Carpathian Gold Inc. (TSX:CPN) (the "Corporation" or "Carpathian") is pleased to
provide a review of the results, progress and achievements for 2010 and an
outlook for 2011.
For 2010, the Corporation established goals for the continued advancement of its
two wholly owned exploration/development projects, the Riacho dos Machados Gold
Project, located in Minas Gerais State, Brazil, and the Rovina Valley Project
which is a gold-copper porphyry system located in central Romania.
The Riacho dos Machados Gold Project is the more advanced of the two projects as
it represents a near-term production project that will elevate the Corporation
to a gold producing company. The primary objectives set out by the Corporation
for 2010 were to:
a) complete an updated resource estimate;
b) complete a Feasibility Study for the open pit portion of the deposit in
mid to late 2010; and
c) proceed with a construction decision.
In July of 2010, the Corporation announced an updated resource estimate in which
the open pit portion of the resource contained 806,200 ounces in the measured
plus indicated Category and 355,900 ounces in the inferred category. A large
percentage of the inferred resource is situated at the bottom of the open pit as
determined by the pit shell optimization program and the Corporation determined
it would be prudent to conduct a follow-up drill program. The goal of the
program was to upgrade additional inferred resources to the measured plus
indicated category, particularly at depth, to ensure the proper mine design and
scheduling was established so as to avoid the risk of the loss of those
resources through the open pit mine plan as well as to lengthen the open pit
mine life. This additional drill program was completed in late 2010 and it is
now anticipated that an updated resource estimate will be completed in January
of 2011. Initial results indicate that this program was successful in converting
a high percentage of the targeted inferred resources that will be incorporated
into the measured plus indicated category. This new open pit resource will then
be incorporated into the final Feasibility Study to be released during the first
quarter of 2011.
For the Rovina Valley Project, the Corporation set out the following objective
for 2010:
a) to complete and release a detailed Preliminary Economic Assessment
("PEA") in the second quarter of 2010;
b) to complete a three-hole deep drill program on the Ciresata porphyry
system, the highest grade and one of three proximal Au-Cu porphyry
deposits as previous drilling showed that many of the drill holes within
the Ciresata porphyry system ended in higher-grade gold plus copper
mineralization; and
c) to complete the required work and documentation to be submitted to the
relevant government authorities by the end of the year for the
conversion of the Rovina Exploration License to a Mining License.
All of the targeted objectives set out for this project for 2010 were
accomplished. The PEA was released in March 2010, and established an
economically viable, long mine life project of approximately 19 years producing
on average approximately 200,000 ounces of gold plus 50 million pounds of copper
per annum. The three deep drill hole program was designed to: 1) test the depth
extension of the gold plus copper mineralization within the Ciresata porphyry
system in the context of utilizing a bulk underground mining method as outlined
in the results of the PEA; 2) confirm the geologic model for the deposit; and 3)
begin upgrading the resource to measured plus indicated categories. The results
of this drilling program met all of the objectives established and have
successfully determined that the Ciresata porphyry system is open and could be
significantly larger.
The technical reports for the conversion of the Rovina Exploration License to a
Mining License have been completed with subsequent information as requested by
the government being delivered.
At the Corporate Level during 2010, the following was achieved.
a) On May 21, 2010, the Corporation concluded a gold purchase and sale
agreement (the "Agreement") for US $30 million with Macquarie Bank
Limited ("Macquarie Bank") for its RDM Gold Project (the "Project") in
Brazil. Under the terms of the Agreement, Macquarie Bank will make
upfront cash payments (the "Upfront Payments") totaling US $30 million
in return for which it will have the right to purchase 12.5% of the gold
produced from the Project at a price of US $400 per ounce of payable
gold delivered ("Delivered Gold Ounce"). The price per Delivered Gold
Ounce to the Corporation will be subject to an inflation escalator as
well as upside price participation for the Corporation of 25% of every
Delivered Gold Ounce delivered at a price above US $1,850 per ounce.
