(All amounts have been expressed in US Dollars except where
otherwise indicated)
Dundee Precious Metals Inc. (TSX:DPM)(TSX:DPM.WT)(TSX:DPM.WT.A)
("DPM" or "the Company") is pleased to report the results of the
new definitive feasibility study ("FS") for the construction and
operation of its Krumovgrad gold project (the "Project") in
Bulgaria undertaken in cooperation with Lyntek Incorporated,
Denver, USA, and Golder Associates, Montreal, Canada.
"We are pleased with the results of the new feasibility study on
our Krumovgrad project which confirms the commercial and economic
viability", stated Jonathan Goodman, President and CEO. "The
Krumovgrad gold project has been designed to become a showcase for
environmental responsibility, community relations and mine
management that will allow us to create value for our shareholders
and at the same time bring new economic opportunities into a great
community," he added. "The recent approval of our EIA by the
Bulgarian Minister of Environment and Waters, which includes
pre-emptive execution, allows us to now move the project to the
next stage of development by proceeding with the permitting process
for the construction of the process plant, the integrated mine
waste facility and the open pit mine."
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Project Highlights 2015 - 2024 (1)
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Average annual mine production 850,000 tonnes
Average annual concentrate production 11,500 tonnes
Average annual gold production 74,000 oz
Average annual silver production 35,000 oz
Total cash cost/tonne ore processed $38.11
Total cash cost per oz gold equivalent (2)(3) $404
Initial capital costs (4) $127.4 million
Sustaining capital $12.5 million
Closure and rehabilitation costs $13.5 million
Average annual EBITDA (3) $52.6 million
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Item Life of Mine
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Total gold production 663,641 oz
Total silver production 314,939 oz
NPV at a discount rate of 7.5%, after tax (3)(4) $165.3 million
Internal Rate of Return, after tax (IRR) (4) 31.0%
Payback Period, after tax 3.3 years
Mine Life 9 years
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(1) Representative period. Based on current Mineral Reserves, the Project
has a mine life of 9 years assuming an annual operating rate of
850,000 tonnes ore.
(2) Gold equivalent ounces includes silver ounces produced and sold
converted to a gold equivalent based on the ratio of the average
metal prices for the commodities.
(3) Assuming gold and silver prices of $1,250/oz and $25.00/oz,
respectively.
(4) Excludes sunk capital.
Mineral Reserves and Resources
The estimated Mineral Reserves for the Project are presented in
the table below. This reserve estimate has been determined and
reported in accordance with Canadian National Instrument 43-101,
"Standards of Disclosure for Mineral Projects," ("NI 43-101") and
the classifications adopted by the Canadian Institute of Mining,
Metallurgy and Petroleum Council in August 2000.
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Krumovgrad - Mineral Reserves
0.6 g/t Au Cut-Off Grade
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Gold Silver
------------------------------------------------
Tonnes Grade Ounces Grade Ounces
Category (M) (g/t Au) ('000) (g/t Ag) ('000)
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Proven 2.94 4.70 433 2.54 239
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Probable 4.30 2.44 337 1.52 211
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Total 7.24 3.36 781 1.93 450
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(1) Stated Mineral Reserves are completely included within the quoted
Mineral Resources.
(2) The rounding of tonnage and grade figures may result in some columns
showing relatively minor discrepancies in sum totals.
The Measured and Indicated Resources reported below were used as
the basis of the Mineral Reserve determination.
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Krumovgrad - Mineral Resources
0.7 g/t Au Cut-Off Grade
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Gold (Au) Silver (Ag)
------------------------------------------------
Tonnes Grade Ounces Grade Ounces
Category (M) (g/t Au) ('000) (g/t Ag) ('000)
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Measured 3.25 4.9 511 3 273
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Indicated 4.17 2.7 358 2 217
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M&I 7.42 3.6 868 2 489
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Inferred 0.29 1.3 13 1 10
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(1) The rounding of tonnage and grade figures may result in some columns
showing relatively minor discrepancies in sum totals.
