TORONTO, April 10, 2018 (GLOBE NEWSWIRE) --
Kerr Mines Inc. (TSX:KER) (OTC:KERMF) (FRA:7AZ1)
(“Kerr” or the “Company”) is pleased to announce
the results of the independent Pre-Feasibility study (“PFS”,
“Study”) and resource update prepared by Hard Rock Consulting, LLC
in accordance with National Instrument 43-101 (“NI 43-101”) for its
past producing Copperstone Mine in Arizona, USA. On the momentum of
a very successful 2017 Phase I exploration program and this PFS,
the Company is pleased to confirm updated gold resources and
positive economics at the Company’s Copperstone Mine in
Arizona.
Copperstone PFS Highlights (all values
US$ unless otherwise noted):
- Base case $1,250/oz gold;
- Initial capital of $22.7 million which includes a mine
equipment capital lease;
- Study life operating margin (EBITDA) of $89M, Internal rate of
return of 40%;
- Payback of initial capital within 2.3 years of 2019 production
start;
- Recovery of gold averaging 95% using crushing, grinding and
whole ore leach;
- Average annual sales of 38,347 ounces gold;
- Cash Operating Cost of $684 per gold ounce;
- All-in Sustaining Cost ("AISC") of $875 per gold ounce;
- Measured and Indicated (“M&I”) Mineral Resources of
1,124,800 tonnes averaging 7.63 g/tonne gold;
- 276,100 ounces contained gold in M&I Resource;
- Inferred Mineral Resources of 666,000 tonnes averaging 6.81
g/tonne gold;
- 145,700 ounces contained gold in Inferred;
- Proven and Probable (“P&P”) Mineral Reserves of 802,048
tonnes averaging 6.79 g/tonne gold;
- 175,093 ounces contained gold in P&P Reserve;
- M&I gold resources ounces, which are not part of the
P&P reserve ounces, are targeted for potential inclusion in the
P&P reserves through recommended future drilling;
- Inferred gold resources are open for further expansion and
conversion through recommended future drilling in the Copperstone
and Footwall zones.
“The results of this PFS display the strong
near-term production opportunity for the Copperstone Mine and
robust returns for our investors. This is just the beginning," says
Martin Kostuik, President. “The impressive exploration upside
displayed by the 2017 Phase I program, the historical production of
over 500,000 gold ounces and the potential to generate solid
positive cash flows by identifying the first four years of gold
production, all point toward the opportunity of many more years,
beyond the Study timeframe, of profitable production. In
fact, there are 100,000 gold ounces of M&I mineral resources
that were not included in the P&P mineral resources, part of
which are immediately accessible for drilling and potential
inclusion.” Kostuik continued, “Our intention is to finance the
initial capital through corporate debt. We are currently
engaged in discussions focused on non-dilutive financing options
with several lending groups to finalize our forthcoming production
decision. Furthermore, we shall continue our efforts to
enhance shareholder value by pursuing other value-adding activities
such as conducting an intense 2018 exploration program which is
designed to increase mine life”
Geology and Mineral Resource Estimate
The updated Mineral Resource Estimate was
developed by Hard Rock Consulting, LLC (“HRC”). In order to
support the mineral resource estimate, Kerr completed over 8,100
meters of infill and step-out drilling in the summer and fall of
2017.
The Copperstone deposit is a mid-Tertiary,
detachment fault related gold deposit. Mineralization is
predominantly controlled by the northwest trending shallow angle
Copperstone fault and shear zone. These structures are not confined
to any lithologic unit, although the majority of the mineralization
is hosted in quartz latite porphyry. Breccia textures as well as
chloritization, silicification, and hematite and specularite
flooding are reliable indications of gold mineralisation.
On February 24th, 2018, HRC completed an updated
mineral resource estimate. The last NI 43-101 resource report on
the Copperstone Project was released in 2011, the estimate used a
gold capping grade of 5 troy ounces per short ton and was domained
primarily by gold grades. In order to support the mineral
resource update, Kerr completed over 8,100 meters of infill and
step-out drilling in the summer and fall of 2017. Since the
2011 report, the drillhole database includes 9,062 additional
meters and an additional 5,552 gold grade determinations. HRC
applied a more aggressive and restrictive capping analysis
resulting in a more conservative model than previous
estimates.
The drill hole database was vetted to identify missing values,
duplicate records, interval overlap errors, from-to data exceeding
maximum collar depth, and special (i.e. non-numeric or less than
zero) values. Errors identified by the mechanical audit were
reviewed with Kerr staff and resolved prior to modelling and
calculation of the mineral resource estimate. In addition, 665
holes of historic core drill logs totaling 83,265 meters were
re-interpreted for alteration and digitized for inclusion into the
2017 resource estimate program database. A random manual check of
10% of the assay database against original certificates was
conducted by HRC. The error rate within the database is considered
to be less than 1% based on the number of samples spot checked.
