- After-tax NPV at a 6% discount rate of
US$208M, IRR of 28.2% and Capex of
US$294M -
Shares Outstanding: 337,568,556
TORONTO, Aug. 1, 2018 /CNW/ - Aquila Resources
Inc. (TSX: AQA) ("Aquila" or the "Company") announced today
the results of an independent open pit only Feasibility Study
("Feasibility Study") completed on its 100% owned zinc- and
gold-rich Back Forty Project in Michigan. The Feasibility Study was compiled
by Lycopodium Minerals Canada Ltd ("Lycopodium") with support
from globally recognized experts and specialist consulting
engineering companies in environmentally critical areas such as
waste water treatment, tailings and waste rock management and mine
design. All economic values within this news release are in US
dollars unless indicated otherwise.
"The completion of the Back Forty Project Feasibility Study is a
significant milestone for Aquila and sets the stage for the next
steps to develop this deposit," said Barry
Hildred, President and Chief Executive Officer of
Aquila. "Back Forty is well-positioned as a permitted project
in a favourable mining jurisdiction that is close to existing
infrastructure. We can now focus the Company's resources on the
pre-construction phase at Back Forty while considering funding
alternatives to complete the development of the Project."
Highlights
- Pre-tax NPV at a 6% discount rate of $259M and IRR of 32.0% at base case metal prices
of $1,300/oz gold, $1.20/lb zinc, $20/oz silver, $3.00/lb copper and $1.00/lb lead.
- After-tax NPV at a 6% discount rate of $208M and IRR of 28.2% with a 2.2 year
payback.
- Open pit Proven and Probable Mineral Reserves of 11.65M tonnes.
- A project life of seven years with total payable gold
production of 468,000 oz (or an average of 67,000 oz per year) and
135,000 oz in Year 1. Total payable gold equivalent production of
1.1 million oz.
- Total payable zinc production of 512M lbs (or an average of 73M lbs per year). Total payable zinc equivalent
production of 1.2B lbs.
- Initial project capital costs estimated at $294M with a 24-month construction period.
- Sustaining capital costs of $110.6M.
- Gross C1 cash costs1 of $499/oz gold equivalent or $0.46/lb zinc equivalent and net C1 cash costs of
-$590/oz gold or -$1.73/lb zinc.
- Gross AISC2 of $677/oz
gold equivalent or $0.62/lb zinc
equivalent and net AISC of -$171/oz
gold or -$1.34/lb zinc.
- The Company has also identified a number of opportunities to
further enhance the overall economics of the Project including the
future addition of an underground expansion.
Andrew Boushy, P.Eng., Senior
Vice President, Projects commented, "I want to thank our entire
expanded team of specialists and consultants for all of their
efforts in helping us complete the Feasibility Study. The robust
results of the study clearly demonstrate that Back Forty is a
compelling project based only on an open pit operation and we see
several opportunities to further enhance value that will be
advanced during the detailed engineering phase. We have set the bar
high for environmental protection and plan to engage local
contractors who live in the community in which we will
operate."
____________________________
1
C1 cash costs, which are intended to
measure direct cash costs of producing paid metal, does not have a
standardized meaning under IFRS. See "Non-IFRS
Measures".
|
2
All-in sustaining costs ("AISC") does not
have a standardized meaning under IFRS. See "Non-IFRS
Measures".
|
Back Forty Project Background
The Back Forty Project (the "Project") is a polymetallic (zinc,
gold, copper, silver, lead) Volcanogenic Massive Sulphide ("VMS")
deposit located in Menominee County,
Michigan, USA. The Back Forty deposit was originally
discovered in 2002, and is currently wholly-owned by Aquila. The
Project is located approximately 55 km south-southeast from
Iron Mountain, and approximately
19 km west of Stephenson,
Michigan.
Mineralization at the Back Forty deposit consists of discrete
zones of: 1) zinc or copper-rich massive sulphide (±lead), which
may contain significant amounts of gold and silver, 2) stockwork
stringer and peripheral sulphide, which can be gold, zinc, and
copper-bearing (±lead/silver), 3) precious metal-only, low-sulphide
mineralization, and 4) oxide-rich, precious metal-bearing
gossan.
Major aspects of the Project include mine open pit, hydrological
cut-off wall, oxide and sulphide processing plants, tailings
management facility, waste rock storage facilities, contact and
non-contact water basins, mine services, access road and a state of
the art waste water treatment plant. The reclamation and
closure plan includes the backfilling of the open pit with waste
rock and the capping of the tailings and waste rock facility
followed by a minimum of 20 years of environmental monitoring
as required by Michigan law.
Access to the facility is from the west side of the Project from
the existing River Road. Principal access will be via a main
security gate near the process plant. Power to the site will be
provided via an incoming high voltage line from the east side of
the Project.