Macquarie Bank will also have the right to extend its participation to
purchase 12.5% of the additional gold produced from any underground
operation within the mining concession and five contiguous exploration
licenses, as well as any open pit and/or underground operation on the
balance of the property ("Expanded Production"), by contributing 12.5%
of the capital required to develop the Expanded Production and paying US
$450 per Delivered Gold Ounce. This price per ounce will also be subject
to adjustment by the price escalation and inflation factor described
above.
b) On September 21, 2010, the Corporation signed a mandate letter with
Macquarie Bank for it to arrange a project financing facility of up to
US $75 million to be used to partially fund the development of the
Corporation's RDM Gold Project, Brazil. In addition, the Corporation
also mandated Caterpillar Financial Services Corporation ("Cat
Financial") to arrange an equipment leasing facility for up to US $22
million for the Project. The mandate letters were signed on the basis of
indicative term sheets that are normal for transactions of this nature.
Due diligence in connection with these mandates is currently underway
pending the results of the final release of the Feasibility Study.
c) On November 3, 2010, the Corporation closed a "bought deal" financing
for gross proceeds in the amount of CDN $51.6 million.
The following details the results and major achievements established in 2010.
Riacho Dos Machados ("RDM") Gold Project, Brazil
-- In July 2010, the Corporation announced the results of an updated NI 43-
101 resource estimate.
The open pit resource includes:
-- Measured + Indicated - 17.20 MM tonnes at 1.46 g/t Au for 806,200 ounces
Au
-- Inferred - 7.18 MM tonnes at 1.54g/t Au for 355,900 ounces Au
The underground resource includes:
-- Measured + Indicated - 0.53 MM tonnes at 3.63 g/t Au for 6,200 ounces Au
-- Inferred - 3.92 MM tonnes at 2.67 g/t Au for 377,000 ounces Au
The combined open pit and underground resource includes:
-- Measured + Indicated - 17.25 MM tonnes at 1.46 g/t Au for 812,300 ounces
Au
-- Inferred - 11.10 MM tonnes at 1.94 g/t Au for 692,900ounces Au
Of the total 2010 resource estimate, 99.2% of the measured and indicated
resource and 51.4% of the inferred resource is located within a Whittle pit
shell. The pit shell was obtained utilizing pit-optimizer software (Whittle
Four-X) using appropriate mining and processing costs from the ongoing
Feasibility Study, a US $950/ounce gold price and a 0.36 g/t Au cut-off grade.
Within this open-pit shell, the measured plus indicated gold resource in the
2010 Resource Estimate has increased by 537,400 ounces, from 268,800 ounces to
806,200 ounces, a 200% increase compared to the 2009 Resource Estimate. Below
the open-pit shell and excluding a 15-metre crown pillar, a higher-grade cut-off
was utilized (1.09 g/t Au), based on potential economic parameters along with
engineering considerations, to define a resource with underground mining
potential.
The gold mineralization at RDM is situated within a continuous 14.0 kilometre
long shear zone hosted in Precambrian metamorphic rocks with a demonstrated gold
endowment. This shear zone is fully covered by the Corporation's mining
concession and exploration licenses that extend over a continuous length of
approximately 30 kilometres covering an area of approximately 22,000 ha. The
most intensely explored zone and location of the current 2010 Resource Estimate
only represents approximately 2.0 kilometres of the southern portion of this
shear zone. There are numerous surface gold targets of similar gold grade that
occur along strike within this shear zone and to date a total of seven (7)
exploration targets have been outlined north of the open pit resource area and
one to the south.
In addition to the strike extension targets and defined satellite exploration
targets, the gold mineralization at RDM is also open at depth. Once the open pit
is in production the Corporation plans to evaluate the underground resource,
which is higher-grade that could add to the overall operation both in terms of
extending the mine life of the Project and potentially increasing the annual
production rate by an additional 50%.
-- The Corporation retained an engineering and environmental consortium
group consisting of Tecnomin Projetos e Consultoria Ltda, NCL Brasil
Ltda, Golder Associates Brasil Consultoria e Projetos Ltda, and YKS
Services Ltda to complete a Feasibility Study. The scope of the
Feasibility Study was to concentrate solely on placing into production
the open pit mineralization. The Project will be a conventional open pit
mine with down-the-hole drill rigs and blasting, backhoe excavators, and
conventional haul trucks. The processing operation will include crushing
the ore and processing it in an industry standard carbon in leach and
ADR (adsorption, desorption, and recovery) plant followed by a
detoxification process prior to placing the tailings in an impoundment
area. Based on metallurgical test work, the gold recovery is estimated
at 90%. The open pit mining operation is envisioned to be at a rate of
approximately 7,000 tonnes per day. The capital costs, operating costs,
infrastructure, layout design required for the Feasibility Study are
essentially complete with some optimization work in progress while a
final open pit design and mine schedule is being completed based on the
additional drilling results carried out in late 2010. It is envisioned
that the Feasibility Study will be completed and released during the
first quarter of 2011.
