After-tax NPV5 of $143.0M & 48% IRR
All figures are in United States of America dollars unless
otherwise stated.
THUNDER BAY, ON, May 15, 2018 /CNW/ - PREMIER GOLD MINES
LIMITED (TSX: PG) ("Premier", "the Company") is pleased to
announce the Preliminary Economic Assessment ("PEA") of its 100%
owned Cove Project (the "Project") located near Battle Mountain, Nevada.
Highlights of the PEA results and life-of-mine plan ("LOM")
include:
- After-tax NPV5 of $143.0 million,
and an after-tax internal rate of return ("IRR") of 48%
- Average operating costs of $199/ton, Cash Cost of $788/oz Au and All-in Sustaining Cost
(AISC)(i) of $897/oz
Au
- Indicated mineral resources of 1,045,000 tons at 0.327 oz/t Au
and 0.861 oz/t Ag for 342,000 ounces of gold and 900,000 ounces of
silver
- Inferred mineral resources of 4,032,000 tons at 0.328 oz/t Au
and 0.609 oz/t Ag for 1,322,000 ounces of gold and 2,457,000 ounces
of silver
- Metallurgical recoveries of 82.7% for gold and 21.6% for
silver
- LOM gold production of 740,000 ounces during 8 years of
operations
- Average LOM annual gold production of 92,400 ounces
- LOM capital cost of $114.4
million after pre-development costs of $25.8 million
- Mine construction capital of $46.6
million
- After-tax payback period of 4 years
"This PEA sets the stage for the Company's planned
advanced-exploration initiative at Cove," stated Ewan Downie, President and CEO of Premier Gold
Mines. "These results support our plan for the construction
of an exploration ramp to further define and expand the deposits in
advance of a future Feasibility Study."
Project Economics
The Project will process 2.93 million tons at an average grade
of 0.305 oz/t Au producing 0.74 million ounces of gold over an
8-year period. The cost profile includes an All-in-Sustaining Cost
of $897 (net of by-product credits)
per ounce of gold sold and an average Cash Cost (net of by-product
credits) of $788 per ounce of gold
sold. Gold production will average 92,400 ounces per year over the
8-year mine life.
The PEA assumes mining of mineral resources in the Helen and Gap
deposits only. Potential exists to increase mineral resources
as the deposits remain open for expansion, as well as adding
potential mineral resources from the Cove South Deep and 2201 zones
following underground exploration and delineation drilling.
These opportunities will be reviewed during underground development
and exploration drilling program.
Project after-tax NPV5 is estimated to be $143.0 million. After-tax cash flows result
in a 4-year payback from the commencement of commercial production
with an after-tax IRR of 48% as shown in Table 1.
Table 1: Summary
of Economic Parameters and PEA Results
|
Gold price - base
case (US$/oz)
|
1,250
|
Mine life
(years)
|
8
|
Maximum mining rate
(tons/day)
|
1,360
|
Average grade (oz/t
Au)
|
0.305
|
Average gold recovery
(roaster %)
|
79.2
|
Average gold recovery
(autoclave %)
|
85.6
|
Average annual gold
production (koz)
|
92.4
|
Total recovered gold
(koz)
|
740
|
Pre-development costs
( M$)
|
25.8
|
Mine Construction
Capital (M$)
|
46.6
|
Sustaining capital
(M$)
|
67.7
|
Cash cost (US
$/oz)
|
788
|
All-in sustaining
cost ($/oz)
|
897
|
Project after-tax
NPV5% (M$)
|
143.0
|
Project after-tax IRR
(%)
|
48
|
Total undiscounted after-tax cash flow over the life of the
Project is estimated to be $196
million as shown in Table 2.
