VANCOUVER, BRITISH COLUMBIA (TSX VENTURE: SWC.DB) today
announced results of an independent preliminary economic assessment
("PEA") for its high grade Kutcho copper project in NW British
Columbia. This study significantly simplifies development approach
to the project, but only evaluates the development of part of one
of the three identified mineral deposits at Kutcho. However, the
PEA lays out several opportunities for enhanced project economics,
a number of which Sherwood is already evaluating as part of its
on-going work program.
"The completion of the preliminary economic assessment for the
high grade Kutcho copper project is just the first step in
Sherwood's on-going reassessment of the project's potential," said
Stephen Quin, President & CEO. "This study evaluates the
potential for the development of a smaller, less capital intensive
open pit mining operation on a portion of the Main deposit that can
be developed relatively quickly. We are now pursuing two parallel
tracks to enhance this base case option by evaluating: (a) a number
of opportunities identified within the study that could
significantly enhance the economics of the project as defined, and
(b) the potential of increasing the production and mine life by
incorporating some of the more than 50% of the project mineral
resources not considered in this study," he said. "The most
significant upside opportunities currently being evaluated are
increasing the tonnes and grade of material to be processed and
improving metallurgical recoveries beyond those assumed in the
study. To this end, we have a major drill program underway at
Kutcho to not only better define the highest grade, closest to
surface portion of the Main deposit, but to provide sample material
for extensive metallurgical testing designed to evaluate
opportunities for enhanced metal recoveries."
Using the PEA as a platform, Sherwood intends to re-engage the
regulatory agencies and advance the Kutcho copper project through
the permitting process. With extensive baseline data, Sherwood has
commenced drafting an Environmental Assessment for submission in
the third quarter of 2008. In parallel with the regulatory process,
Sherwood aims to continue to actively engage the Tahltan and Kaska
First Nations in a consultation process in order to gain their
support for the advancement of this project.
"Given the decline of active mining in NW British Columbia and
the uncertainty surrounding the potential development of a number
of other projects in the region, the high grade Kutcho copper
project stands out as a mine that could be advanced to production
relatively quickly, assuming appropriate support and approvals for
the project," said Mr. Quin. "Our approach to the development of
the project should significantly reduce the environmental footprint
of the project versus previous proposals and should simplify the
long-term abandonment and restoration of the site post-closure," he
said. "In addition, the smaller scale of the proposed development
may result in an extended mine life, once the remainder of the
mineral resources not considered in this study are evaluated and,
if warranted, incorporated into an expanded project."
Sherwood intends to issue an updated PEA in the fall of 2008
that would incorporate the results of the 2008 infill drilling,
results from initial metallurgical testing currently in process and
incorporation of other mineral resources not considered in the PEA.
"Our approach to Kutcho will be similar to that used with our Minto
Mine, where we relentlessly pursue every opportunity for increasing
the value of the asset we own," said Mr. Quin. "We aim to evaluate
each opportunity and drive it to ground in parallel with our
feasibility and permitting process, so that there are regular,
incremental increases in the value of the asset."
Highlights
The PEA lays out the basis for the development of an open pit
mining operation based on mining of the Main deposit only.
