.
Environment, Reclamation and Stakeholder Engagement
In 2014, Kaminak initiated comprehensive environmental baseline studies,
building on the environmental studies that have been ongoing since 2010 with the
aim of completing an Environmental Impact Statement for submission in advance of
Permitting. Kaminak will be seeking the input and involvement of local First
Nations (Tr'ondek Hwech'in, Selkirk First Nation, White River First Nation and
Little Salmon/Carmacks First Nation) in the design and implementation of these
baseline studies and is committed to working with stakeholders to ensure that
concerns are addressed. A closure and reclamation plan will be prepared for the
project proposal submission. Financial assurance must be posted to secure the
closure and reclamation works. In the PEA, the estimate for the closure cost is
$46,000,000, including a 15% contingency, and is based on the owner-operator
closing the mine and completing the reclamation activities. The Government of
Yukon will determine the amount and form of security to be provided.
PEA CONTRIBUTORS
-- JDS Energy & Mining Inc., Lead Author, Overall Mine and Project Design
-- Knight Piesold and Co., Heap Leach Facility Design
-- Sim Geological, Mineral Resource Estimate (January 2014)
-- Kappes Cassidy and Associates, Metallurgical Consultants
Qualified Persons
Fred Lightner, PE, Kaminak Director of Mine Development, is the Company's
designated QP for this news release within the meaning of NI 43-101 and has
reviewed and validated that the information contained in the release is
consistent with that provided by the QPs responsible for the PEA.
Kaminak's disclosure of technical or scientific information in this press
release has been reviewed and approved by Tim Smith, MSc, P.Geo., Vice President
Exploration of Kaminak Gold Corporation, who serves as a Qualified Person under
the definition of National Instrument 43-101.
On behalf of the Board of Directors of Kaminak
Eira Thomas, President and CEO
Kaminak Gold Corporation
For further information about Kaminak Gold Corporation or this news release,
please visit our website at www.kaminak.com.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that
term is defined in the policies of the TSX Venture Exchange) accepts
responsibility for the adequacy or accuracy of this release.
Caution Concerning Forward-Looking Statements
Certain disclosures in this release, including management's assessment of the
future potential of the Coffee Project and future exploration programs,
constitute forward-looking statements that are subject to numerous risks,
uncertainties and other factors relating to Kaminak's operations as a mineral
exploration company that may cause future results to differ materially from
those expressed or implied in such forward-looking statements, including risks
as to the completion of the plans and projects. Readers are cautioned not to
place undue reliance on forward-looking statements. Except as required by law,
Kaminak expressly disclaims any intention or obligation to update or revise any
forward-looking statements, whether as a result of new information, future
events, or otherwise.
The Company has not made a production decision and the Company's strategic plan
to develop a stand-alone heap leach operation is subject to the results of its
Feasibility Study. Further, if and when the Company makes any production
decision, it will disclose the basis of such decision in accordance with the
requirements of National Instrument 43-101 Standards of Disclosure for Mineral
Projects ("NI 43-101").
Cautionary Note concerning estimates of Inferred and Indicated Resources:
This news release uses the terms "Inferred Resources" and "Indicated Resources",
which have a great amount of uncertainty as to their existence, and great
uncertainty as to their economic and legal feasibility. It cannot be assumed
that all or any part of an Inferred and/or Indicated Mineral Resource will ever
be upgraded to a higher category. Under Canadian rules, estimates of Inferred
Resources may not form the basis of feasibility or other economic studies.
Kaminak advises U.S. investors that while this term is recognized and required
by Canadian regulations, the U.S. Securities and Exchange Commission does not
recognize it. U.S. investors are cautioned not to assume that part or all of an
Inferred and Indicated resource exists, or is economically or legally minable.
FOR FURTHER INFORMATION PLEASE CONTACT:
Kaminak Gold Corporation
Tony Reda
Vice-President of Corporate Development
Toll Free: 1-888-331-2269 or Direct: 604-646-4534
info@kaminak.com
www.kaminak.com