Mineral Reserve Estimate
The Proven and Probable Mineral Reserve Estimate for the Project
is summarised in the table below. Approximately 70% of the
Mineral Reserve Estimate is in the Proven category. Only Measured
and Indicated Mineral Resources are included in the open pit
Mineral Reserve Estimate. The Mineral Reserve Estimate was prepared
by P&E Mining Consultants Inc.
Back Forty Mineral
Reserve Estimate as at February 6, 2018
|
|
Ore
Mt
|
NSR
$/t
|
Gold
g/t
|
Silver
g/t
|
Zinc
%
|
Lead
%
|
Copper
%
|
Proven
|
8.12
|
$120
|
1.95
|
18.4
|
3.02
|
0.13
|
0.35
|
Probable
|
3.53
|
$85
|
1.63
|
29.3
|
1.76
|
0.41
|
0.10
|
Proven +
Probable
|
11.65
|
$109
|
1.85
|
21.7
|
2.64
|
0.21
|
0.28
|
1.
|
CIM definitions
were followed for the Mineral Reserve Estimate.
|
2.
|
The Mineral
Reserve Estimate used average long term metal prices of $1,250/oz
gold; $20.00/oz silver; $1.15/lb zinc; $1.00/lb lead; and
$3.00/lb copper.
|
3.
|
A Mineral Reserve
is defined within a mine plan, with pit phase designs guided by
Lerchs–Grossmann (LG) pit shells, after dilution and mining loss
adjustments.
|
4.
|
The Mineral
Reserve Estimate is derived from Measured and Indicated Mineral
Resources only.
|
5.
|
Metallurgical
recovery used was a variable function of the rock type and metal
grade.
|
6.
|
The Mineral
Reserve Estimate for the Project will be comprised of eight
different ore types that will be processed either though a
flotation concentrator or cyanide leach plant. NSR cut-off values
applied are: Ore 1 - $16.50/t, Ore 2,3,4,7,8 - $16.00/t, Ore 5 -
$17.50/t, and Ore 6 - $28.50/t.
|
7.
|
The life-of-mine
strip ratio is 4.3:1 including the pre-construction
period.
|
Mineral Resource Estimate
The Mineral Resource Estimate from which the Mineral Reserve is
derived from is set out below and was prepared by P&E Mining
Consultants Inc.
Back Forty Mineral
Resource Estimate as at February 6, 2018
|
Area
|
Metallurgy
Type
|
Class
|
NSR
Cut-off
|
Tonnes
|
Gold
|
Gold
|
Silver
|
Silver
|
Zinc
|
Zinc
|
Copper
|
Copper
|
Lead
|
Lead
|
$/tonne
|
(1,000)
|
g/t
|
K
oz
|
g/t
|
K
oz
|
%
|
M
lb
|
%
|
M
lb
|
%
|
M
lb
|
Pit
Constr-
ained
|
Floatable
|
Meas
|
21
|
6,797
|
1.75
|
381
|
18.4
|
4,027
|
3.45
|
516.5
|
0.38
|
56.4
|
0.16
|
23.4
|
Ind
|
21
|
3,768
|
1.58
|
191
|
25.2
|
3,056
|
3.15
|
261.7
|
0.24
|
19.9
|
0.39
|
32.8
|
M &
I
|
21
|
10,565
|
1.68
|
572
|
20.9
|
7,083
|
3.34
|
778.2
|
0.33
|
76.3
|
0.24
|
56.2
|
Inf
|
21
|
71
|
1.01
|
2
|
30.7
|
70
|
2.98
|
4.7
|
0.14
|
0.2
|
0.37
|
0.6
|
Leachable
|
Meas
|
22
|
553
|
5.61
|
100
|
34.8
|
618
|
0.19
|
2.4
|
0.05
|
0.6
|
0.13
|
1.5
|
Ind
|
22
|
1,777
|
2.15
|
123
|
39.6
|
2,263
|
0.41
|
16.1
|
0.03
|
1.3
|
0.29
|
11.5
|
M &
I
|
22
|
2,330
|
2.97
|
223
|
38.5
|
2,881