Highlights of the PEA, as compared to previously announced plans by
prior owners, include the following (note that "M" at the end of a
number means "millions" and "K" means "thousands"):
- Open pit mining of approximately 63% of the Main deposit only,
comprising 10.5M tonnes of indicated mineral resource at an average
grade of 1.73% copper, 2.35% zinc, 0.27g/t gold and 26.3g/t silver,
containing over 400M lbs of copper and 540M lbs of zinc, 90,000oz
of gold and 8.9M oz of silver plus some minor amounts of inferred
mineral resource; deeper portions of the Main deposit and all of
the Sumac and Esso deposits which, combined, total more than 50% of
the total resources at Kutcho remain to be evaluated in subsequent
studies;
- Open pit redesigned to optimize grade and strip ratios over
the mine life, with an overall strip ratio of 5.1:1 waste:material
processed versus 6.7:1 in prior studies;
- Processing 4,000 tonnes per day ("tpd") vs. prior plans for
6,000tpd, with recoveries of 84% for copper, 74% for zinc and 50%
and 52% for gold and silver, respectively;
- Average annual payable production of 45M lbs of copper, 48M
lbs of zinc, 5,600oz of gold and 584,000oz of silver over a 7.3
year mine life;
- Life of mine payable production of 331M lbs of copper, 348M
lbs of zinc, 41,000oz of gold and 4.2M oz of silver over an a 7.3
year mine life, with potential for additional life from underground
mining of the remaining 6M tonnes in the Main deposit, as well the
Esso and, possibly, portions of the Sumac deposits in later
years;
- Production of separate copper and zinc concentrates, averaging
30.3% copper and 55% zinc, respectively, with payable the precious
metals reporting to the copper concentrates;
- Average unit operating costs of $52.49 per tonne yielding cash
costs of $1.70 to $1.72 per pound of copper before by-product
credits and $0.82 to $0.93 per pound of copper after by-product
credits;
- Pre-production capital of $183.3M, versus $299M in the
pre-feasibility study prepared by prior owners;
- Pre-tax NPV of $300M to $52M and pre-tax IRR's of 54% to 19%
based on metal prices ranging from the recent forward curve (gold
and silver prices kept flat) to a 30% discount to the forward
curve, giving payback in 1.5 to 3.0 years;
- Approximately 50% reduction in the aerial extent of
disturbance;
- Switch to compacted and encapsulated dry-stack tailings and
buffered waste dumps for any potentially acid generating waste
rock. The dry-stack approach to tailings disposal would eliminate
the need for a conventional tailings dam across Andrea Creek and
would significantly reduce the environmental impact of the
project.
The PEA represents an interim update on the Kutcho Project with
mineral resource estimates as of the end of 2007 and costs as of
May 2008 and only addresses mining of a portion of the Main
deposit. However, the PEA identifies a number of significant value
enhancement opportunities that suggest that additional value could
be extracted from the Kutcho Project. Sherwood will continue to
pursue the crystallization of these enhancements, including
possible extraction of some or all of the remaining mineral
resources in the Main deposit, Esso deposit and Sumac deposit,
possibly by underground methods. These and other opportunities will
be addressed in subsequent studies.
Basis of Preliminary Economic Assessment
In May 2008, Sherwood completed the acquisition of Western
Keltic Mines Ltd. and its Kutcho Project, so that the Kutcho
Project is 100% owned by Kutcho Copper Corp. ("KCC"), a wholly
owned subsidiary of Sherwood. On the basis of the then impending
acquisition, Sherwood commissioned the independent PEA completed
under the supervision of SRK Consulting (Canada) Inc. ("SRK").
While compiled by SRK, the PEA relies extensively on the
contributions of the following companies; JDS Energy and Mining
Inc., Rescan Environmental Services Ltd., Techpro, Sacre-Davey
Engineering and Kirkham Geosystems Ltd.
The PEA only evaluated open pit mining of a portion of one of
the three known deposits comprising the Kutcho Project, known as
the "Main" deposit. The Main deposit is a tabular body of high
grade copper-zinc mineralization that outcrops on surface. West of
the Main deposit lies the poorly drilled Sumac deposit and, beyond
that, the Esso deposit, the highest grade of the three know
deposits.
It is envisioned that, based on the results of this study, KCC
will seek permits and support to develop the Kutcho Project as set
out in the PEA while, in parallel, advancing the project through
completion of a feasibility study and evaluating options to
increase the total quantity of material to be mined and processed
by considering the potential for mining the remaining portions of
the Main deposits, as well as the Esso and Sumac deposits.
