Auryx Receives a Positive PEA for Otjikoto Pre-Tax NPV of USD301 Million and IRR of 42%
September 12 2011 - 6:00AM
Marketwired Canada
Auryx Gold Corp. ("Auryx" or the "Company") (TSX:AYX)(NSX:AYX) is pleased to
announce the results of the Preliminary Economic Assessment ("PEA") on the
Otjikoto gold project (the "Project") in Namibia.
Highlights Include:
-- Pre-tax NPV of USD301 million at a 5% discount rate and an IRR of 42% at
a gold price of USD1,300/oz and an exchange rate of Namibian Dollar
("NAD") 7.50 to the USD;
-- Initial capital costs of USD130 million and ongoing capital of USD15
million (assuming contractor mining);
-- Average annual production of 109,000 ounces of gold over a 10 year life
of mine ("LoM");
-- Average LoM cash operating costs using contractor mining of USD691/oz
before operating contingency (USD725/oz including contingency);
-- Average LoM run of mine ("RoM") head grade of 1.71g/t (1.52g/t including
processing of low grade ore);
The PEA has been prepared by SRK Consulting (South Africa) (Pty) Ltd ("SRK")
with input of a number of independent consultants including Scorpion Mineral
Processing (Pty) Ltd ("SMP"), VBKom Consulting Engineers (Pty) Ltd ("VBKom"),
and Geo Tail. The PEA is preliminary in nature and includes 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, and there is no certainty that the PEA will be realized.
Using a gold price assumption of USD1,300/oz and an exchange rate of
NAD7.50/USD, the Project's pre-tax NPV is USD301 million and the pre-tax IRR is
42%. The Company views the price assumptions used as conservative and notes that
the base case uses a gold price that is 29% below spot and a currency that is
12.5% above spot. At a gold price of USD1,500/oz and an exchange rate of
NAD8.0/USD, Otjikoto's pre-tax NPV and IRR are USD474 million and 57%
respectively.
The Project's initial CAPEX using contractor mining is estimated at USD130
million and includes a contingency allowance of 19%. Sustaining Capital and
Owners' Costs are USD15 million and USD3.4 million respectively. The LoM cash
operating costs are estimated at USD725/oz (including contingency) which
reflects the Project's modelled strip rate of 7.3:1.
Tim Searcy, CEO of Auryx Gold stated: "We are very pleased with the results of
the PEA. It demonstrates that the Otjikoto gold deposit is a very robust
project, which benefits significantly from the local infrastructure. Road, rail,
and water are accessed at site and grid power is available very close by, all of
which positively impact the initial CAPEX estimate. Furthermore, a number of
additional opportunities exist to improve on these results including new zones
that have been discovered but not yet included into the mine model and the
potential for saleable by-product concentrates of sulfides and iron-oxides."
Mineral Resources
The mineral resource estimate (NI 43-101 compliant) presented in the PEA were
first released on 3 February 2011. The resources have been reported according to
the guidelines of the CIM Standing Committee.
Table 1: Otjikoto Mineral Resources reported above a 0.4g/t cut-off (effective
as of 31 December 2010)(i)
Indicated Mineral Resources Inferred Mineral Resources
----------------------------------------------------------------------------
Contained Contained
COG Tonnes Au Grade Metal Tonnes Au Grade Metal
(g/t) (Mt) (g/t) (Moz) (Mt) (g/t) (Moz)
----------------------------------------------------------------------------
0.4 - 0.8 9.34 0.60 0.18 7.21 0.59 0.14
greater than
0.8 15.78 1.94 0.98 8.37 1.94 0.52
----------------------------------------------------------------------------
Total 25.12 1.44 1.16 15.58 1.31 0.66
----------------------------------------------------------------------------
(i)Mineral resources that are not mineral reserves do not have demonstrated
economic viability.
Mining
A pit optimisation was carried out using the Whittle Four-X(R) software. For a
given block model, cost, recovery and slope data, Whittle Four-X(R) software
calculates a series of incremental pit shells within which each shell is an
optimum for a slightly higher commodity price factor. After selecting the
optimal pit shell, a pit design which incorporates access ramps, bench
configurations and mining constraints was developed in Surpac(R). Lower revenue
factor shells from the pit optimisation exercise were selected to serve as push
backs and assist in scheduling the operation. The material inside the pit design
was then scheduled in XPAC(R) software according to feasible tonnage and grade
targets. A low grade stockpile was introduced to allow the selective processing
of high grade ore. The labour and mobile equipment requirements are based on the
mining schedule developed in XPAC(R). The mining capital and operating
expenditure estimates were derived from first principles.