|
0.36
|
18.5
|
0.04
|
1.9
|
0.25
|
13.0
|
Inf
|
22
|
378
|
3.62
|
44
|
40.1
|
487
|
0.38
|
3.2
|
0.06
|
0.5
|
0.52
|
4.3
|
Total
|
Meas
|
21+22
|
7,350
|
2.04
|
481
|
19.7
|
4,645
|
3.20
|
518.8
|
0.35
|
57.0
|
0.15
|
24.9
|
Ind
|
21+22
|
5,545
|
1.76
|
314
|
29.8
|
5,319
|
2.27
|
277.8
|
0.17
|
21.2
|
0.36
|
44.3
|
M &
I
|
21+22
|
12,895
|
1.92
|
795
|
24.0
|
9,964
|
2.80
|
796.6
|
0.28
|
78.2
|
0.24
|
69.2
|
Inf
|
21+22
|
448
|
3.21
|
46
|
38.6
|
557
|
0.79
|
7.9
|
0.07
|
0.7
|
0.49
|
4.9
|
Out of
Pit
|
Floatable
|
Meas
|
70
|
556
|
1.79
|
32
|
26.8
|
480
|
5.32
|
65.2
|
0.33
|
4.0
|
0.41
|
5.0
|
Ind
|
70
|
3,059
|
1.84
|
180
|
26.2
|
2,577
|
4.23
|
285.4
|
0.51
|
34.3
|
0.30
|
20.3
|
M &
I
|
70
|
3,615
|
1.83
|
213
|
26.3
|
3,057
|
4.40
|
350.7
|
0.48
|
38.4
|
0.32
|
25.3
|
Inf
|
70
|
544
|
2.96
|
52
|
37.5
|
656
|
1.38
|
16.6
|
0.62
|
7.5
|
0.39
|
4.6
|
Leachable
|
Meas
|
70
|
37
|
7.38
|
9
|
74.3
|
89
|
0.31
|
0.3
|
0.12
|
0.1
|
0.11
|
0.1
|
Ind
|
70
|
77
|
3.85
|
9
|
47.3
|
117
|
0.32
|
0.5
|
0.15
|
0.2
|
0.13
|
0.2
|
M &
I
|
70
|
114
|
5.01
|
18
|
56.1
|
206
|
0.32
|
0.8
|
0.14
|
0.3
|
0.13
|
0.3
|
Inf
|
70
|
137
|
5.93
|
26
|
81.0
|
356
|
0.42
|
1.3
|
0.16
|
0.5
|
0.49
|
1.5
|
Total
|
Meas
|
70
|
593
|
2.14
|
41
|
29.8
|
569
|
5.01
|
65.5
|
0.32
|
4.1
|
0.39
|
5.1
|
Ind
|
70
|
3,135
|
1.88
|
190
|
26.7
|
2,694
|
4.14
|
286.0
|
0.50
|
34.6
|
0.30
|
20.5
|
M &
I
|
70
|
3,729
|
1.93
|
231
|
27.2
|
3,262
|
4.28
|
351.5
|
0.47
|
38.7
|
0.31
|
25.7
|
Inf
|
70
|
680
|
3.56
|
78
|
46.2
|
1,011
|
1.19
|
17.8
|
0.53
|
8.0
|
0.41
|
6.1
|
Total
|
Floatable
|
Meas
|
21+70
|
7,353
|
1.75
|
414
|
19.1
|
4,507
|
3.59
|
581.7
|
0.37
|
60.5
|
0.18
|
28.4
|
Ind
|
21+70
|
6,827
|
1.69
|
371
|
25.7
|
5,633
|
3.64
|
547.1
|
0.36
|
54.2
|
0.35
|
53.1
|
M &
I
|
21+70
|
14,180
|
1.72
|
785
|
22.2
|
10,140
|
3.61
|
1,128.8
|
0.37
|
114.7
|
0.26
|
81.5
|
Inf
|
21+70
|
615
|
2.74
|
54
|
36.7
|
726
|
1.57
|
21.2
|
0.57
|
7.7
|
0.38
|
5.2
|
Leachable
|
Meas
|
22+70
|
590
|
5.72
|
109
|
37.3
|
707
|
0.20
|
2.6
|
0.05
|
0.7
|
0.12
|
1.6
|
Ind
|
22+70
|
1,854
|
2.22
|
132
|
39.9
|
2,380
|
0.41
|
16.7
|
0.04
|
1.6
|
0.29
|
11.7
|
M &
I
|
22+70
|
2,444
|
3.07
|
241
|
39.3
|
3,087
|
0.36
|
19.3
|
0.04
|
2.2
|
0.25
|
13.4
|
Inf
|
22+70
|
514
|
4.24
|
70
|
51.0
|
842
|
0.39
|
4.5
|
0.09
|
1.0
|
0.51
|
5.8
|
Total
|
Meas
|
21+22+70
|
7,943
|
2.04
|
522
|
20.4
|
5,214
|
3.34
|
584.3
|
0.35
|
61.2
|
0.17
|
30.0
|
Ind
|
21+22+70
|
8,680
|
1.80
|
504
|
28.7
|
8,013
|
2.95
|
563.8
|
0.29
|
55.8
|
0.34
|
64.9
|
M &
I
|
21+22+70
|
16,623
|
1.92
|
1,026
|
24.7
|
13,227
|
3.13
|
1,148.1
|
0.32
|
116.9
|
0.26
|
94.9
|
Inf
|
21+22+70
|
1,129
|
3.42
|
124
|
43.2
|
1,568
|
1.03
|
25.7
|
0.35
|
8.7
|
0.44
|
11.0
|
|
|
1.
