VANCOUVER, BC, Feb. 22, 2022 /CNW/ - Bluestone Resources
Inc. (TSXV: BSR) (OTCQB: BBSRF) ("Bluestone" or the
"Company") is pleased to announce the results of the
Feasibility Study (the "FS" or the "Study") for the
Cerro Blanco Gold Project (the "Project"). The Study
demonstrates a robust, rapid pay-back, high-grade operation at a
first quartile all-in sustaining cost ("AISC").
Jack Lundin, President and CEO,
commented, "The Feasibility Study highlights some of the best
economics for a gold project seen in recent studies and is a major
milestone on the path to the development of the Cerro Blanco mine,
providing a blueprint for the detailed engineering phase and
construction of the Project. Sustainable environmental management
is a key aspect incorporated into the design of the Project,
including a modern dry stack filtered tailings facility and water
treatment plant. Our corporate strategy aligns with our philosophy
of responsible development prioritizing local training and hiring
to maximize opportunities and benefits for our local stakeholders.
Advancing the Cerro Blanco Project represents a tremendous
opportunity to our many stakeholder groups including the local
Guatemalan communities, government partners, and our
shareholders."
Feasibility Study Highlights
The Feasibility Study was
prepared in accordance with National Instrument 43-101 ("NI
43-101") standards. Unless otherwise indicated, all dollar
amounts are stated in U.S dollars ("$"). The base case was
completed at a gold price of $1,600/oz and a silver price of $20/oz.
- Life of mine ("LOM") production of approximately 2.6
million ounces of gold and 10.6 million ounces of silver over an
initial 14-year mine life.
- Peak production of 347,000 ounces and average annual production
of 241,000 ounces gold over the first ten years of operation.
- Average life of mine AISC of $629/oz (net of credits).
- Average annual free cash flow of $228
million per year during the first 10 years and life of mine
total free cash flow of $2.350
billion.
- Net present value ("NPV5%") of $1.047 billion after-tax.
- After-tax internal rate of return ("IRR") of 30%.
- Initial capital of $572 million
with an after-tax payback period of 2.2 years.
- Proven & Probable Reserves of 2.8 million ounces of gold
and 12.6 million ounces of silver (53.9 million tonnes at 1.6 g/t
Au and 7.3 g/t Ag).
- At spot gold and silver prices ($1,897/oz & $23.94/oz), the NPV5% increases to $1.563 billion and the IRR to 40% with a payback
of 1.7 years.
Jack Lundin, President and CEO,
added, "The Study confirms Cerro Blanco as an exceptional open pit
development opportunity. In the first four years of production, the
mill feed grades will average 2.5 g/t gold and the open pit mine
will produce approximately 300,000 oz gold per year. With all-in
sustaining costs at $629/oz and over
2.6 million ounces to be produced over the life of the mine, the
low-cost, robust nature of the deposit will generate significant
free cash flow, making Cerro Blanco a rare development opportunity
in the gold space today."
Cerro Blanco Feasibility Study Details
Bluestone
engaged a consortium of independent consultants, led by G Mining
Services, a specialized mining consultancy firm that provides a
wide range of services to mining projects from greenfield to
operating mines. The Feasibility Study was supported by additional
leading consultants with expertise in various fields, including
Kirkham Geosystems Ltd., NewFields, ERM, and Stantec Inc.
The Feasibility Study evaluates recovery of gold and silver from
an open pit operation and a 4.0 Mtpa conventional process plant
that will include crushing, grinding, and agitated leaching
followed by a carbon-in-pulp recovery process to produce doré
bars.
Table 1 – Summary of the Economic Metrics of the Cerro Blanco
Feasibility Study
Gold price (base
case)
|
$1,600/oz
|
Silver price (base
case)
|
$20.00/oz
|
Exchange rate (Quetzal
to US Dollar)
|
7.69:1
|
Exchange rate (CAD to
US Dollar)
|
0.76:1
|
Peak annual gold
production
|
347,000
ounces
|
Average annual gold
production (years 1-4)
|
297,000
ounces
|
Average annual gold
production (LOM)
|
197,000
ounces
|
Total gold production
(LOM)
|
2,645,000
ounces
|
Strip Ratio
(w:o)
|
2.7 : 1
|
Average gold head
grade
|
1.64 g/t
|
Average silver head
grade
|
7.27 g/t
|
Average gold
recovery
|
93.0%
|
Average silver
recovery
|
84.3%
|
Nominal Plant
Throughput
|
4.0 Mtpa
|
Mine life
|
13.7 years
|
Operating
costs
|
Mining – $2.53/tonne
mined ($10.42/tonne milled) Processing – $12.97/tonne milled
Site Services – $2.73/tonne
milled G&A – $3.42/tonne
milled
|
Total operating
costs
|
$29.55/tonne
milled
|
Cash costs (LOM net of
credits)
|
$560/oz Au
|
All-in Sustaining Cash
Costs (LOM net of credits)*
|
$629/oz Au
|
Initial capital
(including contingency)
|
$572 M
|
Sustaining capital,
including closure costs
|
$178 M
|
Average annual
after-tax free cash flow
|
$308 M per year (years
1-4)
|
Total production
after-tax free cash flow
|
$2,350 M
|
NPV5% (pre-tax)
|
$1,265 M
|
IRR
(pre-tax)
|
37%
|
NPV5% (after-tax)
|
$1,047 M (base
case)
|
IRR
(after-tax)
|
30% (base
case)
|
* Cash costs per
payable ounce of gold, Operating Costs per tonne processed, and
AISC per payable ounce of gold sold are non-GAAP financial
measures. Please see "Cautionary Note Regarding Non-GAAP Measures.