Mineral Resources
The mineral resource estimate for the Main deposit at Kutcho was
completed by Garth Kirkham, P.Geo., of Kirkham Geosystems Ltd.,
using industry standard methods that conform with National
Instrument 43-101 and utilizing MineSight(TM) Software. The
resource estimate for the Main deposit was based upon historical
data from 221 Main deposit drill holes supplied by KCC.
Kutcho PEA - Mineral Resource Estimate (@ 0.75 %CuEq cut-off) - Main
Deposit Only
--------------------------------------------------------------------------
In situ Grade Contained Metal
---------------------------------------------------
% % g/t g/t Cu Zn Ag Au
Class Tonnes Cu Zn Ag Au (Mlb) (Mlb) (Moz) (000's oz)
--------------------------------------------------------------------------
Indicated 17,285,000 1.56 2.12 26.1 0.29 594.5 807.9 14.5 161.2
--------------------------------------------------------------------------
Inferred 367,000 1.62 1.77 23.6 0.13 13.1 14.3 0.3 1.5
--------------------------------------------------------------------------
Mine Plan
The Main deposit is proposed to be developed as an open pit that
would produce a total of 10.7 million tonnes (Mt) of mill feed and
54.3 Mt of waste over an initial 7.3-year mine operating life.
Additional mineral resources remain within the Main deposit, as
well as those in the Sumac and Esso deposits, that could
potentially support an extended life. The life-of-mine ("LOM") plan
for the Main deposit open pit focuses on achieving the required
mill feed production rate, while balancing grade and strip ratios.
Due to the susceptibility of the Kutcho mineralization to
oxidation, minimal stockpile and blending capacity is assumed in
the PEA.
Mine design for the Main deposit open pit was initiated with the
development of a Net Smelter Return ("NSR") model. The model
included estimates of metal prices, exchange rate, mining dilution,
mill recovery, concentrate grade smelting and refining payables and
costs, freight and marketing costs and royalties. The NSR model was
based on a 5m x 5m x 5m block size. The model was then used with
the Gemcom Whittle - Strategic Mine Planning(TM) ("Whittle")
software to determine the optimal mining shell. Mine planning and
scheduling was then conducted on the optimal pit shell with the use
of MineSight(TM) software and mineral resources were estimated (see
table below). A $31/t NSR cut-off was used within the planned
pit.
Kutcho PEA - Open Pit Life-of-Mine Mineral Resource (@ $31/t NSR cut-off)
- Main Deposit Only
--------------------------------------------------------------------------
In situ Grade Contained Metal
---------------------------------------------------
% % g/t g/t Cu Zn Au Ag
Class Tonnes Cu Zn Au Ag (Mlb) (Mlb) (oz) (oz)
--------------------------------------------------------------------------
Indicated 10,513,000 1.73 2.35 0.27 26.3 400.7 543.7 90,400 8,900,000
--------------------------------------------------------------------------
Inferred 163,000 1.67 1.93 0.11 22.16 6.0 6.9 600 116,100
--------------------------------------------------------------------------
The mining sequence was divided into eight phases designed to
maximize grade, reduce pre-stripping requirements, while providing
the required mill feed production per period. The Main pit is most
economical when phases are mined concurrently. The LOM mine
production schedule is summarized in the table below.
Kutcho PEA -Life of Mine Production Schedule - Main Deposit Only
---------------------------------------------------------------------------
Production Year
Pre- ---------------------------------------------
Parameter Units prod 1 2 3 4 5 6 7 8 Total
---------------------------------------------------------------------------
Mineralized Mt - 1.46 1.46 1.46 1.46 1.46 1.46 1.46 0.5 10.7
rock mined(i)
---------------------------------------------------------------------------
Waste mined Mt 0.6 5.0 8.6 8.5 12.4 10 6.0 2.8 0.3 54.3
---------------------------------------------------------------------------
Strip ratio Wt:Ot - 3.4 5.9 5.8 8.5 6.8 4.1 1.9 0.8 5.1
---------------------------------------------------------------------------
Cu grade % Cu - 1.83 1.74 1.93 1.72 1.65 1.53 1.75 1.65 1.73
---------------------------------------------------------------------------
Zn grade % Zn - 2.83 2.38 2.65 2.22 2.07 1.96 2.39 2.06 2.34
---------------------------------------------------------------------------
Au grade Au g/t - 0.29 0.34 0.32 0.26 0.21 0.2 0.24 0.26 0.27
---------------------------------------------------------------------------
Ag grade Ag g/t - 26.6 28.7 29.8 26.1 23.8 23.4 24.9 28.6 26.3
---------------------------------------------------------------------------
(i) Since this is a PEA and incorporates inferred mineral resources (1.5%
of the total), this material cannot be quantified as a reserve under
NI 43-101.