|
Mineral Resources
which are not Mineral Reserves do not have demonstrated economic
viability.
|
2.
|
The Inferred
Mineral Resource in this estimate has a lower level of confidence
that that applied to an Indicated Mineral Resource and must not be
converted to a Mineral Reserve. It is reasonably expected that the
majority of the Inferred Mineral Resource could be upgraded to an
Indicated Mineral Resource with continued
exploration.
|
3.
|
The Mineral
Resource was estimated using CIM guidelines and include the Mineral
Reserve.
|
4.
|
Metallurgical type
Oxide (all gold domains and leachable Gossans) is leachable, while
all other metallurgical types are flotable.
|
5.
|
The Mineral
Resource Estimate was based on metal prices of $1,375/oz gold,
$22.27/oz silver, $1.10/lb zinc, $3.19/lb copper and $1.15/lb
lead.
|
Mining
The Project area consists of subdued terrain and topography. The
area, topography and climate are amenable to the conventional open
pit mining operations proposed for the Project. No
underground mining is planned at this stage although the potential
for underground mining will be evaluated in the near future.
The mining operations will encompass a single large open pit
that will be mined with conventional mining equipment in three
pushback phases. The mining fleet will consist of major equipment
used directly in the rock-moving operation including blast hole
drills, hydraulic excavators, and 91 t haul trucks. Various support
equipment will be required, such as dozers, graders, water trucks,
and light vehicles for maintenance, personnel transport and mine
supervision.
For scheduling purposes, the Back Forty open pit was subdivided
into three phases. Mining commences in a small higher-grade starter
pit and subsequently expands outwards by pushing back the pit
walls. This enables annual waste stripping quantities to be
distributed over time to avoid highly variable annual total
material mined tonnages.
A summary of the phase tonnages is shown in the table
below.
Pit Phase
Tonnages
|
|
|
Phase
1
|
Phase
2
|
Phase
3
|
Total
|
Waste
Stripping
|
|
|
|
|
|
Over
Burden
|
Mt
|
1.23
|
1.65
|
0.90
|
3.78
|
Waste
|
Mt
|
4.63
|
19.43
|
22.39
|
46.45
|
Total
Waste
|
Mt
|
5.86
|
21.08
|
23.29
|
50.23
|
Strip
ratio
|
w:o
|
2.6
|
4.1
|
5.4
|
4.3
|
Ore
Production
|
|
|
|
|
|
Flotation
Ore
|
Mt
|
1.95
|
4.33
|
3.66
|
9.94
|
Leach Ore
|
Mt
|
0.28
|
0.78
|
0.65
|
1.71
|
Total
Ore
|
Mt
|
2.23
|
5.11
|
4.30
|
11.65
|
Avg NSR
|
$/t
|
$135
|
$98
|
$109
|
$109
|
Ore may be delivered either to the primary crusher or placed
into one of the nearby stockpiles. Waste is either taken to a
waste storage facility or used in tailings dam
construction.
In order to improve mining selectivity and reduce ore dilution,
two different bench heights will be used. The Oxide and
Pinwheel Ore Zones can be narrow and closely spaced, hence they
will be mined using a 2.5 m high
bench height. In the Main and Tuff Ore Zones and in large waste
areas away from the ore zones, bench heights of 5.0 m will be used to minimize unit mining costs.
In waste areas near the ore zones, waste must be mined on the
2.5 m bench as part of the ore/waste
mining separation. Approximately 10% of the waste rock tonnage will
be mined on 2.5 m high benches.
Mineral Processing and Metallurgy
The process plant design for the Project is based on a flexible
metallurgical flowsheet designed for treatment of a variety of
different ore types. The flowsheet is based on well proven
unit operations in the industry.
The key project design criteria for the process plant are:
- Nominal throughput of 4,000 tpd sulphide ore and 800 tpd oxide
ore.
- Crushing circuit availability of 75% supported by the use of
surge bins and dedicated feeders for choke feeding cone crushers
for optimum crushing performance and wear minimization.
- Oxide and sulphide process plant availability of 91.3% through
the use of standby equipment in critical areas and reliable grid
power supply.
- Sufficient automated plant control to minimize the need for
continuous operator interface and allow manual override and control
if and when required.
Sulphide Mineral Reserve that will be processed through the
flotation concentrator have been classified into five ore types
from three zones:
- Main Zone - Representing over half of sulphide mineralization,
will produce separate zinc and copper concentrates, each containing
payable levels of gold and silver.
- Tuff Zone - Representing approximately one third of sulphide
mineralization, will produce separate zinc and lead concentrates,
each containing payable levels of gold and silver.
- Pinwheel Zone - Represents the remaining 12% of mineralization
and has been sub-classified into 3 ore types. All Pinwheel ore
types will produce copper mineralization that contains payable
levels of gold and silver. However, only one of the ore types (Type
8) will produce zinc concentrate and this will not contain any
payable by-products.