All in Sustaining Cash Costs (net credits) = (operating costs +
offsite costs + royalties + sustaining and closure capital – value
of payable silver ounces) / payable gold ounces.
|
Table 2 – Economic Sensitivities, Leverage to Gold
Price
Gold price
($/oz)
|
$1,400
|
$1,550
|
$1,600
|
$1,800
|
$2,000
|
After-tax NPV 5%
($M)
|
712
|
964
|
1,047
|
1,377
|
1,706
|
After-tax
IRR
|
23.4%
|
28.6%
|
30.2%
|
36.3%
|
42.1%
|
After-tax
Payback
|
2.6
|
2.3
|
2.2
|
1.9
|
1.6
|
Deposit Geology and Mineral Resource
Cerro Blanco is a
classic hot springs-related low-sulphidation epithermal gold-silver
deposit comprising high-grade vein and low-grade disseminated
mineralization. The high-grade mineralization is hosted mainly in
Mita sedimentary and volcanic rocks as two upward-flaring vein
swarms (North and South Zones) that converge downwards into basal
feeder veins where drilling has demonstrated significant widths of
high-grade mineralization, e.g., 15.5 meters 21.4 g/t Au and 52.0
g/t Ag (hole CB20-420). Bonanza gold grades are associated with
ginguro banding (quartz and silver sulphides) and carbonate
replacement textures. Sulphide contents are low, typically <3%
by volume. Low-grade disseminated and veinlet mineralization in
wall rocks around the high-grade veins is well documented in
drilling since discovery of the deposit, with grades typically
ranging from 0.3 to 3.0 g/t Au.
The Mita rocks are overlain by the Salinas unit, a
sub-horizontal sequence of volcanogenic sediments and sinter
horizons approximately 100 meters thick that form the low-lying
hill at the Project. The overlying Salinas cap rocks are host to
low-grade disseminated mineralization associated with silicified
conglomerates and rhyolite intrusion breccias.
In profile, the inverted wedge-shape of the high-grade veins
(upward flaring arrays) and their low-grade halos overlain by
mineralized Salinas cap rocks to surface render the deposit
amenable to exploitation by surface mining methods with a low strip
ratio.
The mineral resource has a footprint of 800 x 400 meters between
elevations of 525 meters and 200 meters above sea level. The
mineral resource estimate is the result of 141,969 meters of
drilling by Bluestone and previous operators (1,256 drill holes and
channel samples by Bluestone) with the majority of meters drilled
after the completion of the current EIA. The 3.4 kilometers of
underground adits that were developed by previous owners allowed
underground mapping, channel sampling, and over 30,000 meters of
underground drilling that was critical to Bluestone's current
understanding and validation of the Cerro Blanco geological model.
The mineral resource estimate is based on a scenario that considers
open pit mining methods and therefore required improved geological
models of the lithologic units. These broad mineralized lithologies
are host to the high-grade veins that have been the focus of the
potential underground mining scenario. The resulting domain models
and estimation strategy was designed to accurately represent the
grade distribution.
Table 3 – Cerro Blanco Mineral Resource Estimate at a 0.4 g/t
Au Cut-Off
Resource
Category
|
Tonnes
('000)
|
Au Grade
(g/t)
|
Ag Grade
(g/t)
|
Contained Au
(000's oz)
|
Contained Ag
(000's oz)
|
Measured
|
40,947
|
1.8
|
7.9
|
2,382
|
10,387
|
Indicated
|
22,595
|
1.0
|
4.2
|
706
|
3,058
|
Measured and
Indicated
|
63,542
|
1.5
|
6.6
|
3,089
|
13,445
|
Inferred
|
1,672
|
0.6
|
2.1
|
31
|
112
|
|
|
|
|
|
|
Below Pit
(Indicated)*
|
189
|
5.7
|
13.4
|
35
|
82
|
Stockpile
(Measured)
|
30
|
5.4
|
22.6
|
5
|
22
|
* Resources identified
below the pit shell that are amenable to underground mining (3.5
g/t cut off applied).
The mineral resource
statement is subject to the following:
- Prepared by Garth
Kirkham (Kirkham Geosystems Ltd.) an Independent Qualified Person
in accordance with NI 43-101.
- Effective date:
June 20, 2021. All mineral resources have been estimated in
accordance with Canadian Institute of Mining and Metallurgy and
Petroleum ("CIM") definitions, as required under NI
43-101.
- Mineral Resources
reported demonstrate reasonable prospect of eventual economic
extraction, as required under NI 43-101. Mineral Resources are not
Mineral Reserves and do not have demonstrated economic viability.
The Mineral Resources may be materially affected by environmental,
permitting, legal, marketing, and other relevant
issues.
- Cut-off grades are
based on a price of US$1,600/oz gold, US$20/oz silver and a number
of operating cost and recovery assumptions, including a reasonable
contingency factor.