Waste Management
Tailings from the mill will be sent to the proposed dry-stack
location to the east of the mill facility. The approach for
dry-stacking will be similar to that used by Sherwood at its Minto
Mine in the Yukon, with the addition of berms to retain and
encapsulate the tailings for permanent abandonment. Non-potentially
acid generating ("non-PAG") waste rock from the Main pit will be
deposited in a number of dumps adjacent to the pit, as well as in
buffered containments for the dry-stack tailings. A separate waste
dump has been designed for the potential acid generating ("PAG")
rock that will be extracted from the Main pit. Backfilling into
previously mined out areas would offer an improvement in the waste
haulage cycle for the trucking of waste out of the main pit and
will be considered in future studies.
Processing
The mineralogy of the Kutcho deposit is fine grained and
requires a relatively fine primary grind followed by a very fine
regrind to produce copper and zinc concentrates at reasonable
recoveries. The mineralized zone rock has been determined to be
soft and obtaining a fine grind is not considered to be an issue.
The flotation circuit is expected to be a standard copper-zinc
circuit with copper being recovered followed by zinc flotation.
Both copper and zinc rougher concentrates will be reground to
approximately 10 microns followed by three stages of cleaning.
Copper concentrate produced will contain sufficient zinc to likely
incur a smelter penalty. The penalty has been assumed to be
$4.00/dmt of concentrate. The copper concentrate is expected to be
30.3% copper. The sphalerite is low in iron and the grade of the
concentrate will be high at 55% zinc. Recoveries are expected to be
82-84% for copper and 72-74% for zinc. The recovery assumptions
used in this report are shown in the table below.
Metallurgical test work is ongoing to refine the fineness of
primary grind and the reagent scheme. Variability testing will
refine the metallurgical response with depth and will refine annual
production of metals. The current drill program is an opportunity
to refine the characteristics of the mineralization with respect to
bornite/chalcopyrite ratios, degree of dissemination and pyrite
content and relate these characteristics to metallurgical
response.
Kutcho PEA - Assumed Metallurgical Parameters Used in Cash Flow - Main
Deposit Only
--------------------------------------------------------------
Assumed Assumed Cu Assumed Zn
Metal recovery concentrate grade concentrate grade
--------------------------------------------------------------
Copper 84% 30.30%
--------------------------------------------------------------
Zinc 74% 55%
--------------------------------------------------------------
Gold 50% 4 g/t
--------------------------------------------------------------
Silver 52% 330 g/t
--------------------------------------------------------------
Operating & Capital Costs
Operating and capital expenses were derived from a number of
sources. Many costs were factored from Sherwood's Minto Mine in the
Yukon. The Minto Mine is also a small high-grade deposit with many
similarities to the Kutcho design and, therefore, served as a
valuable reference of a small, northern open pit base metal mine
and mill. Capital and operating expense estimates are summarized in
the tables below.