Project Background
An FS was completed in 2005 (Feasibility Study, Krumovgrad Gold
Project, Krumovgrad, Bulgaria, June 2005, Ausenco) based on the
open pit extraction of ore at a nominal rate of 850,000 tonnes per
year ("tpy") with a conventional hybrid carbon-in-leach process
plant that produced gold/silver dore bullion in a plant
approximately 1 km from the pit. That project also contemplated the
disposal of mine waste in a large end tipped waste stack adjacent
to the pit and tailings in a large, conventional tailings
management facility approximately 2 km from the plant site. As a
result of significant community and political opposition to the
project as originally configured, in 2010 Balkan Mineral &
Mining EAD ("BMM"), a subsidiary of DPM, commenced work on
reconfiguring the project to:
-- Reduce and confine the overall project footprint by decreasing distances
between project components and decreasing the footprint of each
component;
-- Consider non-cyanide processing alternatives which were known to produce
lower gold recovery but come with lower social, political and permitting
risk;
-- Move toward best practice high density tailings disposal in a combined
waste rock and tailings facility; and
-- Address community concerns relating to water supply, risk and economic
benefits.
Over the period 2005 to 2010 there were also a number of
legislative changes which occurred as Bulgaria acceded to the
European Union and its laws were harmonized with European law.
These changes required that BMM also address the impact of the
Project on bio-diversity and other matters in a different legal
context.
The result is a completely redefined project and "de-novo"
permitting process as described in the FS.
The Project
The proposed mine site is located at Ada Tepe, approximately 3
km south of the town of Krumovgrad in south-eastern Bulgaria. The
Project objective is to extract ore from an open pit mine and treat
the ore to produce a gold/silver concentrate. Two ore treatment
rates have been considered, namely 850,000 tpy and 1,100,000 tpy. A
treatment rate of 850,000 tpy is consistent with existing
permitting applications and environmental submissions. A treatment
rate of 1,100,000 tpy is potentially more attractive but would
require a modification to BMM's Mining Concession and environment
impact assessment ("EIA") permits. As a consequence, at this stage,
the permitting and base business case remains the 850,000 tpy
case.
The proposed process encompasses crushing and grinding of the
run-of-mine ("ROM") ore followed by froth flotation to produce a
gold/silver bearing concentrate. Tailings will be thickened to a
paste of maximum solids content and disposed of in the Integrated
Mine Waste Facility ("IMWF"), along with waste rock from the
mine.
The Project comprises:
-- Process plant;
-- Deep Cone Thickener Facility;
-- Integrated Mine Waste Facility;
-- Open pit mine and haul roads; and
-- Ancillary buildings and access roads.
The engineering for the mine, process plant and infrastructure
has been developed to support a capital cost estimate, as well as
an operating cost estimate, to an accuracy of +/-3.6%. The capital
and operating costs consider the mining, processing, general
administration costs and environmental implications and are in
fourth quarter 2010 ("Q4 2010") United States Dollars (US$).
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Life of Mine Production Assumptions
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Item Through 2024
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Total Quantity Ore Mined/Milled 7.2 million tonnes
Average Grades
Gold 3.36 g/t
Silver 1.93 g/t
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Recoveries
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Gold 85%
Silver 70%
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Processing Facility
Ongoing project evaluation and the development of alternative
methods of flotation and tailings handling facilitated a new
approach being taken based on the use of flotation to produce a
gold/silver concentrate. The proposed process encompasses crushing
and grinding of the ROM ore followed by flotation to produce a
concentrate. Flotation tailings will be thickened to a paste of
maximum solids content and disposed of in the IMWF, along with
waste rock from the mine.
Comprehensive testwork programs have been completed on samples
representative of Krumovgrad ore types. The recent testing program,
performed in 2009/2010 by SGS Laboratory in Lakefield, Ontario, was
designed to supplement the extensive characterization work on the
Ade Tepe deposit, completed in 2004/2005 and reported in the
previous 2005 FS. The test program was developed to confirm the
potential of both: (a) physical recovery processes (flotation and
gravity) as the primary method of precious metal concentration; and
(b) the ultimate integration of high-density (or "paste") settled
tailings from the process into an overall waste deposition strategy
with the mine waste.
These results were used as the basis for development of the
process flow sheet, process design criteria, mass balance model and
equipment sizing.
