Crazy Horse Resources Inc. (TSX VENTURE:CZH)(OTCQX:CRZHF) -
Highlights:
-- Taysan Copper-Gold Porphyry Project reoriented as a staged development,
reduces initial investment, increases profitability and enhances
robustness.
-- Initial capex reduced by 41% from US$869 million to US$511 million.
-- Post tax IRR increases by over 33%, from 21.9% to 29.3% based on
US$3.00/lb copper and US$1,000/oz gold prices.
-- Robust project economics driven by low strip ratio in initial years,
proximity to port (20 km) and electrical grid, paved road access and
excellent metallurgy.
-- Base case net present value (NPV) is US$484 million at a 10% discount
rate.
-- Pre-feasibility study on Taysan Project is fully funded and scheduled
for completion in March 2012.
-- Project received endorsement from the Provincial Board of Batangas for
further development.
Crazy Horse Resources Inc. (TSX VENTURE:CZH)(OTCQX:CRZHF) (the
"Company") is pleased to announce that its new management has
completed a review and scoping study of the Taysan Copper-Gold
Porphyry Project in Batangas Province on Luzon Island in the
Philippines. The scoping study was initiated in order to lower
initial capital costs, increase profitability and possibly fast
track development. It uses the same resource estimate as contained
in the Company's NI43-101 report dated October 10, 2011 and
entitled "Update of the Mineral Resource Estimate and Preliminary
Economic Assessment for the Taysan Project" prepared by Mining
Associates Pty. Ltd. and AMEC Minproc Limited and available under
the Company's profile at www.SEDAR.com, which strictly relates to
the 30Mtpa case only.
The scoping study is based on new pit optimizations at a higher
copper cutoff grade (0.19% vs 0.10%), as well as a reduced plant
size of 15Mtpa (compared to 30 Mtpa). These changes result in a
significant increase in profitability, with the internal rate of
return of the Project (IRR) increasing by over a third to 29.3%,
from the 21.9% shown in the last Preliminary Economic Assessment
("PEA") based on a 30 Mtpa project. The net present value (NPV) at
US$484 million remains highly attractive:
---------------------------------------------------
30Mtpa 15Mtpa
---------------------------------------------------
IRR 21.9% 29.3%
NPV @ 10% (US$ Million) 639 484
Initial Capital Cost (US$ Million) 869 511
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The Company views the new 15Mtpa throughput configuration as the
first stage of the Taysan Project with the second stage, to double
capacity and output, dependent on future copper prices. It is also
anticipated that the staged development will allow the Company to
fund any future expansion largely with project cash flow and limit
dilution to shareholders.
"This new plan to develop the Taysan deposit through a staged
operation starting with a 15Mtpa plant maximizes profitability, as
evidenced by the 34% increase in the expected IRR and also makes
the project financeable," said Mitch Alland, Chairman and CEO of
Crazy Horse Resources Inc. "Taysan is now an exceptional and robust
copper project and the pre-feasibility study is now continuing on a
much stronger and attractive basis."
New 15 Mtpa Scoping Study
In the new scoping study, IMC Mining Group, the Company's mining
consultant, increased the average copper grade processed material
by selecting a smaller and higher-grade pit to mine; thereby
reducing the waste required to be mined and improving the Project's
cash flows and profitability. This change decreased the mined
copper resource from 750 million tonnes to 250 million tonnes and
the mine life from 25 years to 15 years.
The mining fleet equipment is of the same size as that assumed
for the 30Mtpa operation, thereby not increasing variable mining
costs per tonne. The average in-situ grades for the life of mine
(LOM) and initial five years of the 15Mtpa operation are as
follows:
----------------------------------------------------------
Avg Avg LOM
Grade Year 1-5 Avg LOM Metallurgical recovery
----------------------------------------------------------
Copper (%) 0.39 0.32 91%
Gold (g/t) 0.16 0.12 60%
Silver (g/t) 1.57 1.15 63%
Magnetite (%) 4.21 3.58 51%
----------------------------------------------------------
The 30Mtpa PEA assumed two front-end trains of 15Mtpa each. As a
result, considerable process design parameters and criteria remain
the same in the new study, although the back end of the plant was
reconfigured to suit a 15 Mtpa operation. The planned payable
production of copper, gold, silver and magnetite (net of
deductions) is as follows:
---------------------------------------------------------------------------
Cu Equivalent Cu Equivalent
Production Avg/Year LOM Total LOM (Mlbs) (tonnes)
---------------------------------------------------------------------------
Copper (Mlbs) 89 1,338 1,338 606,979
Gold ('000 oz) 27 409 136 61,864
Silver ('000 oz) 181 2,717 24 10,681
Magnetite ('000 t) 273 4,091 136 61,858
---------------------------------------------------------------------------
Total Copper Equivalent 1,634 741,382
---------------------------------------------------------------------------
The infrastructure requirements, prepared by GHD Australia, are
largely based on the work done for the 30Mtpa PEA. The tailings
storage facility option selected provides the optimum size and
location to minimize capital and operating costs for a 15Mtpa
operation. Other infrastructure requirements remain the same,
including the port, power distribution, telecommunications and
access roads. The water dam, camp, tailings storage facility, haul
roads and fuel farm have all been scaled down to suit the lower
mine throughput.
The following table summarizes the estimated initial capital
expenditure for the 15 Mtpa operation compared to the 30Mtpa
PEA:
-------------------------------------------------------------
Capital Cost Comparison
-------------------------------------------------------------
30 Mtpa 15 Mtpa
-------------------------------------------------------------
Process Plant (including EPCM) 532.2 294.8
Mining Equipment, Mining Pre-production 186.6 76.2
Infrastructure 122.5 89.2
Owners Costs, Land and Port Acquisition 23.0 45.5
Initial Cash Account Funding 5.0 5.0
-------------------------------------------------------------
TOTAL 869.2 510.7
-------------------------------------------------------------
Operating costs are based on pre-feasibility study work
completed for the 30Mtpa operation and have been scaled down in
proportion to the reduction in equipment. Consequently, unit
variable costs are similar, with the difference mostly arising from
the fixed cost elements, including port and administrative costs.