Kutcho PEA - Operating Cost Assumptions & Estimates - Main Deposit Only
----------------------------------------------------
Parameter Unit Cost Unit
----------------------------------------------------
Mining cost 1.64 C$/t rock
----------------------------------------------------
Mining cost 9.87 C$/t milled
----------------------------------------------------
Site Services & G&A cost
----------------------------------------------------
Labour 4.48 C$/t milled
----------------------------------------------------
Equipment 0.68 C$/t milled
----------------------------------------------------
Materials 14.02 C$/t milled
----------------------------------------------------
Expenses 0.94 C$/t milled
----------------------------------------------------
Contingency 2.01 C$/t milled
----------------------------------------------------
Total Services and G&A 22.13 C$/t milled
----------------------------------------------------
Milling cost
----------------------------------------------------
Labour 4.04 C$/t milled
----------------------------------------------------
Equipment 0.62 C$/t milled
----------------------------------------------------
Materials 7.48 C$/t milled
----------------------------------------------------
Expenses 0.37 C$/t milled
----------------------------------------------------
Contingency 1.25 C$/t milled
----------------------------------------------------
Total Milling 13.76 C$/t milled
----------------------------------------------------
Capital leases (total) 5.0 C$/t milled
----------------------------------------------------
Royalties 2% NSR
----------------------------------------------------
Kutcho PEA - Capital Cost Estimates - Main Deposit Only
--------------------------------------------
Initial Capital
Item (Millions)
--------------------------------------------
Site Infrastructure $8.80
--------------------------------------------
Mining $7.10
--------------------------------------------
Process Plant $72.50
--------------------------------------------
Services $2.30
--------------------------------------------
Ancillary Buildings $5.90
--------------------------------------------
Construction Camp Costs $6.10
--------------------------------------------
Off site Infrastructure $18.00
--------------------------------------------
Total Direct Capital Costs $120.70
--------------------------------------------
Indirect Capital Costs $38.70
--------------------------------------------
Total Project $159.40
--------------------------------------------
Contingency @ 15% $23.90
--------------------------------------------
G R A N D T O T A L $183.30
--------------------------------------------
In addition to the capital in the table above, there is another
$43.1M in capital equipment that will be leased over a seven-year
period. Approximately 50% of the leased capital is mobile equipment
for the open pit mine.
Production
The following sets out the copper, zinc, gold and silver in
concentrates and estimated payable metal detailed in the PEA.
Kutcho PEA - Life-of-Mine Metal Production Forecast - Main Deposit Only
------------------------------
Year
--------------------------------------------------------------
Item Unit 1 2 3 4
--------------------------------------------------------------
Copper in cons lb ('000) 49,400 47,100 52,300 46,400
--------------------------------------------------------------
Zinc in cons lb ('000) 67,500 56,700 63,400 52,800
--------------------------------------------------------------
Gold in cons oz ('000) 6.8 8.0 7.4 6.0
--------------------------------------------------------------
Silver in cons oz ('000) 653 705 734 643
--------------------------------------------------------------
Conc. grade % Cu 30.3 30.3 30.3 30.3
--------------------------------------------------------------
Payable copper(i) lb ('000) 47,700 45,400 50,500 44,800
--------------------------------------------------------------
Payable zinc(i) lb ('000) 57,400 48,200 53,900 44,900
--------------------------------------------------------------
Payable gold oz Au ('000) 6.1 7.2 6.7 5.4
--------------------------------------------------------------
Payable silver oz Ag ('000) 588 634 661 578
--------------------------------------------------------------
------------------------------
Year
-----------------------------------------------------------------------
Item Unit 5 6 7 8 Total
-----------------------------------------------------------------------
Copper in cons lb ('000) 44,600 41,500 47,500 14,700 343,000
-----------------------------------------------------------------------
Zinc in cons lb ('000) 49,200 46,700 57,100 16,100 409,000
-----------------------------------------------------------------------
Gold in cons oz ('000) 4.9 4.7 5.7 2.0 45.5
-----------------------------------------------------------------------
Silver in cons oz ('000) 585 574 613 232 4,739
-----------------------------------------------------------------------
Conc. grade % Cu 30.3 30.3 30.3 30.3 30.3
-----------------------------------------------------------------------
Payable copper(i) lb ('000) 43,100 40,000 45,800 14,100 331,000
-----------------------------------------------------------------------
Payable zinc(i) lb ('000) 41,800 39,700 48,500 13,700 348,000
-----------------------------------------------------------------------
Payable gold oz Au ('000) 4.4 4.2 5.1 1.8 41
-----------------------------------------------------------------------
Payable silver oz Ag ('000) 527 517 552 208 4,265
-----------------------------------------------------------------------
(i) Copper, gold and silver are payable only within the Cu concentrate.
