PEA Highlights:
- Average annual production of 77M pounds of zinc, 15M pounds of lead and 437K ounces of silver over a ten year mine
life;
- Life of Mine ("LOM") undiscounted pre-tax net cash flow of
C$483M (C$293M post-tax);
- Pre-tax IRR of a 34.1% (25.2% post-tax) and a pre-tax
NPV8% of C$230M
(C$128M post-tax) with a payback
period of 2.4 years (2.8 years post-tax);
- LOM all-in sustaining costs ("AISC") of C$0.37 per pound of zinc produced, net by-product
credits;
- Total pre-production capital costs of C$168 million (including 18%
contingency);
- Assumed metal prices of US$1.25 per lb of zinc, US$1.10 per lb of lead, US$17 per ounce of silver and a C$/US$ exchange
rate of 0.77; and
- Potential to materially enhance the economic return with
additional drilling over the district-scale land package.
VANCOUVER, May 14, 2018 /CNW/ - Callinex Mines Inc.
(the "Company" or "Callinex") (TSX-V: CNX; OTCQX: CLLXF) is pleased
to announce results from an independent initial Preliminary
Economic Assessment ("PEA") on the Company's 100% owned
Nash Creek and Superjack Projects
located in the Bathurst Mining District of New Brunswick, Canada (See Figure 1 and Figure
2).
The initial PEA outlines a 10-year, 3,900 tpd open-pit mining
operation with a Dense Media Separation ("DMS") plant and 1,950 tpd
conventional flotation process facility at the Nash Creek Project
(the "Project"). The mine plan generates a strong economic
return with a pre-tax internal rate of return ("IRR") of a 34.1%
(25.2% post-tax) and a pre-tax Net Present Value ("NPV") at an 8%
discount rate of C$230 million
(C$128 million post-tax) based on
pre-production capital costs of C$168
million and a zinc price of US$1.25/lb (See
Tables 1 and 2). The Company believes there is a clear
opportunity to significantly enhance the project's economics with
additional exploration that allows for higher grade material to be
scheduled earlier in the mine plan (See Figure 3).
Max Porterfield, President and
CEO, stated, "We are very pleased with the results of this initial
PEA that outlines the potential for a new zinc mine at our Nash
Creek Project. The results of this PEA, combined with close
proximity to infrastructure and a district-scale land package,
represents a highly attractive scenario for Callinex
shareholders."
Click here to view a two-minute video for an overview of the
Nash Creek Project
Cautionary Note on PEA. The PEA is preliminary in nature
and it includes Inferred Mineral Resources that are considered too
speculative geologically to have the economic considerations
applied to them that would enable them to be categorized as Mineral
Reserves. There is no certainty that the PEA will be realized.
The Nash Creek Deposit is open for expansion in several
directions with relatively few drill holes located outside of the
Mineral Resource area. The 2017 drilling campaign on the Nash
Creek Deposit, the first to ever be completed by the Company, led
to a 74% increase in Indicated Mineral Resource zinc equivalent
("Zn Eq.") pounds and a 385% increase in Inferred Mineral Resource
zinc equivalent pounds (See News Release dated April 16, 2018). Additionally, the Project
encompasses several untested high-grade mineral occurrences over a
highly prospective 20 km long trend. The Company plans to commence
permitting while aggressively advancing exploration opportunities
within this underexplored 150 km² district-scale land
package.
The Nash Creek and Superjack
Projects benefit from world-class infrastructure within close
proximity. The Nash Creek Deposit is located approximately 1 km
from Provincial Highway 11 and a 230 Kv high-voltage transmission
lines and only 25 km by road to Glencore's Brunswick Smelter, deep
water port, railway and power plant near the town of Belledune (See Figure 1 and Figure 2).
The Superjack Project is located 90 km by highway from the
Company's Nash Creek Project and 15 km southwest of the Brunswick
No. 12 Mine, which was previously the largest underground mine in
the world (See Figure 1). Mineralization at the Superjack
Project is hosted within a similar geological environment as the
'supergiant' Brunswick No. 12 Mine and Trevali's nearby Caribou
Mine.