Identified errors were corrected prior to modelling and calculation
of the mineral resource estimate.
Gold grades were constrained within estimation
domains modelled with 3D wireframe solids. Estimation domains
follow the overall northwest, shallowly dipping structural trends,
and were defined by drillhole interval selections of gold grades
greater than or equal to 3.43 g/tonne (0.100 troy ounces per short
ton, “oz/ton”). Domains were reviewed in 3D to ensure the models
agree with the overall geologic interpretation and maintained
continuity along strike and down dip. Samples were composited
inside estimation domains to a target length of 1.5 meters.
Composite gold grades within each domain were reviewed for
statistically high outliers, which were then constrained and
capped. The capping analysis considered each domain separately and
a global gold cap was not used. Semi-variograms from
composites were used to inform the search ellipse. Densities
were determined inside and outside estimation domains by lithology
from drill core.
Of 959 drill holes included in the mineral
resource estimate, 716 drillholes intersected mineralised domains.
2,748 composites were used to interpolate grade into 6.1 x 6.1 x
1.5-meter (20 x 20 x 5 feet) blocks rotated and oriented along
strike and down dip and sub-blocked to a minimum block size 6.1 x
1.5 x 0.3 meters (20 x 5 x 1 feet) using an ordinary kriging
algorithm. Blocks mined out by open pit and underground operations
were removed from the resource estimate.
HRC concludes that the sample preparation, security and
analytical procedures are appropriate and adequate for the purpose
of this Technical Report. The sample methods and density are
appropriate, and the samples are of sufficient quality to comprise
a representative, unbiased database.
Zachary J. Black, SME-RM, a Resource Geologist
with HRC is responsible for the mineral resource estimate presented
herein. Estimated blocks were classified as either Measured,
Indicated, or Inferred, in accordance with CIM definition standards
adopted by CIM Counsel on May 10, 2014, based on the minimum
distance from composites to the block, the number of composites
used to estimate a block, and the geologic/geospatial support for
the domain. The mineral resources are confined of material
exceeding the cut-off grade of 3.43 g/tonne (0.100 oz/ton) within
coherent wireframe models. The cutoff is based on the following
assumptions: a long-term gold price of $1,375/oz; assumed mining
cost of $74/ton, process costs of $40/ton, general and
administrative and property/severance tax costs of $14/ton,
refining costs of $4.65/oz and metallurgical recovery for gold of
95%.
Mineral Resource
Classification |
Tonnes
('000's) |
Tons
('000's) |
Gold Grade
grams/tonne oz/ton |
Contained Gold
('000 oz) |
Measured |
478.1 |
527.0 |
8.33 |
0.243 |
128.0 |
Indicated |
646.7 |
712.9 |
7.12 |
0.208 |
148.0 |
Measured + Indicated |
1,124.8 |
1,239.8 |
7.63 |
0.223 |
276.1 |
Inferred |
666.0 |
734.1 |
6.81 |
0.198 |
145.7 |
|
|
|
|
|
|
- The effective date of the Mineral Resource estimate is April
1st, 2018. The QP for the estimate is Mr. Zachary J. Black, SME-RM
of Hard Rock Consulting, LLC. and is independent of Kerr Mines,
Inc.
- Mineral Resources are quoted inclusive of Mineral Reserves.
Mineral Resources that are not Mineral Reserves do not have
demonstrated economic viability. Due to the uncertainty that may be
attached to Inferred Mineral Resources, it cannot be assumed that
all or any part of an Inferred Mineral Resource will be upgraded to
an Indicated or Measured Mineral Resource as a result of continued
exploration.
- Mineral resource is reported at an underground mining cutoff of
0.100 oz/ton Au beneath the historic open pit and within coherent
wireframe models. The cutoff is based on the following
assumptions: a long-term gold price of $1,375/oz; assumed mining
cost of $74/ton, process costs of $40/ton, general and
administrative and property/severance tax costs of $14/ton,
refining costs of $4.65/oz and metallurgical recovery for gold of
95%.
- Rounding may result in apparent differences when summing
tonnes, grade and contained metal content. Tonnage and grade
measurements are in imperial and metric units. Grades are reported
in troy ounces per short ton and in grams per tonne.
Mine Plan and Mineral Reserves
A detailed mine plan was engineered using only
Measured & Indicated Resources. Mechanized overhand cut
and fill was chosen as the preferred mining method.
Datamine’s® Minable Stope Optimizer (MSO) was used to generate the
stopes utilizing a metal price of $1,250/oz for gold and a 3.77
g/tonne (0.111 oz/ton) gold cutoff.
The mine plan for the Project includes
approximately 802,000 tonnes of ore grade material to be extracted
by underground mining in 4.4 years. The mine production
schedule calls for ore production of 544 tonnes per day and 762
tonnes of ore processed per mill working day, 5 days per
week. Mining recoveries of 95% were applied and overall
dilution factors averaged 25.3%. Dilution factors are calculated
based on internal stope dilution calculations and external dilution
factors of 10%. The Table below presents the annual mining schedule
based on these assumptions. Due to the historic underground
mining that has taken place on the property in 2012 and 2013 and
the exploration drift put in by Kerr in the summer of 2017 there is
a reduced amount of development required to get the mine up to full
production.