The most significant operating cost change stems from the use of
available grid power compared to the assumption of building a
captive coal fired power station at Batangas for the larger 30Mpta
operation.
The total average cash operating cost per pound of copper
equivalent is US$1.55/lb over the life of the project and averages
US$1.28/lb during the first five years of operations, compared to
US$1.63/lb and US$1.39, respectively, for the 30Mtpa project. The
NPV and IRR at US$2.50 and US$4.00/lb copper prices, as well as at
the US$3.00/lb base case, is as shown in the following comparison
table:
------------------------------------------------------------------------
Taysan Project - Comparison of Financial Returns
------------------------------------------------------------------------
Item 30 Mtpa 15 Mtpa
------------------------------------------------------------------------
Copper Price $/lb $2.50 $3.00 $4.00 $2.50 $3.00 $4.00
------------------------------------------------------------------------
Gold Price $/oz $850 $1,000 $1,400 $850 $1,000 $1,400
------------------------------------------------------------------------
Silver Price $/oz $24 $26 $28 $24 $26 $28
------------------------------------------------------------------------
Magnetite Price $/tonne $80 $100 $110 $80 $100 $110
------------------------------------------------------------------------
Discount Rate % 10% 10% 10% 10% 10% 10%
------------------------------------------------------------------------
Project NPV $M $47 $639 $1,745 $132 $484 $1,154
------------------------------------------------------------------------
Project IRR % 10.9% 21.9% 41.0% 15.7% 29.3% 52.7%
------------------------------------------------------------------------
Mineral resources that are not mineral reserves do not have
demonstrated economic viability. The PEA is preliminary in nature,
and is based partially on inferred mineral resources that are
considered too speculative geologically to have the economic
considerations applied to them that would enable them to be
categorized as mineral reserves. There is no certainty that the PEA
will be realized.
An updated technical report incorporating this new PEA will be
filed with the securities commissions within 45 days. A complete
copy of the PEA and the updated technical report (once completed)
can be viewed under the Company's profile at www.SEDAR.com.
The Pre-Feasibility Study
Virtually all of the work that had been previously completed for
the pre-feasibility study on a 30 Mtpa operation, including the
resource estimate, mining studies and process and infrastructure
engineering, is now being used for the pre-feasibility study of the
15Mtpa project. In addition, 45 drill holes that have been
completed are now being assayed and will be used for a revised
resource estimate that will be conducted by Mining Associates Pty.
Ltd., the Company's resource consultant. The updated resource
estimate will be used as the basis for the mineral reserve estimate
and mining studies for the pre-feasibility study of the new 15Mtpa
Project. This will result in a better defined estimate, with the
potential to convert some of the Indicated Resource to Measured
status and Inferred Resource to Indicated status.
In addition, as part of the pre-feasibility study, further
detailed pit optimization studies may result in improved mine life
and a further increase in return on investment, Similarly, as in
all pre-feasibility studies, additional work being undertaken on
metallurgy, including comminution and magnetite recovery test work,
as well an on infrastructure options for water supply, tailings
storage facilities, camp sites, access roads and power supply, will
determine optimum solutions to minimize capital and operating costs
and to provide the maximum return to the project. The
pre-feasibility study is fully funded and scheduled for completion
in March 2012.
Additional Upside Potential
Apart from the effect of higher copper prices than assumed in
the base case and from the aforementioned possible upside potential
stemming from on going pre-feasibility work and from a revised
resource estimate, metallurgical test work results indicate that
there is considerable potential to significantly increase the
magnetite recovery from the 51% achieved to date. Test work
continues to assess this upside potential.
The technical information contained in this news release has
been reviewed by Alistair Barton. Mr. Barton is a Qualified Person
("QP") as defined in the "Canadian Institute of Mining, Metallurgy
and Petroleum, CIM standards on Mineral Resources and Reserves" and
NI 43-101.
Board Change and Option Grant
In other news, the Company advises that based on his new
appointment as President and CEO of Sabina Gold and Silver
Corporation and the recent changes to management and direction of
the Company, the Board and Mr. Robert Pease have agreed that Mr.
Pease will step down as the Chairman of the Company. Mr. Pease is
replaced by Mr. Mitchell Alland effective immediately. The Company
wishes to thank Mr. Pease for his contributions and wishes him
success in his new role with Sabina Gold and Silver
Corporation.
The Company has granted to Mr. Alland stock options to purchase
up to 700,000 common shares in connection with his positions as
President, CEO and Chairman of the Board. Each option is
exercisable to acquire one common share of the Company at a price
of C$0.30 until November 13, 2016. The options will vest in
accordance with the Company's stock option plan.
(i) Copper equivalents are calculated on the basis of US$3.00/lb
Cu and 91% Cu metallurgical recovery, US$1,000/oz. Au and 60% Au
recovery, US$26/oz. Ag and 63% recovery and US$100/tonne magnetite
and 51% magnetite recovery.
Glossary
Ag = Silver
Au = Gold
Cu = Copper
g/t = grams per tonne
IRR = internal rate of return
lb = pound(s)
LOM = life of mine
Mtpa = million tonnes per annum
NPV = net present value
oz = ounce(s)
ON BEHALF OF THE BOARD
Mitchell Alland, Chairman, President and CEO
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.
Contacts: KIN Communications Inc. Investor Relations
1-866-684-6730Ir@kincommunications.com