-- Subsequent to the release of the 2010 Resource Estimate in July, the
Corporation drilled an additional 74 core holes for 9,938 m with the
objective of converting additional inferred resources in the open pit to
the measured plus indicated categories. As of December 31, 2010, a total
of 446 drill holes have been incorporated into the database representing
approximately 66,421 m. Additionally, during 2010, the Corporation
completed condemnation drilling in the proposed areas designated for the
waste pile and tailings dam, along with significant geotechnical,
metallurgical and acid rock drainage test work.
-- In 2010, the Corporation completed the purchase of all surface lands
required for the life-of-mine footprint for the open pit mining
operation.
-- The Corporation was also granted the critical path time line license,
the Licenca Previa ("LP") that allows all earthworks in the mine and
water retention dams and tailing dams to be constructed. All technical
documentation required for the Licenca Instalacao ("LI") that will allow
construction to begin on the Project, has been compiled and submitted to
the appropriate government authority for approval.
-- During the year, the Corporation also continued to advance base line
environmental work and social programs.
Rovina Valley Project ("RVP"), Romania
RVP is comprised of three gold-copper porphyry systems discovered by the
Corporation on its 100% owned Rovina Exploration License in central Romania.
From 2006 to 2009, 181 diamond drill holes totaling 71,375 m have been completed
on the project. In late 2008, PEG Mining Consultants Inc. ("PEG") completed a NI
43-101 resource estimate. This resource estimate is based on the drill results
from each of the Colnic, Rovina and Ciresata porphyry deposits, utilizing
diamond drill hole data from the 2006, 2007 and 2008 drilling campaigns, and is
summarized below.
-- Measured + Indicated - 193,100,000 tonnes at 0.49 g/t Au for 3,070,000
ounces Au and 0.18% Cu for 759,100,000 lbs Cu
-- Inferred - 177,700,000 tonnes at 0.68 g/t Au for 3,890,000 ounces Au and
0.17% Cu for 663,100,000 lbs Cu
Base case cut-offs used in the table are 0.45 g/t Au eq. for the Colnic deposit,
0.70 g/t Au eq. for the Ciresata deposit and 0.30% Cu. eq. for the Rovina
deposit.
Au eq. determined by using a gold price of US$675 per ounce and a copper price
of US$1.80/lb as defined by PEG.
Metallurgical recoveries are not taken into account.
The 2008 resource estimate includes enough contained gold-only ounces (3.07
million ounces in the measured + indicated category and 3.89 million ounces in
the inferred Category) to place the Corporation within the top tier of
advanced-exploration companies (top 20) hosting resources that have not yet been
developed. Drilling has indicated that the total resource size of this project
has not yet been fully defined and further immediate potential exists to expand
the current resource estimate. Essentially every drill hole in the Ciresata
porphyry bottomed in higher-grade gold and copper mineralization. In addition,
results from a soil-geochemistry in-fill program highlighted a coincident gold +
copper anomaly extending 300 metres west from the present drill hole pattern
with greater than 10 ppb gold and greater than 20 ppm copper. This anomaly is a
high priority drill target for extending the Ciresata mineralization laterally.
During 2010 the following activities were completed.
-- A detailed PEA was released on March 23, 2010. The PEA was completed by
PEG Mining Consultants Inc ("PEG"), which led a consortium of
specialists assembled for the study. The project is envisioned to be a
conventional open pit mine with down-the-hole drill blast holes,
hydraulic shovels and conventional haul trucks for the Rovina and Colnic
deposits located approximately 2.5 km apart. Mine production from the
combined two open pits is planned at 20,000 tonnes per day. The Ciresata
deposit will be mined by a combination of a sublevel panel retreat
mining in the upper levels of the deposit accessed by a decline from the
surface, and an induced block cave method for the lower part of the
deposit. The upper sublevel panel retreat mining will allow mining
access to high-grade ore while development is undertaken to prepare for
the induced block cave operation at depth. At full capacity, the
underground operation will mine 20,000 tonnes per day. Ore from the
induced block cave operation will be fed to a centralized process plant
located between the Rovina and Colnic deposits via a 6 km inclined
conveyor tunnel to the surface.