- Rounding as
required by reporting guidelines and may result in summation
differences.
|
The mineral resource estimate for Cerro Blanco was prepared to
industry standards and best practices by Garth Kirkham, P.Geo., an Independent Qualified
Person for the purposes of NI 43-101. The mineral resource was
estimated using commercial mine modelling and geostatistical
software. The deposit was segregated into multiple estimation
domains based on geologic models for each of the mineralized veins
and the Salinas and Mita host lithologies, including sinter units.
The mineral resource was estimated using ordinary kriging
interpolation for the continuous vein domains and the Salinas and
Mita host units.
Mining
Mining is to be carried out using conventional
open pit techniques with hydraulic shovels, wheel loaders, and
mining trucks in a bulk mining approach on an owner operated basis.
The majority of the loading in the pit will be done by two
hydraulic shovels matched with a fleet of 90-tonne capacity haul
trucks. Mining is planned to be done in several phases. The
objective of pit phasing is to improve the economics of the Project
by feeding the mill with higher grade material during the earlier
years and/or delaying waste stripping until later years. Initial
phases are designed to have a lower strip ratio than the subsequent
phases. The initial life of the Project is 14 years with upside
potential through regional exploration and identification of
satellite pits. The Company believes there are additional
opportunities to further extend the mine life by exploration.
Historical drilling has identified mineralization along strike
north of the existing Resources, including 2.2 g/t gold over 57.0
meters.
Mine planning and scheduling were engineered to feed 4.0 Mt per
year of mill feed to the process plant at an average strip ratio of
2.7 and an average LOM cost of $2.53/t mined. A total of 53.9 Mt of mill feed
averaging 1.6 g/t gold and 7.3 g/t silver (1.7 g/t Au Eq.), will be
processed over the LOM from the pit area. Mill feed will be trucked
to a primary crusher located to the east of the pit. Waste
totalling 145.4 Mt will be placed in a waste storage facility.
Open-pit mining dilution has been estimated with a dilution skin of
0.5 meters resulting in 6.7% dilution at a grade of 0.2 g/t gold
and 2.3 g/t silver.
A pit stability study was undertaken to determine the pit slope
design parameters, including inter-ramp angles ranging from 42° to
56° and 10-meter benches.
The Feasibility Study outlines an average production profile of
197,000 ounces of gold over the 14-year mine life with a peak
production profile of 347,000 ounces of gold per year. Mining will
occur over a 10-year period with an additional 4 years of
production from stockpiled ore. Mill feed grade averages 2.0 g/t
gold over the first 10 years.
Figure 1 – Production Profile and Mill Feed Grade (Au
g/t)
Table 4 – Production Profile
|
Y1
|
Y2
|
Y3
|
Y4
|
Y5
|
Y6
|
Y7
|
Y8
|
Y9
|
Y10
|
Y11
|
Y12
|
Y13
|
Y14
|
Ore Milled
(kt)
|
4,000
|
4,000
|
4,011
|
4,000
|
4,000
|
4,000
|
4,011
|
4,000
|
4,000
|
4,000
|
4,011
|
4,000
|
4,000
|
755
|
Gold Grade
Milled (g/t)
|
2.87
|
1.95
|
2.83
|
2.16
|
1.14
|
1.52
|
1.75
|
2.07
|
2.04
|
1.73
|
0.56
|
0.56
|
0.56
|
0.56
|
Silver Grade
Milled (g/t)
|
14.55
|
11.75
|
13.88
|
9.81
|
6.29
|
7.36
|
6.08
|
5.32
|
5.02
|
4.96
|
3.66
|
3.66
|
3.66
|
3.66
|
Gold
Recovery (%)
|
94.2%
|
93.9%
|
94.2%
|
93.9%
|
92.6%
|
93.4%
|
92.6%
|
93.1%
|
93.6%
|
92.9%
|
88.5%
|
88.5%
|
88.5%
|
88.5%
|
Gold
Recovered
(koz)
|
347
|
235
|
344
|
261
|
135
|
183
|
209
|
248
|
245
|
207
|
63
|
63
|
63
|
12
|
Mineral Reserves presented by class are shown in the following
table. The mill feed head grade averages 2.0 g/t gold over the
first 10 years of mining, excluding the processing of the low grade
stockpile at the end of the mine life.
Table 5 – Cerro Blanco Mineral Reserve Statement
Mill Feed
Material
|
Tonnes
(000's)
|
Au Grade
g/t
|
Ag
Grade g/t
|
Contained Au (000's Oz)
|
Contained Ag
(000's Oz)
|
Proven
|
37,618
|
1.89
|
8.34
|
2,286
|
10,084
|
Probable
|
16,279
|
1.07
|
4.81
|
560
|
2,518
|
Proven &
Probable
|
53,896
|
1.64
|
7.27
|
2,846
|
12,602
|
The mineral reserve
statement is subject to the following:
- Effective date:
November 1, 2021. The Qualified Person for the Mill Feed estimate
is Mathieu Gignac, P. Eng. of G Mining Services Inc.
- The cut-off grade
for mill feed material was estimated using a $1,550/oz gold price
and gold cut-off grade (COG) of 0.50 g/t Au Eq. Other costs and
factors used for gold cut-off grade determination were process,
G&A, and other costs of $21.17/tonne, a royalty of $31.6 /oz Au
and a gold metallurgical recovery of 91%, and a silver
metallurgical recovery of 85%.