Production Schedule |
Study
Totals |
Year -1 |
Year 1 |
Year 2 |
Year 3 |
Year 4 |
Year 5 |
MINE PRODUCTION |
|
|
|
|
|
|
|
Ore Mined (tonnes) |
802,048 |
52,089 |
207,331 |
219,449 |
170,688 |
144,070 |
8,421 |
Au Grade (g/tonne) |
6.79 |
7.22 |
6.70 |
6.86 |
6.63 |
6.83 |
6.82 |
Mine Development (meters) |
13,295 |
1,002 |
5,153 |
3,613 |
1,940 |
1,476 |
111 |
Development Waste (tonnes) |
487,159 |
40,203 |
202,717 |
139,695 |
57,501 |
43,750 |
3,292 |
Total Tonnes Mined |
1,289,207 |
92,292 |
410,047 |
359,145 |
228,189 |
187,821 |
11,713 |
Dr. Dermot Ross-Brown from Tierra Group
International, Ltd completed a review of the past geotechnical
studies and visited the current underground workings in order to
provide an estimate of the required ground support and maximum
opening sizes for the mine plan. Main ramp development
headings are planned at 4.2m x 4.2m, ore access drifts are planned
at 3.7m x 3m and stope heights are planned at 3.7m with a maximum
width of 4.9m.
In order to select the preferred mining method,
several trade-offs were conducted as part of the pre-feasibility
study. The results are summarized below:
- Mining Method – The Copperstone orebody is relatively flat with
an average dip of 38 degrees. Although there are some areas where
the ore will flow, above a 45-degree dip, the majority of the
deposit is too flat to facilitate a long hole mining method.
Mining costs comparisons were completed on mechanized overhand cut
and fill versus conventional overhand cut and fill utilizing
slushers and hydraulic backfill. Although the conventional
cut and fill reduces the required development costs versus the
mechanized method, the savings were not enough to offset the higher
operating costs. As a result, mechanized cut and fill was
chosen as the preferred option. Mining utilizing the Shallow
Angle Mining System – (“SAMS™”) was also evaluated as an
option. Although mining utilizing SAMS is currently being
tested at a mining site in Canada, further geotechnical and
hydraulic backfill evaluations for Copperstone must be completed
and were beyond the scope of this Study. These factors
resulted in not choosing SAMS for the Study.
- Backfill Method – Patterson and Cooke assisted in developing
costs for utilizing cemented hydraulic backfill (“CHF”) generated
from the mill tailings versus cemented rock fill (“CRF”). By
utilizing CHF from the mill tailings, the Phase 2 lift of the
tailings dam will not be required providing a future capital cost
savings for CHF. Although the CRF option will require
additional backfill sourced from the waste fill located within the
open pit, the capital cost and infrastructure for the CHF plant
were too high to offset the higher operating costs of the CRF
option. Based on these results, CRF was chosen for the mine
plan backfill strategy.
- Operations Strategy - Contract versus owner mining was also
evaluated based on contractor mining quotes using their own
equipment and owner mining with quotes for purchasing new mining
equipment. The owner mining scenario was found to be the most
cost-effective option. Owner mining was also evaluated using
purchased mining equipment versus capital leased equipment.
Purchase and lease rates were provided and the equipment lease
option results in an increase for IRR from 34% to 40%.
The capital lease of the mining equipment was chosen as the
preferred option.
Mr. Jeffery Choquette, P.E., MMSA QP Member, of
HRC is responsible for the mineral reserve estimate presented
herein. The Proven and Probable mineral reserves for the Study as
of April 1st, 2018 are summarized in the Table below.
Mineral Reserve
Classification |
Tonnes
('000's) |
Tons
('000's) |
Diluted Gold Grade
grams/tonne oz/ton |
Contained Gold
('000 oz) |
Proven |
346.7 |
382.2 |
7.30 |
0.213 |
81.4 |
Probable |
455.4 |
501.9 |
6.40 |
0.187 |
93.7 |
Total Proven + Probable |
802.0 |
884.1 |
6.79 |
0.198 |
175.1 |
- The effective date of the Mineral Reserve estimate is April
1st, 2018. The QP for the estimate is Mr. Jeffery Choquette
P.E. of Hard Rock Consulting, LLC. and is independent of Kerr
Mines, Inc.