Table
2: Life-of-Mine Cash Flow
|
Year
|
Revenue
($
M)
|
Operating
Cost
($
M)
|
Pre-
development
($
M)
|
Mine
Construction
Capital
($M)
|
Sustaining
Capital
($
M)
|
Other2
($
M)
|
Pre-tax
Cash
Flow
($
M)
|
Taxes
($
M)
|
After-tax
Cash
Flow
($
M)
|
-3
|
-
|
-
|
(12)
|
-
|
-
|
-
|
-
|
-
|
-
|
-2
|
-
|
-
|
(8)
|
-
|
-
|
-
|
-
|
-
|
-
|
-1
|
-
|
-
|
(6)
|
-
|
-
|
-
|
-
|
-
|
-
|
1
|
-
|
(0)
|
-
|
(26)
|
-
|
-
|
(27)
|
-
|
(27)
|
2
|
50
|
(36)
|
-
|
(20)
|
-
|
(5)
|
(11)
|
(1)
|
(12)
|
3
|
57
|
(37)
|
-
|
-
|
(12)
|
(1)
|
8
|
(1)
|
6
|
4
|
157
|
(90)
|
-
|
-
|
(18)
|
(8)
|
42
|
(5)
|
37
|
5
|
132
|
(86)
|
-
|
-
|
(24)
|
(1)
|
22
|
(2)
|
19
|
6
|
185
|
(101)
|
-
|
-
|
(5)
|
(4)
|
76
|
(5)
|
71
|
7
|
128
|
(87)
|
-
|
-
|
(9)
|
(0)
|
34
|
(2)
|
32
|
8
|
128
|
(88)
|
-
|
-
|
-
|
(2)
|
39
|
(1)
|
38
|
9
|
89
|
(59)
|
-
|
-
|
-
|
2
|
30
|
(1)
|
29
|
10
|
-
|
-
|
-
|
-
|
-
|
7
|
4
|
-
|
4
|
11
|
-
|
-
|
-
|
-
|
-
|
-
|
(3)
|
-
|
(3)
|
Total
|
926
|
(585)
|
(26)
|
(47)
|
(68)
|
(13)
|
215
|
(19)
|
196
|
|
|
1.
|
Includes working
capital and reclamation fund.
|
2.
|
Numbers may not add
due to rounding.
|
A total of $25.8 million in
pre-development costs have been excluded from NPV and IRR
calculations within the PEA. These pre-development costs
relate to advanced exploration, resource conversion, baseline
studies and permitting activities to be completed prior to mine
construction (estimated to occur in Q1-2021) and are considered
sunk costs.
Sensitivities of the Project NPV to the gold price, discount
rate and other Project variables are presented in Table 3 and Table
4.
Table
3: After-Tax NPV Sensitivity to Discount
Rate
|
Discount
Rate
|
After-Tax
Project NPV
(M
$)
|
5%
|
143
|
8%
|
119
|
Table 4: After-Tax
Sensitivity Analysis to NPV5% and After-Tax
IRR
|
|
NPV5%
|
IRR
|
PEA
Variable
|
-15%
($
M)
|
PEA
($
M)
|
+15%
($
M)
|
-15%
(%)
|
PEA
(%)
|
+15%
(%)
|
Operating
Costs
|
190
|
143
|
94
|
61
|
48
|
35
|
Capital
Costs
|
156
|
143
|
130
|
58
|
48
|
41
|
Gold Price
|
50
|
143
|
232
|
22
|
48
|
70
|
The PEA is preliminary in nature, 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, and there is no certainty
that the PEA will be realized.
Location
The Cove Project covers 700 acres and is in the center of the
McCoy-Cove Exploration joint venture, 32 miles south of the
Town of Battle Mountain, in the
Fish Creek Mountains of Lander County,
Nevada. It is centred approximately at 40°22' N and 117°13'
W and lies within the McCoy Mining District. The Property hosts an
historical open pit mine (Cove Pit), operated by Echo Bay Mines
Ltd. (Echo Bay) between 1987 and
2001, which produced 2.6 million ounces of gold and 100 million
ounces of silver.
The property benefits from significant historic geological
datasets, local and regional networks that include its proximity to
paved highways, electric power, and pre-existing mine
infrastructure. Premier is proud of its relationships within local
communities including the Town of Battle
Mountain, which provides important manpower and services to
the Property and serves as the location of its regional office.