Project value will be maximized by campaigning the different
sulphide ore types through the process plant separately, with the
minimum duration of any campaign approximately one month. A total
of seven different ore stockpiles will be used to facilitate
campaigning and also ensure that both the sulphide and oxide
process plants are fed with the highest value ore available.
For the initial 18 months of operation, only Main and Pinwheel
type ores will be campaigned through the process plant. After 26
months of operation, Pinwheel ore will be depleted and for the
remaining life, only Main and Tuff ores will be campaigned through
the process plant.
The overall sulphide process plant flowsheet includes the
following steps:
- Primary crushing.
- Grinding and classification
- Bulk rougher flotation.
- Zinc rougher flotation.
- Bulk concentrate re-grind.
- Zinc concentrate re-grind.
- Bulk cleaner flotation, using three stages of cleaning.
- Zinc cleaner flotation, using two or three stages of cleaning
depending on head grade.
- Bulk concentrate thickening and filtration.
- Zinc concentrate thickening and filtration.
- Tailings thickening and disposal in the common Tailings
Management Facility (TMF).
The overall oxide process plant flowsheet includes the following
steps:
Three stage crushing using an open circuit jaw crusher, open
circuit secondary cone crusher and tertiary cone crusher in closed
circuit.
- Grinding and classification.
- Pre-leach thickening.
- Cyanide leach.
- CCD washing and clarification of pregnant solution.
- De-aeration and zinc precipitation (Merrill Crowe).
- Mercury removal using a retort.
- Smelting to produce doré.
- Cyanide destruction of tailings.
- Tailings thickening and disposal in a common TMF.
Metal Production
Metal production figures are summarized in the table below.
Metal
|
Life of Project
Production
|
Average Annual
Production
|
Gold (K
oz)
|
468
|
67
|
Zinc (K
lbs)
|
512,198
|
73,171
|
Copper (K
lbs)
|
51,109
|
7,301
|
Silver (K
oz)
|
4,458
|
637
|
Lead (K
lbs)
|
24,183
|
3,455
|
A summary of the life of project revenue by metal, revenue by
product, and recovery by metal are included in the tables
below.
|
|
|
|
|
Revenue by
Metal
|
|
Revenue by
Product
|
|
Metal Recovery by
Product
|
Metal
|
% of
Revenue
|
|
Product
|
% of
Revenue
|
|
Metal
|
Concentrates
|
Doré
|
Gold
|
41%
|
|
Zinc
Concentrate
|
45%
|
|
Gold
|
64.5%
|
91.6%
|
Zinc
|
41%
|
|
Copper
Concentrate
|
31%
|
|
Zinc
|
91.7%
|
|
Copper
|
10%
|
|
Doré
|
16%
|
|
Copper
|
80.6%
|
|
Silver
|
6%
|
|
Lead
Concentrate
|
8%
|
|
Silver
|
64.1%
|
68.6%
|
Lead
|
2%
|
|
Total
|
100%
|
|
Lead
|
81.5%
|
|
Total
|
100%
|
|
|
|
|
|
|
|
Concentrate Marketing
In addition to a Doré, the Back Forty Project will produce zinc,
copper and lead concentrates. The zinc concentrates will on average
grade 52.7%, the copper concentates will on average grade 19.3%,
and the lead concentrate will on average grade 35%. Over its seven
year life, the Project will on average annually produce 71,160
tonnes of zinc concentrate, 23,120 tonnes of copper concentrate and
5,600 tonnes of lead concentrate. All concentrates are expected to
be marketable. Studies are ongoing to evaluate the optimal blends,
destinations and transport options for Back Forty concentrates. The
Company believes that there are multiple attractive options for
each of the concentrates.
Capital and Operating Costs
The capital estimate is summarized in the following tables by
area and by discipline. All costs are based on Q1 2018 pricing. The
estimate is deemed to have an accuracy of ±15%.
Capital Estimate
Summary by Area
|
Area
|
$ M
|
Indirect
Construction
|
19
|
Common
Plant
|
20
|
Oxide
Plant
|
33
|
Sulphide
Plant
|
59
|
TMF/WRFs
|
39
|
Infrastructure
|
33
|
Mining
|
25
|
Management
Costs
|
22
|
Owner
costs
|
13
|
Subtotal
|
263
|
Contingency
(12%)
|
31
|
Total
|
294
|
Project Implementation Strategy
The implementation strategy for the Back Forty Project is based
on a traditional Engineering, Procurement and Construction
Management ("EPCM") implementation approach with horizontal
discipline-based contract packaging. Horizontal packages were
established for earthworks, building works, concrete works, field
erected tankage, structural, mechanical and piping installation,
electrical and instrumentation supply and installation.