Zn is payable only within the Zn concentrate.
As noted above, additional smoothing of production is planned
post-PEA as part of an on-going process of open pit optimization,
as well as evaluating options for extending the mine life by
incorporating additional mineral resources defined on the Kutcho
Project but not considered in the PEA, including the balance of the
Main deposit and those in the Esso and Sumac deposits.
Economic Analysis
The economic assessment in the PEA is preliminary in nature and
uses 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 this PEA will be realized. The inferred
mineral resource used in the mine plan is 1.5% of the total LOM
resource.
Three cash flow cases were studied. All cash flow cases used the
same mineral resource estimate and production factors as shown in
the table below.
Kutcho PEA - Summary of Production Cases - Main Deposit Only
--------------------------------------------------------------------------
All Cases
Item Unit Totals/Averages
--------------------------------------------------------------------------
Waste mined M tonnes 54.4
--------------------------------------------------------------------------
Mineralized rock mined M tonnes 10.7
--------------------------------------------------------------------------
Strip ratio Waste rock:Plant feed 5.1
--------------------------------------------------------------------------
Mill Feed M tonnes 10.7
--------------------------------------------------------------------------
Copper millhead grade (average) % Cu 1.73%
--------------------------------------------------------------------------
Zinc millhead grade (average) % Zn 2.34%
--------------------------------------------------------------------------
Gold millhead grade (average) g/t Au 0.26
--------------------------------------------------------------------------
Silver millhead grade (average) g/t Ag 26.5
--------------------------------------------------------------------------
Copper in Cu cons M lb 343
--------------------------------------------------------------------------
Zinc in Zn cons M lb 409
--------------------------------------------------------------------------
Gold in Cu cons K oz 46
--------------------------------------------------------------------------
Silver in Cu cons K oz 4,739
--------------------------------------------------------------------------
Cu Concentrate Grade % Cu 30.3%
--------------------------------------------------------------------------
Zn Concentrate Grade % Zn 55%
--------------------------------------------------------------------------
The cash flow cases were differentiated by average metal prices
and the results for each case are shown in the table below. Case 3
pricing was based on the forward curve for copper as of April,
2008, and spot prices for gold and silver with no escalation or
de-escalation going forward. Case 2 represents an approximately 15%
discount to Case 3 copper gold and silver prices, and Case 1 a 30%
discount of copper, gold and silver prices compared to Case 3. Zinc
prices were set at current spot prices for Case 3 with a US$0.01/lb
and US$0.02/lb reduction for Cases 2 and 1 respectively. All cases
used a gradual zinc price decrease to US$0.92/lb by the 4th year of
production. Exchange rates are based on historic correlations of C$
exchange rates and copper prices for Case 3, but were not changed
for case 2 and 1, whereas historic relationships suggest that the
C$ would be weaker than indicated at these metal prices.