- Bulk density of
mineralized material is variable but averages 2.6
t/m3 .
- The average strip
ratio is 2.7 : 1.
- Tonnages are
rounded to the nearest 1,000 tonnes, metal grades are rounded to
two decimal places. Tonnage and grade measurements are in metric
units; contained gold and silver are reported as thousands of troy
ounces.
- Rounding as
required by reporting guidelines and may result in summation
differences.
|
Processing
The process plant design is built on
conventional industry standard unit operations. The Feasibility
Study is based on treating 4.0 million tonnes of ore per year at an
average feed grade of 1.6 g/t gold and 7.3 g/t silver through a
conventional Leach-CIP process plant to produce doré bars. The
overall process flowsheet includes a single-stage jaw crusher, SAG
and ball mill grinding, atmospheric pre-oxidation, cyanide leach,
carbon adsorption via carbon-in-pulp (CIP), carbon elution, and
gold recovery circuits. Tailings will be treated and dewatered to
produce a filtered tailings product.
Figure 2 – Cerro Blanco Process Flowsheet
Additional metallurgical testing programs were carried out as
part of the Feasibility Study to support the development of the
flowsheet. The additional testing focused on different lithologies
and composite samples to test variability and characterization of
ore zones, grind size, leach extraction, and filtration. Based on
recent and historical metallurgical test work, the estimated
overall recoveries are 93.0% for gold and 84.3% for silver.
Filtered tailings will be placed in a "dry stack" tailings
storage facility, eliminating the need and risks associated with
the construction and operation of a traditional slurry tailings
impoundment.
Capital & Operating Costs
The Feasibility Study
contemplates a 25-month capital development and construction
timeline that includes a 5-month commissioning period. Total
initial capital cost during this period is estimated at
$572 million with LOM capital
estimated at $750 million including
closure costs.
The Feasibility Study provides a blueprint for development and
will provide a basis for project financing. The CAPEX and OPEX
are established from first principles to reflect a self-perform
construction strategy.
Contingency has been applied to the estimate on an area and
discipline basis, variances ranged from -5% to +35% depending on
the area and level of quotation and then applying a Monte Carlo simulation analysis.
Table 6 – Cerro Blanco Capital Cost Estimate
Capital Cost
Estimate ($M)
|
Initial Capital
($M)
|
Sustaining Capital
($M)
|
Life of Mine
($M)
|
Infrastructure
|
$39.6
|
$11.1
|
$50.8
|
Power &
Electrical
|
$38.8
|
-
|
$38.8
|
Water
Management
|
$52.0
|
$39.9
|
$91.9
|
Surface
Operations
|
$14.4
|
-
|
$14.4
|
Mining
|
$42.3
|
$89.2
|
$131.6
|
Process
Plant
|
$136.9
|
-
|
$136.9
|
Construction
Indirects
|
$66.3
|
-
|
$66.3
|
Owners Costs
|
$77.8
|
-
|
$77.8
|
Pre-Prod, Start-up,
Commissioning
|
$35.8
|
-
|
$35.8
|
Pre-Prod Mining and
Pre-Stripping
|
$54.4
|
-
|
$54.4
|
Subtotal
|
$558.3
|
$140.3
|
$698.7
|
Contingency
|
$60.7
|
-
|
$60.7
|
Closure
|
-
|
$38.1
|
$38.1
|
Pre-Prod
Revenue
|
$47.5
|
-
|
$47.5
|
Total Capital
Costs
|
$571.5
|
$178.4
|
$749.9
|
The initial capital cost estimate does not include Value Added
Tax (VAT) estimated at $61 million.
VAT will be recoverable once production begins and is included in
the economic model results.
Table 7 – Cerro Blanco Operating Cost Estimate
Operating Cost
Estimate
|
Cost per Tonne
Milled ($/t)
|
Mining
|
$10.42
|
Processing
|
$12.97
|
Surface Operations
(includes dewatering)
|
$2.73
|
G&A
|
$3.42
|
Total Direct
Operating Costs
|
$29.55
|
Table 8 – All-in Cash Costs Including Sustaining
Capex
Mining
|
$549.9
|
Processing
|
$684.9
|
Site
Services
|
$144.4
|
Site G&A
|
$180.6
|
Refining &
Transport
|
$24.2
|
Royalties
|
$89.9
|
Sustaining
Capital
|
$178.4
|
By-product Ag
Credits
|
$208.6
|
Total
($M)
|
$1,644
M
|
All-in Sustaining
Cash Costs (net of credits) ($/oz)
|
$629/oz
Au
|
All-in sustaining
costs are presented as defined by the World Gold Council,
calculated as: (refining costs + third party royalties + operating
costs + sustaining capital costs + closure capital costs – payable
silver ounces value) / payable gold ounces.
|
Infrastructure
The Project is located approximately
160 kilometers southeast of Guatemala
City. The site is accessible via the Pan-American Highway
(CA1) through the town of Asunción Mita.
Major infrastructure to be built in construction includes a new
access road, bridge, powerline, maintenance and administration
facilities, and camp.
Following the approval of an EIA, construction of a new bridge
is expected to commence in early 2022. Additionally, a new 35
kilometer powerline will be constructed prior to Operations. The
Project is expected to draw an estimated 33 MW from the grid during
steady state operation. Advanced discussions are underway regarding
the powerline design and engineering with construction expected to
commence this year.