Opportunities for vertical or area packages will be reviewed. An
experienced project management firm will be engaged to oversee
Engineering and Procurement support ("EP") services for the
development of the process plant and the associated infrastructure
and directly manage project controls and construction with a focus
on project delivery best practices as part of an integrated owner's
team with Aquila.
Mine Sustaining Capital
Expenditures incurred after Year -1 are considered sustaining
capital and are summarized in the table below. The majority of the
sustaining capital consists of capital lease payments for the
mining equipment. Given the five year life of the open pit, no
equipment replacements are planned.
Mine Sustaining
Capital Cost Summary ($ '000)
|
|
Year
1
|
Year
2
|
Year
3
|
Year
4
|
Year
5
|
Year
6
|
Year
7
|
Total
|
Equip. & Down
payments
|
749
|
277
|
-
|
40
|
-
|
100
|
-
|
1,165
|
Equip. Capital
Leases
|
6,420
|
7,709
|
8,287
|
8,287
|
4,181
|
84
|
84
|
35,052
|
Mine
Development
|
2,956
|
163
|
110
|
-
|
-
|
-
|
-
|
3,228
|
Freight &
Spares
|
358
|
399
|
414
|
416
|
209
|
9
|
4
|
1,811
|
Total Mine
Sustaining Costs
|
10,483
|
8,548
|
8,811
|
8,743
|
4,390
|
193
|
88
|
41,256
|
Project Infrastructure Sustaining Capital
Infrastructure sustaining capital costs include subsequent TMF
stage raises over the life of mine, waste rock facility expansion
costs, mine closure costs, salvage value and rehabilitation costs.
The sustaining capital schedule over the life of mine is estimated
as shown in the table below.
Project Sustaining
Capital Cost Summary ($ '000)
|
|
Year
1
|
Year
2
|
Year
3
|
Year
4
|
Year
5
|
Year
6
|
Year
7
|
Total
|
Cut-off
Wall
|
4,658
|
-
|
-
|
-
|
-
|
-
|
-
|
4,658
|
Tailings Management
Facility
|
15,734
|
4,360
|
5,155
|
-
|
1,813
|
-
|
-
|
27,062
|
South Waste Rock
Facility
|
8,538
|
-
|
-
|
-
|
-
|
-
|
-
|
8,538
|
North Waste Rock
Facility
|
9,798
|
19,263
|
-
|
-
|
-
|
-
|
-
|
29,062
|
Total Project
Sustaining Costs
|
38,728
|
23,623
|
5,155
|
-
|
1,813
|
-
|
-
|
69,320
|
Operating Costs
A summary of the life of Project operating costs is outlined in
the table below.
Operating Costs
Summary
|
|
Life of
Project
($M)
|
$/t
ore
|
Gross
Revenue
|
1,437
|
123
|
Realization
Charges
|
180
|
15
|
NSR (Base
Case)
|
1,256
|
108
|
|
|
|
Mining
|
160
|
14
|
Processing
|
184
|
16
|
G&A
|
27
|
2
|
Total Site
Opex
|
371
|
32
|
Economic Analysis
A summary of key Back Forty Project metrics is outlined in the
table below. The Base Case metal price deck is: $1,300/oz gold, $1.20/lb zinc, $20/oz silver, $3.00/lb copper and $1.00/lb lead.
Summary Economic
Analysis – Base Case Metal Prices
|
Item
|
Description
|
Total
|
Ore
|
Mt
|
11.7
|
Strip
Ratio
|
waste :
ore
|
4.3
|
Grade
|
Gold
equivalent
|
4.3 g/t
|
Grade
|
Zinc
equivalent
|
6.7%
|
Total Recovery &
Payability
|
% of con'd
ZnEq
|
69.1%
|
Payable
Zinc
|
Mlbs
|
512
|
Payable
Gold
|
koz
|
468
|
Payable Zinc
Equivalent
|
Mlbs
|
1,197
|
Payable Gold
Equivalent
|
koz
|
1,105
|
Tailings
|
Mt
|
11.0
|
|
|
|
Gross
Revenue
|
$/t ore
|
123
|
NSR (Base
Case)
|
$/t ore
|
108
|
Total Site
Opex
|
$/t total
ore
|
32
|
Royalties
|
$/t total
ore
|
1
|
EBITDA
|
$/t total
ore
|
75
|
EBITDA
margin
|
EBITDA /
NSR
|
69.6%
|
Gross C1 Cash
Costs
|
$/oz AuEq
|
499
|
Net C1 Cash
Costs
|
$/oz Gold
|
(590)
|
Net C1 Cash
Costs
|
$/lb Zinc
|
(1.73)
|
|
|
|
Initial
Capital
|
$M
|
294
|
Total Investment
(including Closure)
|
$M
|
480
|
Gross
AISCs
|
$/oz AuEq
|
677
|
Net AISCs
|
$/oz Gold
|
(171)
|
Net AISCs
|
$/lb Zinc
|
(1.34)
|
|
|
|
Annual After-Tax
Operating Cash Flow
|
$M pa
|
62
|
After-Tax NPV at a 0%
discount rate
|
$M
|
316
|
After-Tax NPV at a 6%
discount rate
|
$M
|
208
|
After-Tax
IRR
|
|
28.2%
|
After-Tax
Payback
|
Years
|
2.2
|
|
|
|
Pre-Tax NPV at a 6%
discount rate
|
$M
|
259
|
Pre-Tax
IRR
|
|
32.0%
|
|
|
1.