- The Mineral Reserve estimates were prepared with reference to
the 2014 Canadian Institute of Mining, Metallurgy and Petroleum
(CIM) Definition Standards (2014 CIM Definition Standards) and the
2003 CIM Best Practice Guidelines.
- Mineral Reserves are reported within the mine stope designs at
an underground mining cutoff of 0.111 oz/ton. The cutoff is
based on the following assumptions: a long-term gold price of
$1,250/oz; assumed mining cost of $74/ton, process costs of
$40/ton, general and administrative and tax costs of $14/ton,
refining costs of $4.65/oz and metallurgical recovery for gold of
95%.
- Mining recoveries of 95% were applied. Overall dilution
factors averaged 25.3%, dilution factors are calculated based on
internal stope dilution calculations and external dilution factors
of 10% for cut and fill mining.
- Rounding may result in apparent differences when summing
tonnes, grade and contained metal content. Tonnage and grade
measurements are in imperial and metric units. Grades are reported
in troy ounces per short ton and in grams per tonne.
Processing
Kerr Mines and HRC contracted Resource
Development Inc (RDI) who provided new metallurgical testing of the
Copperstone deposit, confirmed prior metallurgical testwork and
economically evaluated processing options. Metallurgical test
work focused on the A, B, C, and D zones of the Copperstone Zone.
Testing also confirmed bond work indexes, abrasion and density
values. The production and sale of a doré bar versus sale of
a gold concentrate has much lower offtake costs. Listed below is a
description and results for three processing options:
Flotation Producing a Concentrate: This is
the approach taken by the previous operators. The flotation
concentrate is estimated to assay ± 500 g/tonne Au and would be
sold to a broker or smelter. A marketing study is needed to
determine the marketability and cost of sales for this grade of
gold concentrate. The flotation circuit would consist of
rougher flotation followed by two stages of cleaners to produce the
required grade of concentrate. This confirms historical
testwork and production results. Recoveries for gold from
flotation for high grade saleable concentrate averaged
88%.
Flotation and Cyanide Leach of the
Concentrate: The objective of this process is to produce a
rougher concentrate maximizing recovery of gold, then leach the
concentrate and produce a doré bar. Recoveries for gold from
flotation concentrate produced for final leach averaged 90%.
Testing for final recovery of gold from leaching the flotation
concentrate is inconclusive and further testing is required.
Whole Ore Leach: WOL utilizes direct cyanidation
leaching of the entire ore feed. This option also includes
the production of a doré bar. WOL resulted in gold extraction of
88% to 97%. There exists an opportunity to decrease the
Processing Cash Operating cost below the Study results with further
cyanide consumption testwork, which is in progress.
WOL of Copperstone ore exhibits the highest
operating costs of the three options but the increase in recoveries
and elimination of concentrate smelter charges make this option
economically superior. In addition, the existing processing
plant will be simplified by eliminating both the course gold
circuit and one of the mills. WOL leach was chosen as the
base case processing scenario for the Study. The block flow
sheet is shown below.
A photo accompanying this announcement is available at
http://resource.globenewswire.com/Resource/Download/2d81a247-51f9-410e-8fab-ffba1554a736
Copper may be a by-product of mining economic
gold ores and extracting the copper during the processing of the
economic gold ore at the Copperstone Mine is at the early stages of
being evaluated. The economics of monetizing copper as a
by-product are potentially attractive as the cash costs of
production are shared with the cash cost of producing the primary
product – gold. Further exploration drilling, assaying
and modelling work of copper bearing gold ore is required.
Metallurgical testing for the economic extraction of copper
is ongoing, but currently incomplete, and further testing is
required. Copper may be incorporated into a compliant mineral
resource dependent upon favorable metallurgical results, and a
complete review of copper data for adequacy.
Project Case Economic
Results
The Project Case for the Study includes mine mobile equipment
financing costs with no financing cost applied to the remaining
Initial Capital. Capital costs were developed for the plant
upgrade, infrastructure needs, and mining. The table below
shows the estimated initial capital costs for the upgrade and
restart of the Copperstone Mine using the optimal project case of a
WOL processing scheme and owner operated mining, with an equipment
capital lease for mine equipment financing. The capital costs
reflect the in-place infrastructure, buildings, and equipment which
is a beneficial aspect of the Copperstone Mine.
Initial Capital |
$USM |
Mine |
5.99 |
Mine Development & Infill Drilling |
5.38 |
Mill Upgrades |
3.52 |
Indirects, EPCM, Owners Cost |
4.02 |
Contingency |
3.83 |
Total Initial Capital |
22.74 |
The capital lease for the mining equipment is
based on a major equipment manufacturer’s quote which includes a
3-year term at 10% interest and a 25% down payment. For this
option, principal and interest payments reduce cash required from
initial financing activity and gross capital costs are booked as
assets on the balance sheet.