Processing Facility
Metallurgical testwork conducted over the last 10 years has been used to define
a processing route. The testwork was conducted by various accredited
laboratories, including Mintek in Johannesburg, and indicated average overall
metallurgical recoveries of 88% for the oxide material and 91% for the fresh
sulfide material through a bulk flotation and leach process. The testwork
highlighted a high level of gravity recoverable gold in the ore body.
The plant consists of a conventional flotation and carbon-in-leach ("CIL")
circuit made up of the following unit processes: crushing, milling, gravity gold
recovery, flotation, CIL, electrowinning and smelting. Crushing will be achieved
in two stages with a primary jaw crusher and a closed circuit secondary cone
crusher. The crushed ore is fed into a single stage milling and gravity gold
recovery circuit before feeding the flotation circuit. The flotation circuit
consists of rougher scavenger, and cleaner cells. The flotation concentrate is
thickened and then pumped to the regrind milling circuit. The liberated ore is
then fed to a CIL circuit where the gold is recovered by activated carbon. The
gold is stripped from the activated carbon in an Anglo American Research
Laboratory ("AARL") elution circuit that generates pregnant solution. The
pregnant solution from the gravity circuit and the CIL circuit is then plated in
an electrowinning step, and smelted on site to produce dore bullion bars.
High and low sulfide waste streams will be produced by the plant from the CIL
and flotation circuits respectively. Both streams will be pumped as slurries to
the tailings disposal facility ("TDF"). Paste thickening (on the low sulphide
stream) will be pumped to the TDF as a paste and filtration (on the high sulfide
stream) will produce filter cake that will be deposited on the lined TDF with a
conveyor system. This approach maximises the water recovery.
The proposed mine processing plant production schedule is shown graphically in
Figure 1 below.
Figure 1: http://media3.marketwire.com/docs/AURYX2.jpg.
Tailings Disposal Facility
The slurry pumped from the process plant will pass through the paste thickener
or filtration systems located at the TDF before being fed into the basins of the
storage facilities. Paste will be pumped to the unlined TDF located in a natural
depression with a calcrete surface layer of between 15 and 30 m thickness. Water
recovered from the low sulphide TDF will be pumped to a return water dam. Dry
deposition of the filter cake using a conveyor system will be used for the lined
high sulfide TDF. Water recovered from this facility will drain to a return
water dam.
The benefits of this approach on the design, due to the lower water content in
the tailings stream, are as follows: a) more efficient volumetric storage; b) a
reduced risk of groundwater contamination; c) less make-up water demand; d) a
more stable structure; and e) accelerated rehabilitation potential.
Power
The total installed power requirement for the facility is 11.5 MW and this will
be supplied from the national grid. An application has been submitted to the
relevant authorities for the supply of this power to the facility. During a
technical review with the authorities, a tap off point was identified on the 220
kV main line, which runs on a line 16 km west of the plant, and feeds the
northern Namibia region. This tap off point was recognized as the preferred
supply route.
Capital Costs
The estimated capital requirements for the project are shown in Table 2.
Variable contingencies have been applied by project activity and give an average
contingency allowance of 19% for the project capital. The mine equipment capital
estimate is for a contractor operated mine. If Auryx elects to conduct the
mining itself, the project and sustaining capital for the Otjikoto Project
increases to USD161 million and USD52 million respectively.
Table 2: Summary of the estimated Capital Costs (Contractor Mining)
----------------------------------------------------------------------------
Project Capital Sustaining Capital
Item (USDm) (USDm)
----------------------------------------------------------------------------
Construction Phase capital 0.85 0
Processing 55.70 0
Plant and Administration Infrastructure 2.36 0
Mine and other Infrastructure 6.55 0
Tailings Disposal Facility 21.20 4.02
Power Supply 4.55 0
Laboratory 0.87 0
Miscellaneous Infrastructure 1.17 0
Owner's Cost 3.44 0
Mining Fleet 2.92 1.11
EPCM 10.22 0.52
Contingencies 19.91 0.67
Sustaining Capital 0 8.69
----------------------------------------------------------------------------
Total 129.74 15.00
----------------------------------------------------------------------------
Operating Costs
The total estimated operating costs for the LoM with contractor mining, as
incorporated into the PEA, are set out in the Table 3. The average unit mining
cost over the LoM is USD2.05/t of total material (high grade and low grade ore
plus waste) mined.