The onsite metallurgical facility will include conventional unit operations such
as crushing, grinding, froth flotation and dewatering to produce a gold-rich
copper flotation concentrate. Ore processing will utilize an industry-standard
flotation process-only at a rate of 40,000 tonnes per day to produce a gold-rich
saleable copper concentrate containing 18 to 22% Cu and 50 to 60 g Au/t. This
process does not require the use of cyanide.
A summary of the PEA results is provided below.
-- Average annual gold production of 238,000 ounces per annum for the first
five years and averaging 196,000 ounces per annum over the mine life of
19 years, for a total of 3.72 million ounces of recoverable gold over
the life-of-mine (LOM).
-- Average annual copper production of 53.5 million lbs for the first five
years and averaging 49.4 million lbs per annum over the19-year mine
life, totaling 938 million lbs of recoverable copper over LOM.
-- Total gold equivalent ounces produced over the 19-year mine life is 6.22
million.
-- Total operating cash cost of US $81/oz with copper as a by-product
credit and US $446/oz gold on a co-product basis (copper cash cost is US
$1.05/lb on a co-product basis), using metal prices of US $1,000/oz Au
and US $3.00/lb Cu.
-- At metal prices of US $1,000/oz gold and US $3.00/lb copper the NPV is
US $1.13 billion based on a 5% discount rate.
-- Project internal rate of return ("IRR") of 24.2%, with an approximate
3.3-year payback on an initial Project capital expenditure of US $509.4
million, at a gold price of US $1,000/oz and copper price of US
$3.00/lb.
There has been no previous commercial mining activity at RVP and the proposed
mine site footprint as defined by the PEA does not include any known protected
heritage sites or archaeological occurrences and has been designed to minimize
impact in the nearby communities of Rovina and Bucuresci.
-- Three deep, vertical core holes for approximately 3,000 m were completed
in 2010 to test for the depth extension of the Ciresata mineralization
as the results of the PEA highlighted additional upside potential for
the resource growth at Ciresata as essentially every drill hole bottomed
in higher-grade gold and copper mineralization. The drill program was
designed not only to test for the depth extension of the mineralization
but also to provide infill drill hole data useful for upgrading the
present resource category from inferred to indicated. The results of
this drilling program have successfully met the objectives and have
added significant depth extensions of gold and copper mineralization
below previous drilling in addition to verifying and upgrading the grade
tenor of the inferred resource estimate. Results of the three deep drill
holes have added 280 to 300 m depth extension of Au-Cu mineralization
below the previous drilling, and indicate that the deposit is still open
laterally.
Highlight intersections from the 2010 deep-drilling program at Ciresata are as
follows:
---------------------------------------------------------------------------
Drill hole From (m) To (m) Length (m) Au (g/t) Cu (%) Au-eq(i) (g/t)
---------------------------------------------------------------------------
RGD-16 142 933 791 0.63 0.14 0.92
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Including 316 524 208 1.13 0.19 1.53
---------------------------------------------------------------------------
RGD-17 160 876 716 1.14 0.16 1.47
---------------------------------------------------------------------------
Including 216 460 244 1.70 0.22 2.15
---------------------------------------------------------------------------
RGD-18 221 930 709 0.63 0.14 0.92
---------------------------------------------------------------------------
Including 309 890 581 0.66 0.16 1.00
---------------------------------------------------------------------------
Including 320 483 163 0.74 0.15 1.02
---------------------------------------------------------------------------
(i) To estimate Au-eq (Gold Equivalent) a gold price of US $1,000 and a
copper price of US $3.00/lb is used.
-- Throughout 2010, the Corporation, through its wholly owned operating
subsidiary in Romania, has maintained its proactive local stakeholder
engagement program. The program includes local community hall public
meetings, a public information centre and partnership programs with
local NGO's (partly funded by the European Union) and community leaders
to implement community-based projects. The good relations with the
community have allowed unhindered surface access for drilling in the
project area which requires permission from landowners. In addition,
throughout the year the Corporation continued with its long lead time
work activities for both EIA and SIA documentation that will be required
for the permitting of the project.