Economic analysis of the Project case uses a
3.77 gold g/tonne (0.111 oz/ton) cut-off grade and a gold price of
US$1,250/oz, which is the 36-month trailing average price and
$50/oz less than the closing spot price at the end of December
2017. The tables below summarize the results.
Before Tax |
|
After Tax |
$USM |
19.12 |
|
Net Present Value (10.0%) |
$USM |
17.91 |
|
% |
41.7 |
% |
Internal Rate of Return |
% |
40.1 |
% |
Yrs |
2.26 |
|
Payback Period |
Yrs |
2.27 |
|
|
|
Study Totals |
Year -2 |
Year -1 |
Year 1 |
Year 2 |
Year 3 |
Year 4 |
Year 5 |
Gold Ounces in Doré |
oz |
166,172 |
|
|
7,349 |
|
38,790 |
|
39,939 |
|
38,722 |
|
39,619 |
|
1,753 |
|
Gross Revenue |
$US |
207,714,250 |
|
|
9,186,375 |
|
48,487,000 |
|
49,923,625 |
|
48,402,250 |
|
49,523,375 |
|
2,191,625 |
|
Cash Operating Costs |
$US |
(113,665,069 |
) |
|
(4,615,312 |
) |
(28,769,608 |
) |
(27,427,293 |
) |
(26,210,707 |
) |
(24,553,976 |
) |
(2,088,173 |
) |
Royalties |
$US |
(4,154,287 |
) |
|
(183,728 |
) |
(969,740 |
) |
(998,473 |
) |
(968,045 |
) |
(990,468 |
) |
(43,833 |
) |
Production Taxes |
$US |
(816,507 |
) |
|
(57,138 |
) |
(164,391 |
) |
(169,687 |
) |
(187,617 |
) |
(237,674 |
) |
- |
|
Total Operating Costs |
$US |
(118,635,863 |
) |
|
(4,856,178 |
) |
(29,903,739 |
) |
(28,595,453 |
) |
(27,366,369 |
) |
(25,782,118 |
) |
(2,132,006 |
) |
Operating Margin (EBITDA) |
$US |
89,078,387 |
|
|
4,330,197 |
|
18,583,261 |
|
21,328,172 |
|
21,035,881 |
|
23,741,257 |
|
59,619 |
|
Sustaining Capital/Closure |
$US |
(26,235,313 |
) |
(500,000 |
) |
(1,380,499 |
) |
(13,314,127 |
) |
(8,890,011 |
) |
(4,261,740 |
) |
(269,937 |
) |
2,381,000 |
|
Site All-In Sustaining Cost* |
$US |
(144,871,176 |
) |
(500,000 |
) |
(6,236,677 |
) |
(43,217,866 |
) |
(37,485,464 |
) |
(31,628,109 |
) |
(26,052,055 |
) |
248,994 |
|
Investment Capital |
$US |
(22,737,126 |
) |
(603,670 |
) |
(22,133,457 |
) |
|
|
|
|
|
Site All-In-Cost* |
$US |
(167,608,303 |
) |
(1,103,670 |
) |
(28,370,134 |
) |
(43,217,866 |
) |
(37,485,464 |
) |
(31,628,109 |
) |
(26,052,055 |
) |
248,994 |
|
Cash Flow, pre-Tax |
$US |
40,105,947 |
|
(1,103,670 |
) |
(19,183,759 |
) |
5,269,134 |
|
12,438,161 |
|
16,774,141 |
|
23,471,320 |
|
2,440,619 |
|
Interest Expense |
$US |
(1,865,121 |
) |
|
(450,161 |
) |
(853,257 |
) |
(474,699 |
) |
(87,003 |
) |
|
|
State & Federal Income Tax |
$US |
(1,961,421 |
) |
|
|
|
|
(623,798 |
) |
(2,662,724 |
) |
1,325,101 |
|
Free Cash Flow |
$US |
36,279,406 |
|
(1,103,670 |
) |
(19,633,920 |
) |
4,415,877 |
|
11,963,463 |
|
16,063,340 |
|
20,808,596 |
|
3,765,720 |
|
Cumulative Free Cash Flow |
$US |
|
(1,103,670 |
) |
(20,737,589 |
) |
(16,321,713 |
) |
(4,358,250 |
) |
11,705,090 |
|
32,513,686 |
|
36,279,406 |
|
Study Life of Mine |
Yrs |
4.4 |
|
|
|
|
|
|
|
|
* no corp
cost |
|
|
|
|
|
|
|
|
|
The lifespan of the project in the Study is
estimated to be 5.4 years: one year of pre-production and
construction, and 4.4 years of full operations. Approximately
175,093 oz of gold are projected to be mined, with 166,172 oz of
gold recovered and produced for sale. An accumulated cash
basis capital investment of $48.9 million, including initial
capital, contingency, sustaining capital and reclamation is
projected. Following the All-In Sustaining Cost (“AISC”)
guidelines, Study life of mine average base case Cash Operating
Cost is projected to be $684/oz of gold sold, before credits for
silver sales. The Study life of mine average Site All-in Sustaining
Cost (including royalties, production taxes and sustaining
capital/closure), before credits for silver sales, is expected to
be $875/oz.