|
None of EBITDA, C1
cash costs or all-in sustaining costs ("AISC") have a standardized
meaning under IFRS. See "Non-IFRS Measures".
|
2.
|
Gold and zinc
equivalencies were determined using total contained and payable
metals and the respective ratio of Base Case metals
prices.
|
3.
|
Evaluation
includes financial impacts of the Company's silver stream with
Osisko Gold Royalties (OGR) but does not include the financial
impact of its gold stream with OGR for which the majority of the
upfront payments have yet to be received and for which there is
uncertainty regarding the exact timing of these payments. See the
Company's Q1 2018 Financial Statements and MD&A available on
SEDAR for additional details regarding the gold
stream.
|
Figure 1 illustrates life of project production, payable
production and cash flow that would result under the Base Case
macro-economic scenario.
Sensitivity Analysis
|
Base
Case
-15%
|
Base
Case
|
Base Case
+ 15%
|
Gold
($/oz)
|
1,105
|
1,300
|
1,495
|
Zinc
($/lb)
|
1.02
|
1.20
|
1.38
|
Silver
($/oz)
|
17.00
|
20.00
|
23.00
|
Copper
($/lb)
|
2.55
|
3.00
|
3.45
|
Lead
($/lb)
|
0.85
|
1.00
|
1.15
|
Pre-Tax
|
|
|
|
NPV (6% discount
rate) (M)
|
102
|
259
|
416
|
IRR
|
17.9%
|
32.0%
|
44.1%
|
After-Tax
|
|
|
|
NPV (6% discount
rate) (M)
|
79
|
208
|
332
|
IRR
|
15.5%
|
28.2%
|
38.9%
|
Payback Period
(years)
|
3.3
|
2.2
|
1.5
|
Opportunities
Aquila believes there are a number of opportunities available to
the Company to improve the performance of the Project as currently
outlined in the Feasibility Study, all of which require additional
evaluation. These include:
Underground Expansion
The Feasibility Study Mineral Reserve Estimate does not consider
any out of pit Mineral Resource. The Company believes there is an
opportunity to develop the out of pit Mineral Resource, which
currently stands at 3.7M tonnes
(Measured + Indicated), but additional studies will be required to
demonstrate the economic viability of an underground expansion. An
underground expansion would also defer mine closure costs which
currently commence in Year 8 at a nominal cost of $74.7M. The Company's existing permits are for an
open pit mine only and amendments and additional environmental
studies would be required to allow underground mining. Aquila will
soon be commencing an exploration drill program to further define
the underground Mineral Resource.
Process Plant
Metallurgical test work and optimization is continuing with the
objective of decreasing process plant cyanide consumption, water
treatment costs and tailings treatment operability. Studies will
also be undertaken to follow up on initial test results that have
demonstrated increased copper recoveries particularly in the years
of higher copper grades in the process plant feed.
Next Steps
Certain pre-construction activities have already commenced. The
Company is finalizing its Project Execution Plan which will further
define the Project development strategy including contracting
philosophy, plans for basic and detailed engineering and any
required permit amendments, as well as plans for building the
owner's team in preparation for the construction and operational
readiness phases of the Back Forty Project.
The Company will continue discussions with prospective financial
partners to secure the required capital to build the Back Forty
Project. Aquila, with the assistance from its advisors, will
consider all strategic and financial options available to the
Company and the Project.
With its current cash resources and an additional $47.5M in staged payments that remain available
to the Company under its gold stream purchase agreement with Osisko
Gold Royalties Ltd, Aquila is well-financed to complete its planned
pre-construction and exploration activities.
Technical Report
The Company will file the Feasibility Study Technical Report on
SEDAR in accordance with NI 43-101 within 45 days of the date of
this news release. Readers are cautioned that the conclusions,
projections and estimates set out in this news release are subject
to important qualifications, assumptions and exclusions, all of
which are detailed in the Feasibility Study and Technical Report.
To fully understand the summary information set out in this news
release, the Technical Report to be filed on SEDAR should be read
in its entirety.
Qualified Persons
This news release has been reviewed and approved by the
Qualified Persons noted below. The Qualified Persons have reviewed
or verified all information for which they are individually
responsible.