-- Using the base results of the PEA, the Corporation retained a
consortium of State-recognized consulting groups to prepare detailed
technical studies required to convert the Rovina Exploration License
into a Mining License as per the norms of the National Agency of Mineral
Resources ("NAMR"). These studies include preliminary evaluations of
social and environmental impacts, risk factors, and economic benefits to
be reviewed solely by the NAMR for Mining License designation. These
documents have been completed, with additional follow up by
documentation being submitted as requested the NAMR for their review.
Acceptance and conversion of the Exploration License to a Mining License
is anticipated to be in early 2011.
Hungary
No fieldwork was completed in Hungary during the year and the Corporation will
be terminating its activities within the country.
2011 Outlook
The Corporation's priorities are to continue to advance the RDM Gold Project
towards a construction decision as well as to continue to advance and expand the
resources at the Rovina Valley Project. The following lists the major objectives
for 2011.
RDM Gold Project, Brazil
-- Complete an updated resource estimate, followed by a reserve estimate
and Feasibility Study within the first quarter of 2011.
-- Announce a construction decision within the first quarter of 2011 in
preparation for targeted production in late 2012.
-- Finalize and secure the necessary project financing for construction of
the project.
-- Continue exploration drilling (approximately 13,000 m) primarily on-
strike following up on the positive results obtained to outline
additional shallow resources for future growth and extend the mine life
of the project.
-- Commence evaluation studies for the exploitation of deeper resources via
an underground operation with the objective of adding approximately 50%
more mineable material approximately half way through the open pit
mining operation.
Rovina Valley Project, Romania
-- Obtain final approval for the conversion of the Exploration License to a
Mining License.
-- Complete an initial planned drilling program of 20,000, which commenced
in late 2010 with the primary objective of drilling a combination of in-
fill holes and lateral extension holes on the Ciresata deposit in order
to build upon the size of the deposit as well as to test satellite
targets on the project.
-- Advance the project to the pre-feasibility stage and complete an updated
resource estimate.
-- Continue EIA and SIA programs throughout the year as well as all long-
lead time programs that will be required for permitting of the project.
-- Initiate the detailed permitting process in order to put the project
into production.
Further details on the Corporation and the individual projects can be found on
the Corporation's website at www.carpathiangold.com.
Mr. Titaro is the qualified person (as defined in National Instrument 43-101)
overseeing the design and implementation of the present exploration programs. He
is responsible for preparing the technical information contained in this news
release.
About Carpathian
The Corporation is an exploration and development company whose primary business
interest is developing near-term gold production on its 100% owned Riacho dos
Machados Gold Project in Brazil, which is currently in the Feasibility Study
stage, along with progressing its exploration and development plans on its 100%
owned Rovina Valley Au-Cu Project located in Romania. On a company wide basis,
the Corporation currently hosts 43-101 resources of 3.88 million ounces of gold
in the measured plus indicated categories and 4.58 million ounces of gold in the
inferred category, as well as 759.1 million pounds of copper in the measured
plus indicated category and 663.1 million pounds of copper in the inferred
category.
The Riacho dos Machados Gold Project, which is in the final phase of a
Feasibility Study, is targeted to produce in the order of 100,000 ounces of gold
per annum, with construction targeted by management to be initiated in early to
mid 2011 with an anticipated goal for the commencement of production in late
2012. The Rovina Valley Project will enhance the Corporations growth profile as
a mid-tier gold producer.
Forward-Looking Statements: This press release includes certain statements that
may be deemed "forward-looking statements". Forward-looking statements are
frequently characterized by words such as "plan", "expect", "Project", "intend",
"believe", "anticipate", "estimate", and other similar words, or statements that
certain events or conditions "may" or "will" occur. All statements in this
release, other than statements of historical facts, that address future
exploration drilling, exploration activities and events or developments that the
Corporation expects, are forward-looking statements. Although the Corporation
believes the expectations expressed in such forward-looking statements are based
on reasonable assumptions, such statements are not guarantees of future
performance and actual results or developments may differ materially from those
in forward-looking statements. Factors that could cause actual results to differ
materially from those in forward-looking statements include market prices,
exploitation and exploration successes, continued availability of capital and
financing, and general economic, market or business conditions. There can be no
assurance that forward-looking statements will prove to be accurate, as results
and future events could differ materially from those anticipated statements. The
Corporation undertakes no obligation to update forward-looking statements if
circumstances or management's estimates or opinions should change. The reader is
cautioned not to place undue reliance on forward-looking statements.