The key results of the testwork program were:
-- Confirmation that the gold and silver extraction results obtained
(approximately 85% Au and 70% Ag) are achievable on a range of
Krumovgrad concentrates;
-- Identification of process conditions and an overall process flow sheet
which can deliver these extractions at optimal reagent consumptions; and
-- Confirmation of the process performance and design criteria of the key
circuits.
Integrated Mine Waste Facility
The tailings storage location was revised to minimize land use
and environmental footprint. The concept of a conventional slurry
disposal facility, as proposed in the 2005 FS, has been replaced
with an IMWF which will receive both the thickened tailings and the
mine waste rock from the Ada Tepe pit. The concept of the IMWF is
to place dewatered and thickened tailings into cells constructed
from mine rock.
At the economic parameters used for this study (ie 0.6 g/t
cut-off grade), 15 million tonnes of mine rock and 7.2 million
tonnes of tailings will be stored within the IMWF during the life
of the mine.
Permitting
Bulgaria's legal framework for conducting business has improved
significantly since enactment of the Commerce Act in 1991. With the
accession to the European Union in 2007, further positive changes
are taking place in Bulgaria. While the legal and permitting
requirements are both complicated and time consuming, the desire
for change has created a collaborative environment for the
government/regulatory agencies and the investor to work together to
satisfy objectives of mutual benefit.
On November 23, 2011, the Bulgarian Minister of Environment and
Waters signed a resolution approving the EIA for the Company's
Project in Bulgaria. This approval includes pre-emptive execution
and, while subject to appeal, allows DPM to advance the Krumovgrad
project.
The Company is currently preparing a detailed development and
implementation plan for the Project and site areas, which is also a
prerequisite for issuance of a construction permit. The Project is
fully compliant with all European safety and environmental
directives and industry Best Available Techniques requirements.
Capital Cost
The capital cost estimate reflects the initial capital cost,
including an accuracy allowance of $4.6 million, sustaining
capital, and closure and rehabilitation costs.
The updated FS and the related financial analysis include only
incremental capital costs and excludes financing and sunk
costs.
The table below is a summary of the estimated capital costs
required to complete the Project.
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CAPITAL COST ESTIMATE SUMMARY
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Item Total ($M) (1)
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Initial Capital Cost
Direct costs 94.23
Indirect costs 28.64
Accuracy allowance (3.6%) 4.60
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127.40
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Sustaining capital 12.50
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Closure and rehabilitation costs 13.50
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TOTAL CAPITAL - Life of Mine 153.50
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(1) The capital cost estimate is expressed in Q4 2010 US dollars.
Operating Costs
Operating costs are based on the mining and treatment of 850,000
tpy of ore, producing an annual average of 74,000 oz of gold and
35,000 oz of silver, for the period indicated. Costs for the new
facilities are based on Q4 2010 quotations for all materials and
consumables.
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SUMMARY OF ESTIMATED OPERATING COSTS
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$/t ore
Item Processed(1)
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Mining costs 8.24
Processing costs 16.54
Tailings treatment costs 4.10
General & administration 4.68
Accuracy allowance 1.41
Royalty 3.14
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Total Annual Cash Costs 38.11
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(1) Average cash cost over 9 years.
Technical Information
The technical report prepared in support of the FS will be filed
on Sedar at www.sedar.com by January 13, 2012. Investors should
review the detailed information contained in the technical report
for the key assumptions, parameters and additional information
relevant to the matters discussed in this news release.
The technical information contained in this news release has
been prepared in accordance with Canadian regulatory requirements
set out in NI 43-101 and has been reviewed and approved by Dr.
Julian Barnes, B.Sc.Hon., PhD (Geology), Technical Consultant,
formerly Executive Vice President of DPM, and Dr. Simon Meik, B.Sc.
Hon., PhD (Minerals Processing), Vice President, Processing, of
DPM, both of whom are Qualified Persons as defined under NI 43-101
and not independent of the Company.