Callinex anticipates that development of the Nash Creek Project
will provide a major economic benefit to the community of
Lorne and additional nearby
communities within New Brunswick.
The PEA assumes that development of the project would create
approximately 225 full-time jobs and contribute nearly $200 million in direct tax benefits.
The PEA was prepared under the supervision of Eugene Puritch, P. Eng., FEC, CET of P&E
Mining Consultants Inc. the technical report will be filed on SEDAR
within 45 days of this news release.
Opportunities and Exploration Potential
The Company's management team is very encouraged about the
strong economic results generated from its initial PEA and the
opportunities for further improvement with additional exploration,
especially considering that only limited drilling has occurred
outside of the Mineral Resource area. Notable opportunities for
further improvement include:
- Exploration or acquisition activities resulting in the addition
of higher-grade material after year one of the mine plan which
could have potential to significantly increase the IRR and
NPV8% (See Figure 3);
- Expand the 10-year mine life with additional exploration
success at the Nash Creek Deposit, which is open for expansion, to
increase the NPV8% and evaluate increasing process plant
throughput with potential to lower unit costs and increase
production volumes; and
- Potential for new discoveries within a 150 km2 land
package where a primary north-south corridor has several high-grade
mineral occurrences up to 19% Pb+Zn at surface with very limited
historic drilling.
Overview of PEA Results and Assumptions
Economic Sensitivities and Indicators
Table 1: Economic Sensitivities and Project Economics
The economic sensitivities and project economics are as
follows:
|
|
|
|
Parameter
|
Unit
|
Base
Case
|
Spot
Scenario
|
Zinc Price
|
US$/lb
|
$1.25
|
$1.40
|
Lead Price
|
US$/lb
|
$1.10
|
$1.05
|
Silver
Price
|
US$/oz
|
$17.00
|
$16.70
|
Exchange
Rate
|
C$/US$
|
0.77
|
0.78
|
|
|
|
|
|
|
Pre-tax Undiscounted
Net Cash Flow
|
C$M
|
$
|
483.4
|
$
|
582.6
|
Pre-tax
NPV5%
|
C$M
|
$
|
303.9
|
$
|
372.7
|
Pre-tax
NPV8%
|
C$M
|
$
|
230.2
|
$
|
286.6
|
Pre-tax
IRR
|
%
|
34.1%
|
39.2%
|
Pre-tax Payback
Period
|
years
|
2.4
|
2.1
|
|
|
|
|
|
|
After-tax
Undiscounted Net Cash Flow
|
C$M
|
$
|
292.5
|
$
|
350.7
|
After-tax
NPV5%
|
C$M
|
$
|
175.7
|
$
|
216.2
|
After-tax
NPV8%
|
C$M
|
$
|
127.6
|
$
|
160.7
|
After-tax
IRR
|
%
|
25.2%
|
28.8%
|
After-tax Payback
Period
|
years
|
2.8
|
2.6
|
|
|
|
|
|
|
Net Smelter
Return
|
C$/t DMS
plant feed
|
$
|
80.13
|
$
|
87.07
|
Operating
Margin
|
C$/t DMS
plant feed
|
$
|
49.28
|
$
|
56.23
|
Total Operating Cost
(Incl. royalty)
|
C$/t DMS
plant feed
|
$
|
30.94
|
$
|
31.01
|
|
|
|
|
|
|
Total Operating Cost
(Incl. royalty)
|
C$/lb Zn
Produced
|
$
|
0.30
|
$
|
0.31
|
All-in Sustaining
Costs (Excl. G&A)
|
C$/lb Zn
Produced
|
$
|
0.37
|
$
|
0.38
|
Mining and Processing Method
The PEA assumes a conventional truck and excavator open-pit
mining operation at an average annual process plant production rate
of 1,425,000 tonnes per annum over a mine life of approximately 10
years. Mining operations will reach an annual average total
material movement of 10 million tonnes using 11.5 m3 diesel hydraulic excavators,
90 tonne haulage trucks, and track mounted diesel powered drill
rigs with up to 200 mm diameter blastholes drilled on 5 and 10
metre height benches.