The design of the Project includes a comprehensive water
management plan for construction, operations, and closure. The mine
will be dewatered through a series of peripheral wells, drain
holes, and in-pit sumps. All water collected will be treated prior
to being recycled for use in the process plant or discharged from
the site. Water quality testing and reporting has been ongoing at
the Project for almost 15 years and is a key aspect to the
Company's water management plan. Test results are submitted
regularly to national authorities and verified through a
community-led participatory water monitoring program.
Permitting
The Company recently submitted the
environmental permit amendment application for the change in mining
method to the governmental authorities. The next steps include a
site visit from the permitting authorities, followed by a
clarification period after which approval of the permit is
expected. Based on current estimates, the Company believes it will
be possible to receive approval of the permit amendment in Q3 2022,
followed by a construction licence and a forestry license.
The amendment application is a comprehensive document that
covers all aspects of the Project in detail. It builds on
historical data and the previously approved 2007 EIA to incorporate
the new mining method. Environmental monitoring has been ongoing at
the Project since the early 2000s and there is a substantial
database of environmental information for the site and region.
While aspects of the Project layout have increased in size,
fundamental design characteristics remain unchanged, including the
processing plant, filtered "dry stack" tailings, water management
infrastructure, and other facilities.
As part of the submittal of the permit amendment application,
and prior to lodging it, the Company hosted a socialization event
that presented a detailed overview of the Cerro Blanco Project,
environmental aspects, and mitigation measures to the surrounding
communities. Additionally, the Company has hosted over 300 visitors
through guided site tours of the existing Project
infrastructure.
Jack Lundin, President and CEO,
commented, "Submitting the permit amendment application last year
was a significant milestone. It is a comprehensive document that
outlines the Cerro Blanco Project in detail. Over the next several
months we will be working to provide answers or supplemental
information to any further inquiries. We were recently awarded an
EIA for the construction of a new bridge. Construction of this key
piece of offsite infrastructure is anticipated to start in the
current quarter."
Corporate Social Responsibility
A priority will be to
continue to train and develop skills of the local workforce as the
Project advances, which is in line with the Company's philosophy of
creating shared benefits.
Bluestone has initiated training programs with over 500
positions being offered to local communities. Courses range on
average from 12 to 18 months in duration and will help prepare for
Early Works activities which the Company will be looking to
initiate late in 2022. Additional programs will kick off in the
first quarter of 2022 with a focus on carpentry, mechanics,
technicians, and welding.
In addition to job skills training, the Company has initiated an
Adult Education Program with the national government and local
educational institutions. The program is aimed at enhancing the
social and economic conditions of the communities within the
Project area of influence, to improve eligibility for future
employment and/or entrepreneurship.
Supplier development programs are underway with the goal of
providing the necessary tools for local businesses to become
suppliers to the mine. This includes training, technical
assistance, and capacity building to support a larger scale
operation.
Benefits to Guatemala
The development of the
Project is expected to provide substantial economic benefits to
Guatemala, both locally and at a
national level. Cerro Blanco will be one of the largest foreign
direct investments in the county since the Covid-19 pandemic (the
"Pandemic") and will be a meaningful contributor to gross
domestic product. Some of the direct benefits are listed below:
- It is estimated that during production the mine will contribute
about $160 million annually and
approximately $1.8 billion over the
LOM to the Guatemalan economy through direct employee wages,
consumables, taxes, and royalties.
- In taxes and royalties alone, the Project is anticipated to
generate payments to the Government of approximately $300 million over the LOM.
- During construction, direct employment including employees of
the Company and contractors is estimated to peak at approximately
1,100 persons.
- During operations, direct employment including employees of the
Company and contractors is estimated to range between 400 and 500
persons. The Project will generate an additional several thousand
indirect jobs to support the mine operations.
- It is expected that the Project will improve local and regional
infrastructure through the development of a new access road and
bridge.
- In addition to the continuation of existing community
investment programs and small business development, economic
diversification activities to attract and grow other industries
near the Project will be advanced in parallel.
Next Steps
The Company intends to continue with an
ambitious work plan to advance Cerro Blanco to production, key
activities in 2022 include:
- Commencing detailed engineering and design activities.
- Initiating construction of the bridge and powerline.
- Further advancement of project readiness and training
initiatives in preparation of Early Works.
- Advancement of project financing activities.
- Receipt of the Project permit amendment.
The next phase for the Cerro Blanco Project is Detailed
Engineering and an Early Works program. The Early Works program
will prepare key infrastructure and facilities to support the
commencement of the Project development phase which is set for
early 2023. The technical team will focus on advancing engineering
in order to prepare procurement and other activities to support an
efficient project start-up and mitigate risks of increasing lead
times and variable international logistics. Early Works are planned
to start in the fourth quarter of 2022.
Comparison to the February 2021
Preliminary Economic Assessment ("PEA")
The February 2021 PEA presented a
scenario when the decision was made to pivot to an open pit
development option. The FS outlines many aspects of the Project in
more detail that was developed through further engineering, design
and test work.
Key differences and approximate impact between the PEA and
Feasibility Study are listed below:
- A mine plan optimization process increased mining rates from
18.0 Mtpa to 21.0 Mtpa. The optimization exercise was designed to
maximize the NPV of the Project while minimizing plant
throughput.