Qualified
Person
|
Employer
|
Professional
Designation
|
Neil
Lincoln
|
Lycopodium Minerals
Canada Ltd
|
P.Eng.
|
Eugene
Puritch
|
P&E Mining
Consultants Inc.
|
P.Eng.
|
David
Penswick
|
Gibsonian
Inc
|
P.Eng.
|
Kebreab
Habte
|
Golder
Associates
|
P.Eng.
|
ABOUT AQUILA RESOURCES
Aquila Resources Inc. (TSX:
AQA) is a development‐stage company with strategic assets in the
Great Lakes Region. The Company's experienced management team is
focused on advancing pre-construction and exploration activities
for its 100%‐owned zinc‐ and gold‐rich Back Forty Project in
Michigan.
Aquila's flagship Back Forty Project is an open pit volcanogenic
massive sulfide deposit with underground potential located along
the mineral‐rich Penokean Volcanic Belt in Michigan's Upper Peninsula. The Project
contains approximately 1.1B pounds of
zinc and 1M ounces of gold in the
Measured & Indicated Mineral Resource categories, with
additional upside potential. Aquila has received all State and
Federal permissions required for the construction and commencement
of operations at the Back Forty Project.
The Company has three other exploration projects: Reef Gold
Project located in Marathon County,
Wisconsin, the Bend Project located in Taylor County, Wisconsin and Aquila Nickel
located in the Upper Peninsula,
Michigan. Reef is a gold-copper property and Bend is a
volcanogenic massive sulfide occurrence containing copper and
gold.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING
INFORMATION
This press release contains certain
forward‐looking statements within the meaning of applicable
Canadian securities legislation. In certain cases, forward‐looking
statements can be identified by the use of words such as "plans",
"expects" or "does not anticipate", or "believes", or variations of
such words and phrases or statements that certain actions, events
or results "may", "could", "would", "might" or "will be taken",
"occur" or "be achieved" and similar expressions suggesting future
outcomes or statements regarding an outlook.
Forward‐looking statements relate to any matters that are not
historical facts and statements of our beliefs, intentions and
expectations about developments, results and events which will or
may occur in the future, without limitation, statements with
respect to additional upside potential of the Project and the
potential for underground mining activities at the Project and
benefits associated therewith, statements with respect to the
expected project economics for the Project, such as estimates of
life of mine, total production and average production, metal
production and recoveries, C1 cash costs, AISC, capital and
operating costs, pre- and post-tax IRR, pre- and post-tax NPV and
cash flows, the potential conversion of Inferred Mineral Resources
into Indicated Mineral Resources, any projections outlined in the
Feasibility Study in respect of the Project, the permitting status
of the Project and Aquila's future exploration and development
plans.
These and other forward‐looking statements and information are
subject to various known and unknown risks and uncertainties, many
of which are beyond the ability of Aquila to control or predict,
that may cause their actual results, performance or achievements to
be materially different from those expressed or implied thereby,
and are developed based on assumptions about such risks,
uncertainties and other factors set out herein. These risks include
those described under the heading "Risk Factors" in Aquila's most
recent annual information form and its other public filings, copies
of which can be under Aquila's profile at www.sedar.com. Aquila
expressly disclaims any obligation to update forward‐looking
information except as required by applicable law. Such
forward‐looking information represents Aquila's best judgment based
on information currently available. No forward‐looking statement
can be guaranteed and actual future results may vary materially.
Accordingly, readers are advised not to place undue reliance on
forward‐looking statements or information. Furthermore, Mineral
Resources that are not Mineral Reserves do not have demonstrated
economic viability.
Non-IFRS Measures
C1 cash costs, AISC, EBITDA and free
cash flow are non-IFRS financial measures calculated by the Company
as set forth below, and may not be comparable to similar measures
reported by other companies.
C1 cash costs, which are intended to measure direct cash costs
of producing paid metal, include all direct costs that would
generate payable recoveries of metals for sale to customers,
including mining of mineralized materials and waste, leaching,
processing, refining and transportation costs, on-site
administrative costs and royalties, net of by-product credits. C1
cash costs do not include depreciation, depletion, amortization,
exploration expenditures, reclamation and remediation costs,
sustaining capital, financing costs, income taxes, or corporate
general and administrative costs not directly or indirectly related
to the Project. C1 cash costs are divided by the number of ounces
of gold or pounds of zinc, as applicable, estimated to be produced
for the period to arrive at cash costs per gold ounce or zinc pound
produced.
AISC includes C1 cash costs, as defined above, plus exploration
costs at the Project and sustaining capital expenditures (including
additional leach pads, permitting and customary improvements to the
operations over the life of the project). AISC is divided by the
number of ounces of gold or pounds of zinc, as applicable,
estimated to be produced for the period to arrive at AISC per gold
ounce or zinc pound produced.
EBITDA is earnings before interest, taxes, depreciation, and
amortization.
Free cash flow is cash flows from operations less all capital
investments including closure costs.
SOURCE Aquila Resources Inc.