The mined material will be processed at a new 3,950 tonne per
day dense media plant and a 1,950 day tonne per day grinding and
flotation plant located on the Project site. Two concentrates will
be produced; zinc-silver and lead-silver. It is anticipated
that lead concentrates could be processed at the nearby Belledune
Smelter and zinc concentrates at Valleyfield, QC. The zinc concentrates also
have potential to be processed overseas via the deep water port
from Belledune although this
alternate option was outside the scope of the PEA and was not
investigated. A review of metallurgical test work has not
identified any deleterious elements that would impact the
marketability of the zinc and lead concentrates, which are
considered of good quality.
Table 2: Mine Production Summary(1)
The operating assumptions for the financial model are as
follows:
|
|
|
Parameter
|
Unit
|
Base
Case
|
Mine Life
|
Years
|
10
|
Annual Production in
Concentrate
|
|
|
|
Zn Eq.
|
M Lbs
|
95.5
|
Zinc
|
M Lbs
|
76.7
|
Lead
|
M Lbs
|
14.6
|
Silver
|
M Oz
|
0.4
|
Tonnes Mined
(LOM)
|
Mt
|
14.4
|
Nash Creek
|
Mt
|
13.1
|
Superjack
|
Mt
|
1.3
|
|
|
|
|
Strip Ratio
(LOM)
|
Waste to Mill
Feed
|
6.7
|
DMS Plant
Feed
|
|
|
|
Zn Eq.
|
%
|
3.70%
|
Zinc
|
%
|
2.88%
|
Lead
|
%
|
0.62%
|
Silver
|
g/t
|
20.26
|
DMS Rejection
Rate
|
%
|
50.0%
|
DMS Sulphide
Loss
|
%
|
7.0%
|
Mill Feed
(LOM)
|
Mt
|
7.2
|
Average Head Grade
(LOM)
|
|
|
|
Zn Eq.
|
%
|
6.88%
|
Zinc
|
%
|
5.36%
|
Lead
|
%
|
1.15%
|
Silver
|
g/t
|
37.68
|
|
|
|
|
Average Recovery to
Concentrate
|
|
|
|
Zinc (Zinc
Concentrate)
|
%
|
90.0%
|
Lead (Lead
Concentrate)
|
%
|
80.0%
|
Silver (Lead and Zinc
Concentrate)
|
%
|
25.0%
|
|
|
|
|
Zinc in Zinc
Concentrate
|
%
|
53.8%
|
Silver in Zinc
Concentrate
|
g/t
|
105
|
Lead in Lead
Concentrate
|
%
|
50.3%
|
Silver in Lead
Concentrate
|
g/t
|
517
|
Zinc Concentrate
Terms
|
|
|
|
Treatment
Charge
|
US$/dmt
|
$150
|
Transportation
Cost
|
US$/wmt
|
$30
|
Payable Rate for
Zinc
|
%
|
85%
|
|
|
|
|
NSR from Zinc
Concentrate
|
C$M
|
$
|
939
|
Lead Concentrate
Terms
|
|
|
|
Treatment
Charge
|
US$/dmt
|
$134
|
Transportation
Cost
|
US$/wmt
|
$5
|
Payable Rate for
Lead
|
%
|
95%
|
|
|
|
|
NSR from Lead
Concentrate
|
C$M
|
$
|
217
|
- Zinc equivalent calculation used to reference PEA figures is
based on the following metal prices: zinc US$2,755/t (1.25/lb), lead US$2,205/t (1.10/lb), and silver US$17.0 per oz. Metal recoveries of 100% were
applied in the metal equivalent calculations. The zinc equivalent
calculation is as follows: Zn Eq = 100 ((Ag
Price in (g) x Ag Grade) +
(Pb Price*2204.6 x Pb Grade(%)/100) + (Zn Price*2204.6 x (Zn
Grade(%)/100))/Zn Price*2204.6).