Table 3: Summary of the estimated Operating Costs for the LoM (Contractor Mining)
----------------------------------------------------------------------------
LoM Operating Cost
--------------------------------------
Total Unit Cost
Description (USDm) (USD/t processed)
----------------------------------------------------------------------------
Processing 288.81 11.01
Tailings Disposal 9.31 0.35
Mining 447.05 17.05
Admin 65.57 2.50
----------------------------------------------------------------------------
Total Cash Operating Cost (before
contingency) 808.51 30.83
----------------------------------------------------------------------------
Environmental & Social
Closure Fund Contributions 13.68 0.52
Retrenchment/Downsizing 2.73 0.10
Monitoring 1.20 0.05
Social community support 1.80 0.07
Contingencies 41.40 1.58
Royalties 45.64 1.74
----------------------------------------------------------------------------
Total Working Costs 914.96 34.89
----------------------------------------------------------------------------
Unit Cash Operating costs (USD/oz recovered) (USD/t processed)
Mining 381.97 17.05
Processing & Tailings 254.72 11.37
Admin 54.12 2.42
Cash Operating Cost 690.81 30.83
Environmental & Social 16.58 0.74
Contingency 35.37 1.58
Royalty 39.00 1.74
Total Working Cost 781.77 34.89
----------------------------------------------------------------------------
Financial Analysis
The economics of the project have been evaluated at a gold price of USD1,300/oz
and an exchange rate of NAD7.5/USD based on a 24-month historic average. The
effective date for the PEA is deemed to be 1 September 2011. The PEA
demonstrates the potential for significant positive economic returns from
developing the Otjikoto Gold Project. The variation in NPV with discount factors
is given in Table 4. No formal tax planning was undertaken to optimize the
post-tax scenario.
Table 4: Variation of NPV with discount factor (Contractor Mining)
----------------------------------------------------------------------
NPV (USDm)
Discount Rate Pre-tax Post-tax
----------------------------------------------------------------------
0% 458 286
4% 327 201
5% 301 184
6% 278 169
7% 256 155
8% 236 141
9% 217 129
10% 200 118
12% 170 98
----------------------------------------------------------------------
A summary of key economic results on a pre- and post-tax basis for contractor
and owner operated mining are compared below in Tables 5 and 6.
Table 5: Key economic results (Contractor Mining)
----------------------------------------------------------------------------
Summary Units Pre-Tax Post-Tax
----------------------------------------------------------------------------
NPV @ 5% (USDm) 301 184
IRR 42% 33%
LoM Capital (USDm) 145
Project Capital (USDm) 130
Peak Funding (USDm) 127
Payback years 4.9
Average Au recovered/year (koz) 109
Total Au recovered LoM (koz) 1 170
Unit Cash Operating Cost
(Average LoM) (USD/t ore mined) 30.83
(USD/oz) 690.81
----------------------------------------------------------------------------
Table 6: Key economic results (Owner Operated Mining)
----------------------------------------------------------------------------
Summary Units Pre-Tax Post-Tax
----------------------------------------------------------------------------
NPV @ 5% (USDm) 303 184
IRR 36% 29%
LoM Capital 214
Project Capital (USDm) 161
Peak Funding (USDm) 139
Payback years 4.4
Average Au recovered/year (koz) 109
Total Au recovered LoM (koz) 1 170
Unit Cash Operating Cost
(Average LoM) (USD/t ore mined) 27.87
(USD/oz) 624.43
----------------------------------------------------------------------------
The revenue, operating cost, capital cost and gold price NPV sensitivities are
presented in Table 7 below.