- The updated mine plan increased total recoverable ounces by
~200,000 ounces. Approximately 100,000 ounces are attributable to
the increase in Measured and Indicated ("M&I") mineral
resources from the updated resource and infill drill program in
2021 and the 100,000 ounces are a result of the increase in
recoveries supported by additional metallurgical testing.
- The mine plan optimization process was effective in decreasing
the process plant throughput from 5.0 Mtpa to 4.0 Mtpa for a cost
savings of approximately $20M.
- Further geochemical testwork incorporated into the hydrology
model better defined water treatment requirements and costs which
resulted in an increase in water treatment costs of $13M.
- The decision to add a camp, kitchen, and larger maintenance
facility were included that added $20M in capital costs.
- Inflationary pressures led to increases in steel and consumable
pricing which are reflected in the updated capital costs. In
addition, due to current short-term supply and shipping constraints
related to the Pandemic, freight costs increased by $13M during the capital period.
- Savings of $16M were realized in
construction indirects through revised expat loadings and
contingency with additional engineering and detail.
- Increase in owners cost due to a longer ramp up period (5
months), revised headcount and camp costs which resulted in a
$15M increase.
Table 9 - Comparison of 2021 PEA and 2022 Feasibility
Study
|
PEA
|
Feasibility
Study
|
Gold price (base
case)
|
$1,550/oz
|
$1,600/oz
|
Silver price (base
case)
|
$20.00/oz
|
$20.00/oz
|
Exchange rate (Quetzal
to US Dollar)
|
7.5:1
|
7.69:1
|
Exchange rate (CAD to
US Dollar)
|
0.78:1
|
0.76:1
|
Peak annual gold
production
|
334,000
ounces
|
347,000
ounces
|
Average annual gold
production (years 1-4)
|
277,000
ounces
|
297,000
ounces
|
Average annual gold
production (LOM)
|
231,000
ounces
|
197,000
ounces
|
Total gold production
(LOM)
|
2,449,000
ounces
|
2,645,000
ounces
|
Strip Ratio
(w:o)
|
2.36:1
|
2.70:1
|
Average gold head
grade
|
1.60 g/t
|
1.64 g/t
|
Average silver head
grade
|
7.27 g/t
|
7.27 g/t
|
Average gold
recovery
|
91.0%
|
93.0%
|
Average silver
recovery
|
85.0%
|
84.3%
|
Nominal Plant
Throughput
|
5.0 Mtpa
|
4.0 Mtpa
|
Mine life
|
11 years
|
13.7 years
|
Operating
costs
|
Mining – $2.95/tonne
mined Processing – $13.30/tonne
milled Site Services –
$3.98/tonne milled G&A –
$2.28/tonne milled
|
Mining – $2.53/tonne
mined Processing – $12.97/tonne
milled Site Services –
$4.17/tonne milled* G&A –
$3.42/tonne milled
|
Total operating
costs
|
$28.78/tonne
milled
|
$29.55/tonne
milled
|
Cash costs (LOM net
credits)
|
$570/oz Au
|
$560/oz Au
|
All-in Sustaining Cash
Costs (LOM net credits)*
|
$642/oz Au
|
$629/oz Au
|
Initial capital
(including contingency)
|
$548 M
|
$572 M
|
Sustaining capital,
including closure costs
|
$173 M
|
$178 M
|
Average annual
after-tax free cash flow
|
$272 M per year (years
1-4)
|
$308 M per year (years
1-4)
|
Total production
after-tax free cash flow
|
$2.0 B
|
$2.3 B
|
NPV5% (pre-tax)
|
$1,115 M
|
$1,265 M
|
IRR
(pre-tax)
|
35%
|
37%
|
NPV5% (after-tax)
|
$907 M (base
case)
|
$1,047 M (base case),
$964M
($1,550/oz gold)
|
IRR
(after-tax)
|
28.5% (base
case)
|
30.2% (base case),
28.6%
($1,550/oz gold)
|
* Includes rehandling
costs associated with the dry stack tailings facility. For the
Feasibility Study these costs were captured in mining.
|
Technical Information
The Technical Report summarizing
the results of the Feasibility Study is being prepared in
accordance with NI 43-101 and will be filed under the Company's
profile on SEDAR within 45 days of this press release. The
Qualified Persons have reviewed and verified that the scientific
and technical information in respect to the Feasibility Study in
this press release is accurate and approve the written disclosure
of such information.
The Qualified Persons who will prepare the Technical Report
are:
Qualified
Person
|
Company
|
QP
Responsibility
|
Mathieu Gignac, P.
Eng.
|
G Mining Services
Inc.
|
Project Management,
Permitting/Social,
CAPEX, OPEX, Economic Analysis
|
Mathieu Gignac, P.
Eng.
|
G Mining Services
Inc.
|
Mining Methods and LOM
Plan
|
Carl Burkhalter,
P.E
|
NewFields
|
Tailings
Management
|
Neil Lincoln, P.
Eng.
|
G Mining Services
Inc.
|
Metallurgy, Recovery
Methods
|
Joël Lacelle, P.