Kutcho PEA - Summary of Results by Case - Main Deposit Only
--------------------------------------------------------------------------
Item Unit Case 1 Case 2 Case 3
--------------------------------------------------------------------------
Average Copper Price US$/lb $2.24 $2.73 $3.20
--------------------------------------------------------------------------
Average Zinc Price US$/lb $0.94 $0.95 $0.96
--------------------------------------------------------------------------
Average Gold price US$/oz $600 $725 $850
--------------------------------------------------------------------------
Average Silver price US$/oz $10.00 $13.00 $16.00
--------------------------------------------------------------------------
Exchange rate C$:US$ $1.11 $1.11 $1.11
--------------------------------------------------------------------------
NSR C$/t milled $88 $106 $125
--------------------------------------------------------------------------
Unit Mining costs (ex equip. lease) $/t mined $1.64 $1.64 $1.64
--------------------------------------------------------------------------
Unit Mining costs (ex equip. lease) $/t milled $9.87 $9.87 $9.87
--------------------------------------------------------------------------
Unit Milling costs $/t milled $13.76 $13.76 $13.76
--------------------------------------------------------------------------
Unit G&A and Site services (ex $/t milled $22.13 $22.13 $22.13
equip. lease)
--------------------------------------------------------------------------
Unit Lease costs $/t milled $5.00 $5.00 $5.00
--------------------------------------------------------------------------
Unit Total OPEX (inc royalties) $/t milled $52.49 $52.86 $53.24
--------------------------------------------------------------------------
Unit OPEX C$/lb Cu $1.70 $1.71 $1.72
--------------------------------------------------------------------------
Unit OPEX (with Zn, Au, Ag credits) C$/lb Cu $0.93 $0.87 $0.82
--------------------------------------------------------------------------
Pre-Production Capital (excluding $ M $183.30 $183.30 $183.30
sustaining capital, capital
leases and closure)
--------------------------------------------------------------------------
NPV @ 10% discount rate pre-tax $ M $52 $176 $300
--------------------------------------------------------------------------
NPV @ 10% discount rate after tax $ M $31 $116 $199
--------------------------------------------------------------------------
IRR pre-tax % 19% 38% 54%
--------------------------------------------------------------------------
IRR after tax % 16% 33% 46%
--------------------------------------------------------------------------
Payback period (tax in) Years 3 2 1.5
--------------------------------------------------------------------------
Sensitivity Analysis
Sensitivity analysis was done using metal prices, mill head
grade, capital costs and operating costs as variables. As with many
projects, the Net Present Value ("NPV") was most sensitive, in
order of magnitude, to metal price, grade and recovery, operating
expenses ("OPEX") and capital expenses ("CAPEX"). Each variable was
changed independently while all other variables were held at the
constant base case level.
In Case 1, a 20% increase in metal prices leads to an increase
in the post-tax NPV using a 10% discount rate ("NPV10%") from $31M
to $148M. The mill head grade and recovery also have a similar
large impact with a $79M NPV10% gain for a 20% increase in grade or
recovery. Conversely, decreases in metal prices, mill head grades
or recoveries have a correspondingly large negative effect on the
NPV10%. The Case 1 results show the project is uneconomic if metal
prices or mill head grade/recovery drop by more than 5-7%. Cases 2
assumes higher metal prices than Case 1 and is therefore more
immune to negative metal price changes. Case 2 shows the same large
variances in NPV10% as Case 1 but an 18% drop in metal prices is
required before it will lead to a negative NPV10%. Case 3 assumes
metal prices approximately in line with the forward curve for
copper and zinc, but with no escalation of precious metal prices,
and is the most robust scenario.
Environmental
The Kutcho Project is subject to the British Columbia
Environmental Assessment Act and the Canadian Environmental
Assessment Act. The former requires that the project undergo an
environmental assessment and obtain an Environmental Assessment
("EA") Certificate. The Project was initiated into the BC EA
process through the issuance of a Section 10 order by the BC
Environmental Assessment Office ("EAO") on July 29, 2005. The
provincial and federal processes will be integrated in a harmonized
review, with the EAO taking the lead. On December 24, 2007, the
Canadian Environmental Assessment Agency announced that the Kutcho
Project would be subject to a Comprehensive Study.
In 2005, a program of environmental and socio-economic baseline
studies was begun to provide the information necessary to prepare
the EA Application and to develop management and monitoring plans.