Table 7: NPV Sensitivity (Contractor Mining)
----------------------------------------------------------------------------
Sensitivity (NPV
@ 5%) Units -20% -15% -10% -5% 0% 5% 10% 15% 20%
----------------------------------------------------------------------------
Pre-tax
Revenue (USDm) 86 140 194 248 301 355 409 463 517
Operating cost (USDm) 424 393 363 332 301 271 240 210 179
Capital cost (USDm) 328 321 315 308 301 295 288 282 275
----------------------------------------------------------------------------
Post-tax
Revenue (USDm) 48 82 116 150 184 218 252 286 320
Operating cost (USDm) 261 242 223 204 184 165 146 127 107
Capital cost (USDm) 202 198 193 189 184 180 175 171 167
----------------------------------------------------------------------------
Au Price
Sensitivity -15% -12% -8% -4% 0% 4% 8% 12% 15%
----------------------------------------------------------------------------
Actual Au Price 1 100 1 150 1 200 1 250 1 300 1 350 1 400 1 450 1 500
----------------------------------------------------------------------------
NPV @ 5% real
discount
Pre-tax (USDm) 141 181 221 261 301 342 382 422 462
Post-tax (USDm) 83 108 134 159 184 210 235 260 285
----------------------------------------------------------------------------
Within the accuracy of the PEA, it is not possible to confirm whether contractor
or owner operated mining is the more beneficial route to follow. This decision
will be governed by the Company's cost of capital.
Environmental and Social Aspects
All baseline studies have been completed and no fatal flaws have been identified
to date. As planned, the primary source of water supply for the mine will be
from production boreholes located in the marble aquifers found on the property.
Current estimates indicate that four production boreholes will be capable of
supplying the bulk water required by the facility, based on yields from adjacent
well fields.
Closure costs in the PEA are estimated at USD13.6 million based on preliminary
estimates and compared with other operations in Namibia. Currently the project
life is estimated at 12 years, with closure occurring 2 years after final mining
once the low grade stockpile has been processed.
Project Opportunities
Auryx is actively pursuing a number of alternatives for enhancing and increasing
the economics and financial returns relating to the Otjikoto project. These
include delineating additional resources within and outside of the modelled pit
and evaluating the potential for saleable by-products, such as sulfide and
iron-oxide concentrates.
Development Timelines
The Company intends to deliver an updated resource estimate in Q1 2012 and then
use that resource for the basis of a FS. The previous guidance on timing of a FS
was Q2 2013. The Company believes it can materially advance the delivery and
will advise the market on this issue before the end of the 2011.
Qualified Persons
The PEA was prepared by leading independent industry consultants and Qualified
Persons ("QPs") under the National Instrument 43-101.
The QP who assumes overall responsibility for the PEA is Mr Andrew McDonald, a
Principal Engineer with SRK holding a MSc degree in Geophysics (cum laude) from
the University of the Witwatersrand and a MBL from UNISA. He is a registered
Chartered Engineer (Reg. No. 334897) through the Institution of Materials,
Minerals and Mining in London and is a Fellow of the Southern African Institute
of Mining and Metallurgy. He has 37 years of diverse experience in a range of
management, technical and financial activities in mining and light industrial
industries, the past 16 of which have been involved in the fields of feasibility
studies, due-diligence audits, financial evaluation and regulatory reporting for
mining-related projects throughout Africa and other international locations. He
has undertaken numerous mineral asset valuations since 1995. Mr McDonald has
reviewed and approved the content of this press release.
The QP who assumes the responsibility for reporting of the Mineral Resources is
Mr Mark Wanless. Mark is an associate Partner, and Principal Geologist with SRK,
and is registered as a Professional Natural Scientist with the South African
Council for Natural Scientific Professionals Reg: 400178/05 and is also an
associate member of the South African Institute for Mining and Metallurgy. Mark
has over 15 years of experience in Southern Africa and internationally. His
expertise is in due diligence studies, and Mineral Resource estimation. Mark has
experience in a range of commodities including Gold, PGEs, base metals, Iron and
Manganese, and Mineral sands. Mr Wanless has reviewed and approved the content
of this press release.
The QP who assumes the responsibility for the Mining Section of the PEA is Mr
Hermanus J Kriel (Pr. Eng.), the Chief Executive Officer of VBKom Consulting
Engineers holding a B.Eng. (Mining) from the University of Pretoria and a MBL
from UNISA in South Africa. He is a registered Professional Engineer (Reg. No.
20080140) through the Engineering Council of South Africa. He has 16 years of
practical and consulting experience on surface and underground mining projects
throughout the African continent over the whole commodity spectrum. Mr Kriel has
reviewed and approved the content of this press release.