Eng.
|
G Mining Services
Inc.
|
Infrastructure
|
Garth Kirkham,
P.Geo.
|
Kirkham Geosystems
Ltd.
|
Geology, Mineral
Resource Estimate
|
Other than as set forth above, all scientific and technical
information contained in this press release has been reviewed,
verified, and approved by David
Cass, P.Geo., the Company's Vice President Exploration, a
Qualified Person under NI 43-101.
Bluestone will be hosting a webinar on Thursday February 24, 2022 at 9:00 am PST.
Conference call and webcast registration details:
Register now HERE or
https://6ix.com/event/cerro-blanco-pathway-to-production/
Dial in Details:
Dial-in Number: +1 (312) 248-9348
Dial-in ID: 116713
Dial-in Passcode: 2283
About Bluestone Resources
Bluestone Resources is a
Canadian-based precious metals exploration and development company
focused on opportunities in Guatemala. The Company's flagship asset is the
Cerro Blanco Gold Project, a near surface mine development project
located in Southern Guatemala in
the department of Jutiapa. The Company released the results of a
Feasibility Study for the Project, outlining an asset capable of
producing over 300 koz/yr at head grades of +2.0 g/t gold. The
Project will produce 2.6 million ounces of gold over the life of
mine at an all-in sustaining cost of $629/oz (as defined per World Gold Council
guidelines, less corporate general and administration costs) over
an initial 14-year mine life. The Company trades under the symbol
"BSR" on the TSX Venture Exchange and "BBSRF" on the OTCQB.
On Behalf of Bluestone Resources Inc.
"Jack Lundin"
Jack Lundin | Chief Executive
Officer & Director
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.
Forward Looking Statements
This press release contains
"forward-looking information" within the meaning of Canadian
securities legislation and "forward-looking statements" within the
meaning of the United States Private Securities Litigation Reform
Act of 1995 (collectively, "forward-looking statements"). All
statements, other than statements of historical fact, that address
activities, events, or developments that Bluestone Resources Inc.
("Bluestone" or the "Company") believes, expects, or anticipates
will or may occur in the future including, without limitation: the
estimated value of the Cerro Blanco Project (the "Project"); the
planned open pit development scenario for the Project; the
estimated gold production volume per year from the Project; gold
and silver price estimates used in the preliminary economic
assessment ("PEA"); additional financial estimates of Project
economics resulting from the PEA, including peak and average annual
gold productions amounts, average all-in sustaining costs, average
annual free cash flow, after-tax net present value ("NPV"),
after-tax internal rate of return, initial capital requirements,
life of mine gold and silver production amounts, measured and
indicated resources and NPV assuming a higher gold price estimate;
management's assessment of plans, projects and intentions with
respect to the further development of the Project and future
engineering and construction phases; the expected impact of the
Project on stakeholder groups; mineral resource estimates; the
reasonable prospect of eventual economic extraction demonstrated by
reported mineral resources; gold and silver price estimates and a
reasonable contingency factor used as the basis for mineral
resource estimate cut-off grades; the potential for subsequent
assessment of mining, environmental, processing, permitting,
taxation, socio-economic and other factors to affect mineral
resources; the estimated tonne-per-day recovery volume of the
planned open pit operation; the planned use of pit phasing,
conventional open pit mining techniques and owner operated
machinery; that expectation that the LOM may be extended with
continued exploration; measured and indicated mill feed amounts and
estimated diluted mill feed to be processed over the LOM from the
pit area; planned trucking and crushing operations; anticipated
crushing and waste storage locations; estimated open-pit mining
dilution; estimated average production profile from mining and
stockpiled ore; process plant capacity in tonnes per day of ore;
planned processing rate measured in dry tonnes per year and average
mill feed grade thereof; estimated diluted gold grade and head
grade of mineralized material; process plant design and associated
processing methods, including pre-oxidation, leach and
carbon-in-pulp absorption circuit elements; expected gold and
silver recovery percentages; expected configuration of filtered
tailings in dry stack facilities; the Project's anticipated capital
development and construction timeline; capital and operating cost
estimates; the Company's estimation of VAT amounts and
recoverability thereof; estimated all-in cash costs including
sustaining CAPEX; advancement of project readiness and training
initiatives in preparation of Early Works; planned construction of
an access road, bridge and power transmission line in 2022; the
Project's expected power draw during steady state operation; the
planned facility construction, operations, monitoring, testing,
reporting, treatment and recycling in connection with the Project's
water management plan; the anticipated approval of a permit
amendment application in the Q3 2022; the Company's intention to
hire and train local employees and the initiation of training
programs; and the Project's expected economic benefits to
Guatemala. These forward-looking
statements reflect the current expectations or beliefs of the
Company based on information currently available to Bluestone and
often use words such as "expects", "plans", "anticipates",
"estimates", "intends", "may", or variations thereof or the
negative of any of these terms.
All forward-looking statements are made based on Bluestone's
current beliefs as well as various assumptions made by Bluestone
and information currently available to Bluestone. Generally, these
assumptions include, among others: the presence of and continuity
of metals at the Cerro Blanco Project at estimated grades; the
availability of personnel, machinery, and equipment at estimated
prices and within estimated delivery times; currency exchange
rates; metals sales prices and exchange rates assumed; appropriate
discount rates applied to the cash flows in economic analyses; tax
rates and royalty rates applicable to the proposed mining
operations; the availability of acceptable financing; the impact of
the novel coronavirus (COVID-19); anticipated mining losses and
dilution; success in realizing proposed operations; and anticipated
timelines for community consultations and the impact of those
consultations on the regulatory approval process.