Operating and Capital Costs
Table 3: Operating Cost
The anticipated operating costs are as follows:
|
|
|
|
Parameter
|
Unit
|
Unit
Cost
|
LOM
Costs (C$M)
|
Mining Cost
(Ovb)
|
C$/t mined
|
$2.00
|
$
|
7.4
|
Mining Cost
(Waste)
|
C$/t mined
|
$2.35
|
$
|
209.0
|
Mining Cost
(Mineralized)
|
C$/t mined
|
$2.75
|
$
|
39.9
|
Superjack Ore
Transport
|
C$/t mined
|
$13.00
|
$
|
16.8
|
DMS Processing
Cost
|
C$/t mined
|
$0.20
|
$
|
2.9
|
Flotation Processing
Cost
|
C$/t
milled
|
$13.20
|
$
|
95.2
|
Tailings
Handling
|
C$/t DMS
feed
|
$1.25
|
$
|
17.1
|
Environmental
|
C$/t DMS
feed
|
$1.44
|
$
|
20.8
|
G&A
|
C$M/yr
|
$2.50
|
$
|
25.8
|
Royalty
|
NSR
|
1.0%
|
$
|
11.6
|
Total Operating
Cost
|
C$/t mined
|
$30.94
|
$
|
434.8
|
Table 4: Life of Mine Capital Costs
The initial and sustaining capital costs are presented as
follows:
|
|
|
Category
|
Contingency
|
Initial
(C$M)
|
Mine
Pre-Stripping
|
5%
|
$
|
10.2
|
Mining Capital
Cost
|
20%
|
$
|
5.3
|
Process Plant with
DMS (Directs)
|
20%
|
$
|
63.1
|
Infrastructure
|
20%
|
$
|
23.0
|
Permitting and
Tailings
|
10%
|
$
|
16.7
|
Indirects
|
20%
|
$
|
24.6
|
Contingency
Total
|
18%
|
$
|
31.4
|
Total Initial
Capital Cost
|
|
$
|
168.3
|
|
|
|
|
Category
|
Contingency
|
Sustaining
(C$M)
|
Mine & Equipment
Lease
|
20%
|
$
|
31.1
|
Process Plant with
DMS
|
10%
|
$
|
3.0
|
Closure &
Reclamation
|
10%
|
$
|
15.8
|
Contingency
Total
|
15%
|
$
|
8.0
|
Total Sustaining
Capital
|
|
$
|
57.9
|
|
|
|
|
Total Capital
Cost
|
|
$
|
226.2
|
Project Infrastructure
The Project will benefit from infrastructure, services and
skilled labour available in the Bathurst Mining Camp. The Nash
Creek Project site is located approximately 50 km northwest of the
city of Bathurst and is accessible
year-round from paved Provincial Highway 11 and a 1 km paved
road. Project site infrastructure is anticipated to
include:
- Plant site and haul roads;
- Administration buildings and assay lab;
- Mine maintenance shop, warehouse and fuel storage
facilities;
- Fresh water supply and sewage treatment; and
- Lined tailings storage area.
The proposed Nash Creek Project mill and process plant site is
ideally located on the access road to the open pit and on private
land owned by Callinex. The proposed processing plant site is
located on a relatively flat area adjacent to the open pit. A small
creek valley to the west of the open pit provides a suitable site
for a dammed tailings management facility for the first 4 years of
mine life. Thereafter, tailings will be deposited into the first
small pit area to be mined out. Power to the site will be supplied
by a 1 km transmission line connecting to the nearby 230 kV
provincial grid.