The QP who assumes the responsibility for the Process Plant and the
Infrastructure related to the PEA is Mr Matthys J Wessels (Pr. Eng.), a Project
Engineer with Scorpion Mineral Processing holding a B.Eng. (Mechanical) from the
North-West University in South Africa. He is a registered Professional Engineer
(Reg. No. 20050108) through the Engineering Council of South Africa. He has 12
years of diverse experience in a range of technical activities in mining and
heavy engineering industries throughout Africa and other international
locations. His Engineering experience varies from heavy steel industry to port
facilities and mineral processing. Mr Wessels has reviewed and approved the
content of this press release.
The QP who assumes responsibility for the PEA for the Tailings Storage
Facilities is Mr Guillaume Louw de Swardt, a Director with Geo Tail holding an
MSc degree in Civil Engineering from the University of the Witwatersrand. He is
a registered Professional Engineer (Reg. No. 950429) through the Engineering
Council of South Africa. He has 20 years of diverse experience in geotechnical
and tailings engineering. He has been involved in numerous major mining projects
on the African continent and his experience in tailings management encompasses
the full range of disposal options for different types of tailings. Mr de Swardt
has reviewed and approved the content of this press release.
About Auryx Gold Corp.
Auryx Gold Corp. (TSX:AYX)(NSX:AYX) is a Canadian, growth-focused resource
company engaged in the acquisition and exploration of gold projects in Namibia.
The Company is currently advancing the Otjikoto gold project, located 300km
north of Namibia's capital city, Windhoek. By virtue of its location, the
project benefits significantly from Namibia's well established infrastructure
with paved highways, a railway, power grids, and water grid all close by.
Located in the western part of southern Africa, Namibia is lauded as one of the
continent's most politically and socially stable jurisdictions.
On behalf of the Board of Directors,
Tim Searcy, P.Geo., Chief Executive Officer
Cautionary Notes
Cautionary Note Concerning Forward Looking Statements
Certain information set forth in this press release contains "forward-looking
information" under applicable securities laws. Except for statements of
historical fact, certain information contained herein constitutes
forward-looking information which include management's assessment of Auryx's
future plans and operations and are based on Auryx's current internal
expectations, estimates, projections, assumptions and beliefs, which may prove
to be incorrect. These risks and uncertainties include, but are not limited to:
successful completion of the proposed FS and exploration and development
programs referred to herein; the actual results of current and future
exploration and development activities, liabilities inherent in exploration,
mine development and production; geological, mining and processing technical
problems; Auryx's inability to obtain required licenses, permits and regulatory
approvals required in connection with exploration, mining and mineral processing
operations; competition for, among other things, capital, acquisitions of
resources, reserves, undeveloped lands and skilled personnel; incorrect
assessments of the value of acquisitions; changes in commodity prices and
exchange rates; currency and interest rate fluctuations; various events which
could disrupt operations and/or the transportation of mineral products,
including labour stoppages and severe weather conditions; the demand for and
availability of rail, port and other transportation services; the availability
of financing, and management's ability to anticipate and manage the foregoing
factors and risks. There can be no assurance that forward-looking information
will prove to be accurate, as actual results and future events could differ
materially from those anticipated in such statements. Auryx undertakes no
obligation to update forward-looking information if circumstances or
management's estimates or opinions should change except as required by
applicable securities laws. The reader is cautioned not to place undue reliance
on forward-looking information.
Cautionary Note Concerning Resource Estimates
The mineral resource figures referred to in this press release are estimates and
no assurances can be given that the indicated levels of gold will be produced.
Such estimates are expressions of judgment based on knowledge, mining
experience, analysis of drilling results and industry practices. Valid estimates
made at a given time may significantly change when new information becomes
available. While the Company believes that the resource estimates included in
this press release are well established, by their nature resource estimates are
imprecise and depend, to a certain extent, upon statistical inferences which may
ultimately prove unreliable. If such estimates are inaccurate or are reduced in
the future, this could have a material adverse impact on the Company. There is
no certainty that mineral resources can be upgraded to mineral reserves through
continued exploration.
Due to the uncertainty that may be attached to inferred mineral resources, it
cannot be assumed that all or any part of an inferred mineral resource will be
upgraded to an indicated or measured mineral resource as a result of continued
exploration. Confidence in the estimate is insufficient to allow meaningful
application of the technical and economic parameters to enable an evaluation of
economic viability worthy of public disclosure, except in the case of the
Preliminary Assessment. Inferred mineral resources are excluded from estimates
forming the basis of a feasibility study.
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