FORWARD-LOOKING STATEMENTS
This news release contains "forward-looking statements" that
involve a number of risks and uncertainties. Forward-looking
statements include, but are not limited to, statements with respect
to the future price of gold and silver, the estimation of mineral
reserves and resources, the realization of mineral estimates, the
timing and amount of estimated future production and output, costs
of production, capital expenditures, costs and timing of the
development of new deposits, success of exploration activities,
permitting time lines, currency fluctuations, requirements for
additional capital, government regulation of mining operations,
environmental risks, unanticipated reclamation expenses, title
disputes or claims, limitations on insurance coverage and timing
and possible outcome of pending litigation. Often, but not always,
forward-looking statements can be identified by the use of words
such as "plans", "expects", or "does not expect", "is expected",
"budget", "scheduled", "estimates", "forecasts", "intends",
"anticipates", or "does not anticipate", or "believes", or
variations of such words and phrases or state that certain actions,
events or results "may", "could", "would", "might" or "will" be
taken, occur or be achieved.
Forward-looking statements are based on the opinions and
estimates of management as of the date such statements are made,
and they involve known and unknown risks, uncertainties and other
factors which may cause the actual results, performance or
achievements of the Company to be materially different from any
other future results, performance or achievements expressed or
implied by the forward-looking statements. Such factors include,
among others: the actual results of current exploration activities;
actual results of current reclamation activities; conclusions of
economic evaluations; changes in project parameters as plans
continue to be refined; future prices of gold, copper, zinc and
silver; possible variations in ore grade or recovery rates; failure
of plant, equipment or processes to operate as anticipated;
accidents, labour disputes and other risks of the mining industry;
delays in obtaining governmental approvals or financing or in the
completion of development or construction activities, fluctuations
in metal prices, as well as those risk factors discussed or
referred to in Management's Discussion and Analysis under the
heading "Risks and Uncertainties" and other documents filed from
time to time with the securities regulatory authorities in all
provinces and territories of Canada and available at www.sedar.com.
Although the Company has attempted to identify important factors
that could cause actual actions, events or results to differ
materially from those described in forward-looking statements,
there may be other factors that cause actions, events or results
not to be anticipated, estimated or intended. There can be no
assurance that forward-looking statements will prove to be
accurate, as actual results and future events could differ
materially from those anticipated in such statements. Unless
required by securities laws, the Company undertakes no obligation
to update forward-looking statements if circumstances or
management's estimates or opinions should change. Accordingly,
readers are cautioned not to place undue reliance on
forward-looking statements.
NON-IFRS FINANCIAL MEASURES
This news release refers to estimated EBITDA, cash cost per
tonne of ore processed and cash cost per ounce of gold because
management and certain investors use this information to assess the
Company's performance and also determine the Company's ability to
generate cash flow for investing activities. In addition,
management utilizes these metrics as an important management tool
to monitor cost performance of the Company's operations. These
measurements have no standardized meaning under International
Financial Reporting Standards ("IFRS") and may not be comparable to
similar measures presented by other companies. These measurements
are intended to provide additional information and should not be
considered in isolation or as a substitute for measures of
performance prepared in accordance with IFRS.
Dundee Precious Metals Inc. is a well-financed, Canadian based,
international gold mining company engaged in the acquisition,
exploration, development, mining and processing of precious metals.
The Company's principal operating assets include the Chelopech
operation, which produces a gold, copper and silver concentrate,
located east of Sofia, Bulgaria; the Kapan operation, which
produces a gold, copper, zinc and silver concentrate, located in
southern Armenia; and the Tsumeb smelter, a concentrate processing
facility located in Namibia. DPM also holds interests in a number
of developing gold properties located in Bulgaria, Serbia, and
northern Canada, including interests held through its 51.4% owned
subsidiary, Avala Resources Ltd., its 47.7% interest in Dunav
Resources Ltd. and its 11.6% interest in Sabina Gold & Silver
Corp.
Contacts: Dundee Precious Metals Inc. Jonathan Goodman President
& Chief Executive Officer (416)
365-2408jgoodman@dundeeprecious.com Dundee Precious Metals Inc.
Lori Beak Senior Vice President, Investor & Regulatory Affairs
and Corporate Secretary (416) 365-5165lbeak@dundeeprecious.com
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