Environmental, Permitting and Taxes
The PEA envisages potential to create approximately 225 jobs if
the project is advanced into production. The project could have a
major impact within the surrounding communities of Lorne and Belledune, where there are limited number of
economic opportunities resulting in a unemployment rate exceeding
20%. The nearby cities of Bathurst
and Cambellton located within 50 km to the Project also have higher
unemployment rates of approximately 11%. In addition to the
potential for direct job creation, the PEA outlines gross taxes and
royalty payable to the Province of New
Brunswick of approximately $130
million and approximately $64
million to the Government of Canada (See Table 6).
The Nash Creek Project will be subject to federal, provincial
and local regulatory requirements. The principal provincial
legislation related to the approval of mining projects and
environmental impact assessment (EIA) and are the New Brunswick
Mining Act and General Regulation 86-98 of The Clean Environment
Act and EIA Regulation 87-83, and Water Quality Regulation 82-126.
Relevant key federal legislation includes the Canadian
Environmental Assessment Act, Fisheries Act and Metal Mining
Effluent Regulations. The New Brunswick Department Energy and
Resource Development has provided a concise guide to the mine
approval process.
The relatively low sulphide content of the Nash Creek mineralization is anticipated to
have low waste rock ARD potential. Additionally, identifiable ARD
material will be placed in the mined out open pits at the end of
the Project life.
Table 5: Taxes Payable
|
|
|
|
Parameter
|
Unit
|
Tax
Rate
|
Taxes
Paid
|
Federal Income
Tax
|
C$M
|
15.0%
|
$
|
63.2
|
New Brunswick Income
Tax
|
C$M
|
14.0%
|
$
|
58.9
|
NB Net Profit Mining
Tax
|
C$M
|
16.0%
|
$
|
61.6
|
NB Net Revenue
Tax
|
C$M
|
2.0%
|
$
|
17.2
|
Gross Tax
Payable
|
C$M
|
40.2%
|
$
|
200.9
|
Conceptual Toll Milling Scenario
P&E investigated the concept of transporting the mined
mineralized material with DMS upgrading to a hypothetical toll
milling facility within the Bathurst Mining District located 100 km
from the Nash Creek Project. Transport costs of C$15/tonne and toll processing costs of
C$24/tonne were assumed. This
scenario provided robust economic return on capital with a pre-tax
IRR of 46.9% (32.3% post-tax) and a pre-tax NPV8% of
C$125 million (C$69 million post-tax) with a pre-production
capital cost of $62.2M
Mineral Resource Estimates Incorporated in PEA
The PEA mine plans assumes that 14.4 million tonnes of diluted
mineralized material grading 3.1% Zn Eq. (2.9% Zn, 0.6% Pb and 20.3
g/t Ag) is delivered to the DMS plant. The table below outlines the
total Indicated and Inferred Mineral Resources (See News Release
dated April 16, 2018), including
those that were not included within the mine plan.
Table 6: Mineral Resource Estimates for the Nash Creek and Superjack Projects
Indicated Mineral
Resources
|
Project
|
Tonnes
|
Zn
Eq. (%)
|
Zn
(%)
|
Pb (%)
|
Ag
(g/t)
|
Cu (%)
|
Contained Zn
Eq. (M
lbs)
|
Nash Creek
|
13,592,000
|
3.21
|
2.68
|
0.58
|
17.8
|
n/a
|
963.4
|
Total
|
13,592,000
|
3.21
|
2.68
|
0.58
|
17.8
|
n/a
|
963.4
|
Inferred Mineral
Resources
|
Project
|
Tonnes
|
Zn Eq.
(%)
|
Zn
(%)
|
Pb
(%)
|
Ag (g/t)
|
Cu (%)
|
Contained Zn
Eq. (M
lbs)
|
Superjack
|
3,211,000
|
4.63
|
3.01
|
0.78
|
29.5
|
0.27
|
327.6
|
Nash Creek
|
5,929,000
|
3.11
|
2.68
|
0.47
|
13.9
|
n/a
|
407.1
|
Total
|
9,140,000
|
3.64
|
2.80
|
0.58
|
19.4
|
0.09
|
734.7
|
Notes:
- Mineral Resources are categorized according to CIM Definition
Standards; it cannot be assumed that all or any part of Inferred
Mineral Resources will be upgraded to Indicated or Measured as a
result of continued exploration.