LOM Average Operating Costs |
|
$US/ tonne Processed |
$US/ oz Gold |
Mining |
84.33 |
407.04 |
Processing |
39.98 |
192.99 |
Site G&A |
15.45 |
74.61 |
Transportation and Refining |
1.94 |
9.39 |
Cash Operating Cost |
141.70 |
684.03 |
|
|
|
All-In Sustaining Cost |
183.58 |
874.83 |
Mineral resources were incorporated in the model
only if classified as Proven or Probable Reserves according to CIM
definitions. A throughput of 762 tonnes per day five days per
week is the base case processing rate, and operations and capital
factors were developed from this basis. Recovery for gold is
expected to average 95% for the Project case. Construction of
the facilities is projected to conclude at the end of year
-1.
The Project, like almost all precious metals
projects, is very responsive to changes in the price of its chief
commodity, gold. From the base case, a change in the average
gold price of US$50/oz Au would change the NPV-10 by approximately
$5 million. After-tax economic results with sensitivity to
gold price below.
Gold Price$/oz |
Net Cash Flow $M |
NPV 10% $M |
IRR % |
Payback
Yrs |
Payback Multiple |
|
|
1,100 |
14.25 |
3.27 |
15.34 |
3.3 |
1.6 |
|
1,150 |
22.24 |
8.51 |
23.90 |
3.0 |
2.0 |
|
1,200 |
29.51 |
13.37 |
32.11 |
2.6 |
2.4 |
|
1,250 |
36.28 |
17.91 |
40.12 |
2.3 |
2.7 |
|
1,300 |
43.19 |
22.53 |
48.42 |
2.0 |
3.1 |
|
1,350 |
49.98 |
27.07 |
56.88 |
1.8 |
3.5 |
|
1,400 |
56.65 |
31.50 |
65.24 |
1.6 |
3.9 |
|
Equity Case Economic
Results
The Equity case for the Study assumes no equipment financing and no
financing cost for Initial Capital. The first table below
shows the estimated initial capital costs for the upgrade and
restart of the Copperstone Mine using the Equity model case of a
WOL processing scheme and owner operated mining without mine
equipment financing. The corresponding tables for this case are
also below.
Initial Capital |
$USM |
Mine |
17.53 |
Mine Development & Infill Drilling |
5.38 |
Mill Upgrades |
3.52 |
Indirects, EPCM, Owners Cost |
4.02 |
Contingency |
3.83 |
Total Initial Capital |
34.28 |
Before Tax |
|
After Tax |
$USM |
19.14 |
|
Net Present Value (10.0%) |
$USM |
17.78 |
|
% |
35 |
% |
Internal Rate of Return |
% |
34 |
% |
Yrs |
2.27 |
|
Payback Period |
Yrs |
2.28 |
|
|
|
Study Totals |
Year -2 |
Year -1 |
Year 1 |
Year 2 |
Year 3 |
Year 4 |
Year 5 |
Gold Ounces in Doré |
oz |
166,172 |
|
|
7,349 |
|
38,790 |
|
39,939 |
|
38,722 |
|
39,619 |
|
1,753 |
|
Gross Revenue |
$US |
207,714,250 |
|
|
9,186,375 |
|
48,487,000 |
|
49,923,625 |
|
48,402,250 |
|
49,523,375 |
|
2,191,625 |
|
Cash Operating Costs |
$US |
(113,665,069 |
) |
|
(4,615,312 |
) |
(28,769,608 |
) |
(27,427,293 |
) |
(26,210,707 |
) |
(24,553,976 |
) |
(2,088,173 |
) |
Royalties |
$US |
(4,154,287 |
) |
|
(183,728 |
) |
(969,740 |
) |
(998,473 |
) |
(968,045 |
) |
(990,468 |
) |
(43,833 |
) |
Production Taxes |
$US |
(816,507 |
) |
|
(57,138 |
) |
(164,391 |
) |
(169,687 |
) |
(187,617 |
) |
(237,674 |
) |
|
Total Operating Costs |
$US |
(118,635,863 |
) |
|
(4,856,178 |
) |
(29,903,739 |
) |
(28,595,453 |
) |
(27,366,369 |
) |
(25,782,118 |
) |
(2,132,006 |
) |
Operating Margin (EBITDA) |
$US |
89,078,387 |
|
|
4,330,197 |
|
18,583,261 |
|
21,328,172 |
|
21,035,881 |
|
23,741,257 |
|
59,619 |
|
Sustaining Capital/Closure |
$US |
(14,695,063 |
) |
(500,000 |
) |
|
(9,698,927 |
) |
(4,896,252 |
) |
(1,710,947 |
) |
(269,937 |
) |
2,381,000 |
|
Site All-In Sustaining Cost* |
$US |
(133,330,926 |
) |
(500,000 |
) |
(4,856,178 |
) |
(39,602,666 |
) |
(33,491,705 |
) |
(29,077,316 |
) |
(26,052,055 |
) |
248,994 |
|
Investment Capital |
$US |
(34,277,376 |
) |
(603,670 |
) |
(33,673,707 |
) |
|
|
|
|
|
Site All-In Cost* |
$US |
(167,608,303 |
) |
(1,103,670 |
) |
(38,529,885 |
) |
(39,602,666 |
) |
(33,491,705 |
) |
(29,077,316 |
) |
(26,052,055 |
) |
248,994 |
|
Cash Flow, pre-Tax |
$US |
40,105,947 |
|
(1,103,670 |
) |
(29,343,510 |
) |
8,884,334 |
|