Geology & Mineral Resources
The Cove Gold Project is in the central Nevada portion of the Basin and Range
Province, which underwent regional extension during the Tertiary
period that created the present pattern of alternating largely
fault bounded ranges separated by alluvial filled valleys. Prior to
this extension, central Nevada had
been the site of numerous tectonic events, including at least two
periods of regional compression. The property lies west of the
central part of the Battle Mountain-Eureka Trend and hosts four
distinct mineralization types Carlin-style, polymetallic sheeted
veins, carbonate replacement (Manto), and skarn. The Helen, CSD Gap
and CSD deposits are Carlin-style deposits while the 2201-VG zone
is comprised of steeply dipping polymetallic sheeted veins.
Mineral resources were constrained using a cut-off grade of
0.149 oz/t Au. The Project mineral resources are summarized
in Table 5.
Table
5: Mineral Resource Estimate
|
|
tons
(000)
|
Tonnes (t)
(000)
|
Au
(oz/ton)
|
Au
(g/t)
|
Ag
(oz/ton)
|
Ag
(g/t)
|
Au
ozs
(000)
|
Ag
ozs
(000)
|
Indicated
|
|
|
|
|
|
|
|
|
Helen
|
577
|
524
|
0.369
|
12.7
|
0.103
|
3.5
|
213
|
60
|
Gap
|
167
|
151
|
0.357
|
12.2
|
0.431
|
14.8
|
60
|
72
|
CSD
|
301
|
273
|
0.229
|
7.9
|
2.556
|
87.6
|
69
|
768
|
2201
|
-
|
|
-
|
|
-
|
|
-
|
-
|
Total
Indicated
|
1,045
|
948
|
0.327
|
11.2
|
0.861
|
29.5
|
342
|
900
|
|
|
|
|
|
|
|
|
|
Inferred
|
|
|
|
|
|
|
|
|
Helen
|
1,493
|
1,355
|
0.335
|
11.5
|
0.118
|
4.1
|
500
|
177
|
Gap
|
1,731
|
1,570
|
0.317
|
10.9
|
0.457
|
15.7
|
549
|
791
|
CSD
|
503
|
456
|
0.204
|
7.0
|
2.266
|
77.7
|
103
|
1,140
|
2201
|
305
|
277
|
0.596
|
20.4
|
1.140
|
39.1
|
169
|
350
|
Total
Inferred
|
4,032
|
3,658
|
0.328
|
11.2
|
0.609
|
20.9
|
1,322
|
2,457
|
|
|
1.
|
The effective date of
the estimate is March 31, 2018.
|
2.
|
Underground Mineral
Resources are reported at a cut-off grade of 0.149 opt Au (5.11 g/t
Au).
|
3.
|
Mineral resources
which are not mineral reserves do not have demonstrated economic
viability. The estimate of mineral resources may be materially
affected by environmental, permitting, legal, marketing, or other
relevant issues.
|
4.
|
Mineral resources
were estimated using the Canadian Institute of Mining, Metallurgy
and Petroleum (CIM), CIM Standards on Mineral Resources and
Reserves, Definitions and Guidelines prepared by the CIM Standing
Committee on Reserve Definitions and adopted by CIM
Council.
|
5.
|
The quantity and
grade of reported Inferred resources in this estimation are
uncertain in nature and there has been insufficient exploration to
define these inferred resources as an Indicated or Measured mineral
resources.
|
6.
|
Numbers may not add
due to rounding.
|
Mining
The mine will be accessed by a single ramp extending from the
surface (elevation 4625 ft) to the lowest extent of planned mining
(elevation 3430). The access ramp will be large enough to
accommodate 30 ton trucks. A series of raises will provide
secondary egress and ventilation. A mining contractor will
extract the mineralization using drift and fill mining methods at
an average rate of 1,270 tons per day.
Metallurgy & Processing
Metallurgical testing was completed by SGS Laboratories under
the direction of Jacobs Engineering on behalf of Premier.
Composite samples from the Helen and Gap zones underwent whole ore
cyanidation testing, roasting and calcine cyanidation tests, and
pressure oxidation with cyanidation of the residues. Results
indicate that in general the Gap mineralization performs better
with pressure oxidation and the Helen mineralization performs
better with roasting. Recoveries were assigned to each
mineralized lens from the associated composite test results. The
recoveries stated herein represent a weighted average value for all
mineralisation contained in the mine plan of 82.2% for gold and
21.5% for silver.