- The Nash Creek Mineral Resource Estimate includes the Hickey
Zone and Hayes Zone.
- The Superjack Mineral Resource Estimates includes the
Nepisiguit A (the "A Zone") and Nepisiguit C Zones (the "C
Zone").
- Zinc equivalent Mineral Resources for the Nash Creek Project
based on trailing 3-year metal prices and metallurgical recovery
assumptions based on limited testwork. Zinc equivalency is
calculated as Zn%+ 0.747*Pb% + 0.006*Ag_ppm.
- A cut-off grade of 1.5% Zn Eq. was utilized in the
resource estimate.
- Zinc equivalent Mineral Resources for the Superjack Project
were calculated using metal prices of $1.12/lb for zinc, $1.06/lb for lead, $2.97/lb for copper and $20.38/oz for silver. Metal recoveries have been
assumed to be 100% for zinc, 72% for lead, 86% for copper and 70%
for silver. A cut-off grade of 1.5% Zn Eq. was utilized in the
Mineral Resource Estimate.
Figure 1: Map of the Bathurst Mining District of New Brunswick
Figure 2: Nash Creek Land Package
Figure 3: Nash Creek Production Schedule Overview - Operating
Cash Flow and Zinc Grades
Figure 4: Nash Creek Provides Leverage to Zinc and Lead
Prices
Figure 5: Conceptual Nash Creek Open Pit with Mineral
Resources
Qualified Persons Statement
The PEA was prepared under the supervision of Eugene Puritch, P. Eng., FEC, CET of P&E
Mining Consultants Inc. Mr. Puritch is an independent Qualified
Person in accordance with NI 43-101 and has reviewed and approved
the technical contents of this news release.
Cautionary Note on PEA
The PEA is preliminary in nature and it includes Inferred
Mineral Resources that are considered too speculative geologically
to have the economic considerations applied to them that would
enable them to be categorized as Mineral Reserves. There is no
certainty that the PEA will be realized.
About Callinex Mines Inc.
Callinex Mines Inc. (TSX-V: CNX ; OTCQX: CLLXF) is advancing
its portfolio of zinc rich deposits located in established Canadian
mining jurisdictions. The portfolio is highlighted by its
Nash Creek and Superjack deposits
in the Bathurst Mining District of New
Brunswick. A 2018 PEA outlined a mine plan that generates a
strong economic return with a pre-tax IRR of a 34.1% (25.2%
post-tax) and a pre-tax NPV8% of C$230 million (C$128
million post-tax). The projects have significant exploration
upside over a district-scale land package that encompasses several
high-grade mineral occurrences along a 20 km trend.
Callinex has a project portfolio that also includes projects
within the Flin Flon Mining District of Manitoba that are located 25 km to an
operating processing facility that requires additional ore. The
Company's projects host Indicated resources of 13.6 Mt averaging
3.2% Zn Eq. totaling 963 million pounds and Inferred resources of
23.2 Mt averaging 5.2% Zn Eq. totaling 2.7 billion pounds (See News
Release dated April 16,
2018).
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.
Some statements in this news release contain forward-looking
information. These statements include, but are not limited to,
statements with respect to future expenditures. These statements
address future events and conditions and, as such, involve known
and unknown risks, uncertainties and other factors which may cause
the actual results, performance or achievements to be materially
different from any future results, performance or achievements
expressed or implied by the statements. Such factors include, among
others, the ability to complete the proposed drill program and the
timing and amount of expenditures. Except as required under
applicable securities laws, Callinex does not assume the obligation
to update any forward-looking statement.
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content:http://www.prnewswire.com/news-releases/callinex-announces-results-of-initial-preliminary-economic-assessment-that-generates-a-34-irr-and-a-230m-npv8-at-the-nash-creek-and-superjack-projects-300647765.html
SOURCE Callinex Mines Inc.