16,431,920 |
|
19,324,934 |
|
23,471,320 |
|
2,440,619 |
|
Interest Expense |
$US |
|
|
|
|
|
|
|
|
State & Federal Income Tax |
$US |
(2,215,684 |
) |
|
|
|
|
(878,061 |
) |
(2,662,724 |
) |
1,325,101 |
|
Free Cash Flow |
$US |
37,890,263 |
|
(1,103,670 |
) |
(29,343,510 |
) |
8,884,334 |
|
16,431,920 |
|
18,446,873 |
|
20,808,596 |
|
3,765,720 |
|
Cumulative Free Cash Flow |
$US |
|
(1,103,670 |
) |
(30,447,179 |
) |
(21,562,846 |
) |
(5,130,926 |
) |
13,315,947 |
|
34,124,543 |
|
37,890,263 |
|
Study Life of Mine |
Yrs |
4.4 |
|
|
|
|
|
|
|
|
* no corp
cost |
|
|
|
|
|
|
|
|
|
LOM Average Operating Costs |
|
$US/ tonne Processed |
$US/ oz Gold |
Mining |
84.33 |
407.04 |
Processing |
39.98 |
192.99 |
Site G&A |
15.45 |
74.61 |
Transportation and Refining |
1.94 |
9.39 |
Cash Operating Cost |
141.70 |
684.03 |
|
|
|
All-In Sustaining Cost |
169.19 |
805.38 |
Infrastructure and Permitting
The Copperstone Mine benefits from extensive
existing infrastructure development including 3,000 meters of
underground development with two portals to access the underground
mine from the bottom of the historic open pit mine. Supporting the
underground development are electrical equipment, compressors and
ventilation. Also present are a mineral processing plant with
crush/grind and flotation capable of +762 tonnes per day, a
tailings storage facility expandable, within existing permits, to
contain the Study life of mine ore tailings; and other surface
infrastructure including line power, office buildings, maintenance
shop, fuel bay, wash rack, assay lab, warehouse and a dry.
The entire mine-site layout is compact with the underground
operations proximal to the process plant, tailings facility and
site buildings.
All permits are in place for operations with the
infrastructure as described above. Modifications to existing
permits are underway for the Study case of WOL, and also for the
ability to discharge ground water from the underground workings to
a water storage/evaporation pond near the crest of the open
pit.
A photo accompanying this announcement is available at
http://resource.globenewswire.com/Resource/Download/d11adb09-f555-4ee2-b371-5e0f78bb3d2c
2018 Phase-II Exploration
Program
The 2017 Phase-I exploration program was developed to provide a
pathway for increasing resources in both the Copperstone and
Footwall zones. The program advanced knowledge of
mineralizing controls of ore zones at the Copperstone Mine and
provided a pathway for adding resources by confirming
mineralization, improving continuity and increasing mineralized
extents along continued open trends in both the Copperstone and
Footwall Zones. The 2017 program is the foundation of the PFS
economics and forthcoming production decision.
Building upon the outcomes of 2017 drilling and
PFS, the 2018 Phase-II exploration drilling program is aimed at
increasing mine life beyond the Study mine life through upgrading
and increasing resources. The objectives of the 2018 program
are extension of known gold zones and addition of Inferred
mineralization near existing development.
Copperstone 2018 Phase-II Drilling Plan:
- Up to 6,500 meters with the objective of upgrading
Inferred tonnes to Indicated or better and to improve continuity
and grade of the M&I mineral resource tonnes that were not part
of the P&P mineral resource tonnes in the current
resource.
- Up to 5,500 meters to test additional zones and add Inferred
tonnes.
- Up to 2,000 meters for structural, geotechnical and
metallurgical purposes.
Drilling location targets for additions and
conversions are associated with structural, alteration and
lithologic controls which have demonstrated to have significant
support for mineralization. Drilling targets also include
areas of magnetite skarns and replaced limestones which often
demonstrate significant upside potential in near mine
extents. The funding of this Phase-II program is not included
in the PFS.