Forward-looking statements are subject to a number of risks and
uncertainties that may cause the actual results of Bluestone to
differ materially from those discussed in the forward-looking
statements and, even if such actual results are realized or
substantially realized, there can be no assurance that they will
have the expected consequences to, or effects on, Bluestone.
Factors that could cause actual results or events to differ
materially from current expectations include, among other things:
potential changes to the mining method and the current development
strategy; risks and uncertainties related to expected production
rates; timing and amount of production and total costs of
production; risks and uncertainties related to the ability to
obtain, amend, or maintain necessary licenses, permits, or surface
rights; risks associated with technical difficulties in connection
with mining development activities; risks and uncertainties related
to the accuracy of mineral resource estimates and estimates of
future production, future cash flow, total costs of production, and
diminishing quantities or grades of mineral resources; changes in
Project parameters as plans continue to be refined; title matters;
risks associated with geopolitical uncertainty and political and
economic instability in Guatemala;
risks related to global epidemics or pandemics and other health
crises, including the impact of the novel coronavirus (COVID-19);
risks and uncertainties related to interruptions in production;
risks related to Project working conditions, accidents or labour
disputes; the possibility that future exploration, development, or
mining results will not be consistent with Bluestone's
expectations; uncertain political and economic environments and
relationships with local communities and governmental authorities;
risks relating to variations in the mineral content and grade
within the mineral identified as mineral resources from that
predicted; variations in rates of recovery and extraction;
developments in world metals markets; and risks related to
fluctuations in commodity prices and currency exchange rates. For a
further discussion of risks relevant to Bluestone, see "Risk
Factors" in the Company's annual information form for the year
ended December 31, 2020, available on
the Company's SEDAR profile at www.sedar.com.
Any forward-looking statement speaks only as of the date on
which it was made, and except as may be required by applicable
securities laws, Bluestone disclaims any intent or obligation to
update any forward-looking statement, whether as a result of new
information, future events or results, or otherwise. Although
Bluestone believes that the assumptions inherent in the
forward-looking statements are reasonable, forward-looking
statements are not guarantees of future performance, and
accordingly, undue reliance should not be put on such statements
due to their inherent uncertainty. There can be no assurance
that forward-looking statements will prove to be accurate, and
actual results and future events could differ materially from those
anticipated in such statements.
Non-GAAP Financial Performance Measures
The Company has included certain non-Generally Accepted
Accounting Principles ("GAAP") measures in this news release that
are not defined under International Financial Reporting Standards
("IFRS"), including cash costs and AISC per payable ounce of gold
sold and per tonne processed. Non-GAAP 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 Company believes that these measures, in addition to measures
prepared in accordance with GAAP, provide investors an improved
ability to evaluate the underlying performance of the Company and
to compare it to information reported by other companies. The non-
GAAP measures 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 GAAP. These
measures do not have any standardized meaning prescribed under
GAAP, and therefore may not be comparable to similar measures
presented by other issuers.
Cash costs
Cash operating costs and cash operating costs per ounce sold are
non-IFRS financial measures and ratios. In the gold mining
industry, these metrics are common performance measures but do not
have any standardized meaning under IFRS. The Company follows the
recommendations of the Gold Institute Production Cost Standard. The
Gold Institute, which ceased operations in 2002, was a
non-regulatory body and represented a global group of producers of
gold and gold products. The production cost standard developed by
the Gold Institute remains the generally accepted standard of
reporting cash operating costs of production by gold mining
companies. Cash operating costs include mine site operating costs
such as mining, processing and administration, but exclude royalty
expenses, depreciation and depletion, share based payment expenses
and reclamation costs. Revenue from sales of by-products including
silver, lead and zinc reduce cash operating costs. Cash operating
costs per ounce sold is based on ounces sold and is calculated by
dividing cash operating costs by volume of gold ounces sold. The
most directly comparable measure prepared in accordance with IFRS
is production costs. Cash operating costs and cash operating costs
per ounce of gold sold should not be considered in isolation or as
a substitute for measures prepared in accordance with IFRS.
Net free cash flow
The Company calculates net free cash flow by deducting cash
capital spending from net cash provided by operating activities.
The Company believes that this measure provides valuable assistance
to investors and analysts in evaluating the Company's ability to
generate cash flow after capital investments and build the cash
resources of the Company. The most directly comparable measure
prepared in accordance with IFRS is net cash provided by operating
activities less net cash used in investing activities.
All-in sustaining costs
The Company believes that all-in sustaining costs ("AISC") more
fully defines the total costs associated with producing gold.
The Company calculates AISC as the sum of refining costs, third
party royalties, site operating costs, sustaining capital costs,
and closure capital costs all divided by the gold ounces sold to
arrive at a per ounce amount. Other companies may calculate this
measure differently as a result of differences in underlying
principles and policies applied. Differences may also arise due to
a different definition of sustaining versus non-sustaining
capital.
AISC reconciliation
AISC and costs are calculated based on the definitions published
by the World Gold Council ("WGC") (a market development
organization for the gold industry comprised of and funded by 18
gold mining companies from around the world). The WGC is not a
regulatory organization.
SOURCE Bluestone Resources Inc.