There are three roasting facilities and two pressure oxidation
facilities located in northern Nevada which are amenable to processing the
Cove mineralization. The PEA incorporates toll-milling arrangements
with associated over-the-road trucking costs for both process
methods.
Infrastructure
General infrastructure for the Project will include:
- Site access and haul roads are in place; upgrades and general
maintenance required
- Electrical service is available from Nevada Energy; upgrades
included for commercial production
- Waste rock storage facility
- Water settling pond
- Rapid infiltration basins
- Workshop is in place on surface; a smaller maintenance facility
will be required near the portal
- Shotcrete and backfill plants
- Office and mine dry facilities for contractor mining
- Explosives and detonator storage areas
- Fuel storage and distribution
- Potable water and sewage systems
- Fire water systems
- Site security and fencing
Pre-Development and Capital Costs
The breakdown of pre-development and capital costs is provided
in Table 6.
Table 6:
Pre-Development and Capital Cost
|
|
Pre-Development
($M)
|
Mine
Construction
($M)
|
Sustaining
($
M)
|
Environmental and
Permitting
|
2.9
|
1.5
|
1.0
|
Helen
Dewatering
|
2.1
|
12.0
|
2.7
|
Gap
Dewatering
|
2.1
|
0
|
28.7
|
Electrical Service
and Powerline
|
1.0
|
3.1
|
-
|
Mine Development
Helen
|
5.9
|
18.4
|
15.4
|
Mine Development
Gap
|
-
|
0.3
|
13.6
|
Mine
Facilities
|
1.3
|
5.8
|
1.3
|
Pre-Production
Expense
|
4.2
|
1.9
|
0
|
Mobile
Equipment
|
-
|
-
|
-
|
Resource Conversion
Drilling
|
4.4
|
-
|
-
|
Contingency (15%
Excluding Drilling and Development)
|
2.0
|
3.6
|
5.1
|
Total
|
25.8
|
46.6
|
67.7
|
Sustaining capital is required during operations for mine
development, dewatering, and other underground infrastructure.
Operating Costs
The average operating cost is $788/oz Au or $198.81/t milled over the LOM. The AISC,
which includes royalties, closure, reclamation, and sustaining
capital costs, averages $897/oz
Au. Table 7 presents the LOM operating costs.
Table 7:
Life-of-Mine Operating Cost Summary
|
Category
|
Total Costs
($ M)
|
Unit
Cost
($/t
milled)
|
Cost per
Ounce
($/oz
Au)
|
Mining
|
270
|
92.05
|
365
|
Transportation &
Processing
|
221
|
75.24
|
298
|
G&A, Royalties
and
Net Proceeds
tax
|
94
|
32.19
|
128
|
By Product
Credits
|
(2)
|
(0.66)
|
(3)
|
Total Operating
Cost
|
583
|
198.81
|
788
|
Closure &
Reclamation
|
13
|
4.36
|
17
|
Sustaining
Capital
|
68
|
23.10
|
92
|
All-in Sustaining
Cost
|
664
|
226.27
|
897
|
A 1.5% net smelter royalty ("NSR") is payable to Newmont Mining
Corporation.
Permitting
The Cove Project is fully permitted under an Environmental
Assessment ("EA") to develop an exploration ramp, complete
underground diamond drilling, and to test mine up to 120,000 tons
of potentially economic mineralization. The PEA assumes that
a new EA will be required in order to dewater ahead of mining in
the Helen Zone. The collection of baseline data, permitting, and
bonding is predicted to be completed in Q1 2021. It is
expected that an Environmental Impact Statement ("EIS") will be
required in order to dewater ahead of mining in the Gap Zone.
Collection of baseline data, permitting, and bonding for the EIS is
predicted to be completed in Q2 2024. These timelines may be
accelerated pending the interpretation and implementation of recent
guidelines given to regulatory agencies by the federal government
in the United States.
Next Steps
The focus for the remainder of 2018 and 2019 includes refinement
of the hydrological model and development of an exploration decline
to support underground diamond drilling to upgrade and add to
mineral resources. Baseline studies, permitting, and a
feasibility study are planned for 2019-20.
A technical report for the Cove Project will be prepared in
accordance with National Instrument 43-101 and will be filed on
SEDAR at www.sedar.com and on the Company's websites within 45
days.