Qualified Persons
Qualified Person |
Company |
QP Responsibility/Role |
Mr. Zachary Black, RM-SME |
Hard Rock Consulting,
LLC |
Mineral Resources |
Ms. J.J. Brown, P.G. |
Hard Rock Consulting,
LLC |
Geology, Environment Studies and Permitting, Site visit |
Mr. Jeffery Choquette, P.E. |
Hard Rock Consulting,
LLC |
Mineral Reserves, Mining Methods and Economic Analysis |
Mr. Deepak Malhotra, Ph.D. |
Resource Development,
Inc. |
Mineral Processing and Plant Design |
Contributing Person |
Company |
Responsibility/Role |
Mr. Dermot Ross-Brown, Ph.D. |
Tierra Group
International, Ltd |
Mine Geotechnical |
Mr. Matt Bachman, P.E. |
Paterson and Cooke |
Mine Backfill Design |
Mr. David Abranovic, P.E. |
Environmental Resources
Management |
Permitting and Environmental |
Mr. Scott M. Bruno, P.E. |
BODEC, Inc. |
Mine Electrical |
Mr. Michael R. Smith, RM-SME |
Geological Professional Services, LLC |
Mine Ore Control and Quality Assurance, Quality Control |
The technical information in this news release
has been prepared in accordance with the Canadian regulatory
requirements set out in NI 43-101 and reviewed and approved by
HRC. The qualified persons responsible for preparing the
Copperstone PFS are named above. All of whom act as independent
consultants to the Company, are Qualified Persons as define by
National Instrument 43-101 and have reviewed and approved the
contents of this new release.
HRC is a client focused
consultancy comprised of a formal collaboration of industry
professionals including geologists, engineers, and business
advisors who offer a wealth and variety of professional
experience - and a passion to gain more. As a team, HRC takes
pride in our ability to apply practical solutions to real-world
project challenges, whether in the field or in the office, for
projects in North America and around the world.
www.hardrock-consulting.com
A technical report in support of the
Pre-Feasibility Study prepared in accordance with National
Instrument 43-101 – Standards of Disclosure for Mineral Projects
(“NI 43-101”) will be filed on SEDAR (www.sedar.com) within 45 days
of this news release. Readers are strongly encouraged to review the
final technical report in its entirety.
About Kerr Mines Inc.
Kerr Mines is a North American gold development and exploration
company currently advancing the 100% owned, fully permitted
past-producing Copperstone Mine project. Copperstone is a
high-grade gold project located along a detachment fault mineral
belt in mining-friendly Arizona. The project demonstrates
significant upside exploration potential within a 4,775-hectare
(11,800 acres) land package that includes a production history of
over 500,000 ounces of gold. The Company’s current focus is on
maximizing Copperstone’s potential by defining and expanding
current resources and strengthening the mine’s economics leading to
project financing and a production decision.
For further information
contact:
Claudio Ciavarella
Chief Executive Officer
cciavarella@kerrmines.com
416-855-9305
Cautionary Note Regarding Forward
Looking Statements
This news release contains forward-looking statements, including
current expectations on the timing of the commencement of
production and the rate of production, if commenced. These
forward-looking statements entail various risks and uncertainties
that could cause actual results to differ materially from those
reflected in these forward-looking statements. Such statements are
based on current expectations, are subject to a number of
uncertainties and risks, and actual results may differ materially
from those contained in such statements. These uncertainties and
risks include, but are not limited to, the strength of the Canadian
economy; the price of gold; operational, funding, and liquidity
risks; the degree to which mineral resource estimates are
reflective of actual mineral resources; and the degree to which
factors which would make a mineral deposit commercially viable are
present; the risks and hazards associated with underground
operations. Risks and uncertainties about Kerr Mines’ business are
more fully discussed in the Company's disclosure materials,
including its annual information form and MD&A, filed with the
securities regulatory authorities in Canada and available at
www.sedar.com and readers are urged to read these materials. Kerr
Mines assumes no obligation to update any forward-looking statement
or to update the reasons why actual results could differ from such
statements unless required by law.
Neither TSX nor its Regulation Services Provider
(as that term is defined in the policies of the TSX) accepts
responsibility for the adequacy or accuracy of this release and no
stock exchange, securities commission or other regulatory authority
has approved or disapproved the information contained herein.
Cautionary Note to US Investors Regarding Mineral
Reporting Standards: The Company has prepared its
disclosure in accordance with the requirements of securities laws
in effect in Canada, which differ from the requirements of US
securities laws. Terms relating to mineral resources in this press
release are defined in accordance with National Instrument 43-101 -
Standards of Disclosure for Mineral Projects under the guidelines
set out in the Canadian Institute of Mining, Metallurgy, and
Petroleum Standards on Mineral Resources and Mineral
Reserves. The Securities and Exchange Commission (the
“SEC”) permits mining companies, in their filings
with the SEC, to disclose only those mineral deposits that a
company can economically and legally extract or produce. The
Company uses certain terms, such as, “measured mineral resources”,
“indicated mineral resources”, “inferred mineral resources” and
“probable mineral reserves”, that the SEC does not recognize (these
terms may be used in this press release and are included in the
public filings of the Company which have been filed with securities
commissions or similar authorities in Canada).