All abbreviations used in this press release are available by
following this link (click here).
Investor Day – May 15,
2018
Premier would like to cordially invite all analysts, investors
and interested people to an investor day to highlight exploration
and development initiatives completed by the Company to date and
discuss plans for the remainder of the year. The meeting will be
held today, Tuesday May 15, 2018 at
10:00am EDT at the Toronto Board of Trade, 1 First Canadian
Place. For those that cannot attend in person a webcast and
conference call dial-in are available.
Details for the conference call and webcast can be found below
and will be accessible on the Company's website.
Toll Free (North
America): 1-888-231-8191
International: 1-647-427-7450
Conference ID: 4262118
Investor Day Webcast Link
https://event.on24.com/wcc/r/1658624/8401841F6E9EA071503AA06A24BE1B5D
Investor Day Conference Call Replay
The conference call replay will be available from 3:00pm EDT on May 15,
2018 until 11:59 pm EDT on
May 22, 2018.
Toll Free Replay Call (North
America): 1-855-859-2056
International Replay Call: 1-416-849-0833
Passcode: 4262118
Qualified Person & QA/QC
Scientific and technical information in this press release has
been reviewed and approved by Mark Odell, P.E. (NV Lic#13708) of
Practical Mining LLC, an "independent qualified person" within the
meaning of National Instrument 43-101.
Notes:
i.
|
A cautionary note
regarding Non-IFRS financial metrics is included in the "Non-IFRS
Measures" section of the Q1-2018 Management Discussion and
Analysis.
|
Non-IFRS Measures
The Company has included certain terms and performance measures
commonly used in the mining industry that are not defined under
International Financial Reporting Standards ("IFRS") within this
document. These include: cash cost per ounce sold, all-in
sustaining cost ("AISC") per ounce sold, earnings before interest,
tax, depreciation and amortization ("EBITDA"), free cash flow,
capital expenditures (growth), capital expenditures (sustaining)
and average realized price per ounce. Non-IFRS measures do not have
any standardized meaning prescribed under IFRS, and therefore, they
may not be comparable to similar measures employed by other
companies. The data presented is intended to provide additional
information and should not be considered in isolation or as a
substitute for measures prepared in accordance with IFRS and should
be read in conjunction with the Company's consolidated financial
statements. Readers should refer to the Company's Management
Discussion and Analysis under the heading "Non-IFRS Measures" for a
more detailed discussion of how such measures are calculated.
Premier Gold Mines Limited is a gold producer and
respected exploration and development company with a high-quality
pipeline of precious metal projects in proven, accessible and safe
mining jurisdictions in Canada,
the United States, and
Mexico. Premier's team is focused
on creating a low-cost, mid-tier gold producer through its two
producing gold mines; and two advanced multi-million ounce
development projects where permitting and pre-construction
initiatives are in progress.
This Press Release contains certain information that may
constitute "forward-looking information" under applicable Canadian
securities legislation. Forward-looking information includes, but
is not limited to, statements about strategic plans, including
future operations, future work programs, capital expenditures,
discovery and production of minerals, price of gold and currency
exchange rates, timing of geological reports and corporate and
technical objectives and statements about the results of economic
analyses in respect of the Cove Project (including those contained
in the PEA) and the timing, extent and success of mining
operations. Forward-looking information is necessarily based upon a
number of assumptions that, while considered reasonable, are
subject to known and unknown risks, uncertainties, and other
factors which may cause the actual results and future events to
differ materially from those expressed or implied by such
forward-looking information, including the risks inherent to the
mining industry, adverse economic and market developments and the
risks identified in Premier's annual information form under the
heading "Risk Factors". There can be no assurance that such
information will prove to be accurate, as actual results and future
events could differ materially from those anticipated in such
information. Accordingly, readers should not place undue
reliance on forward-looking information. All forward-looking
information contained in this press release is given as of the date
hereof and is based upon the opinions and estimates of management
and information available to management as at the date
hereof. Premier disclaims any intention or obligation to
update or revise any forward-looking information, whether as a
result of new information, future events or otherwise, except as
required by law.
SOURCE Premier Gold Mines Limited