It covered all facets of the biophysical and human environment,
including meteorology, air quality, hydrology, hydrogeology, metal
leaching and acid rock drainage, aquatic ecology, fish and fish
habitat, soils, vegetation, ecosystem mapping, wildlife, wetlands,
archaeology, socio-economics, land use, country foods and human
health, and traditional use and traditional ecological knowledge.
The program was completed in 2007. Monitoring of meteorology, air
quality, hydrology and water quality will continue throughout the
construction, operation, closure and post-closure phases. The most
significant environmental issue for the Project will be maintaining
water quality in the receiving environment. Treatment of mine
effluent to BC water quality criteria will be required during all
mine phases.
The Kutcho Project is in the traditional territories of the
Tahltan and Kaska Dena First Nations. Consultation with these First
Nations and other stakeholders has been ongoing since activity at
the Kutcho Project re-started approximately four years ago.
Project Risks
The major risk areas identified in the PEA are:
1. Environmental and permitting requirements could delay or
preclude the development of the Kutcho Project;
2. Adverse changes in exchange rates, metal prices and external
financial influences could negatively impact the development of the
project;
3. Process recoveries could be less than assumed in the PEA,
negatively affecting project returns;
4. Potential for increases in capital costs over those estimated
in the PEA;
5. Poor grade control could result in over-dilution of the high
grade mineralization, negatively affecting recoveries.
Project Opportunities
The most important opportunities to improve the project are:
1. Increased grade of the in situ mineral resource as a result
of in-fill drilling currently in process (In-fill drilling in 2006
on a limited portion of the Main deposit suggested potential to
increase overall mineral resource grades versus that previously
modelled - with a comprehensive in-fill drill program underway,
Sherwood will be better able to evaluate this opportunity by the
fall of 2008);
2. Optimization of mine plan following in-fill drilling to
maximize grade and reducing stripping in the early years of the
mine plan (an increase of 1M tonnes of mill feed at the average
grade used in the PEA would increase the pre-tax NPV10% $12M;
3. Increased life of mine production as a result of mining
additional mineral resources from the Main pit (only 63% of the
Main deposit mineral resource is extracted in the proposed open
pit, leaving 6.3Mt that could be exploitable, depending on metal
prices and costs, and extending the mine life);
4. Exploitation of mineral resources from the other deposits
already known (Esso and Sumac) which, together with the unmined
portion of the Main deposit, comprise more than 50% of the total
project resources;
5. Reduced stripping by steepening pit walls, if supported by
planned geotechnical drilling (a 0.1 reduction in the strip ratio
increases the pre-tax NPV10% by $1M);
6. Improved metallurgical recoveries in the process plant as a
result of metallurgical test work currently in process (a 1%
increase in recoveries increases the pre-tax NPV by $7M and IRR by
1%) and improved concentrate grades (a 1% increase in concentrate
grade increases pre-tax NPV10% by $4M);
7. Reduced energy usage as equipment is specified and sized;
8. Reduced capital costs through expanded utilization of used
and refurbished equipment;
9. Reduced overall transportation costs of concentrate from mine
to smelter (a 10% reduction increases pre-tax NPV10% by $3M);
and
10. Potential for lower than assumed TC/RC's, especially copper,
where current rates are well below those assumed in the PEA (a10%
reduction in TC/RC's increases pre-tax NPV10% by $3M).
It should be noted that the upside potential indicated above
could also become negative if the factors are worse than expected.
In this regard, the list can be used to identify which parameters
might have the largest positive or negative effect on the project
and risk mitigation plans could be developed.
Moving Forward
As a result of the recommendations in the PEA, Sherwood has an
extensive work program underway to investigate the project
opportunities identified and to mitigate the project risks. This
work program includes:
1. In-fill drilling the Main deposit in order to better define
the high grade mineralization, optimize the mine planning and
enhance the quality of the assay database;
2. Geotechnical investigations to steepen up the pit walls and
reduce the overall stripping;
3. Evaluating the potential of an expanded open pit or
underground extraction of the unplanned portions of the Main
deposit immediately adjacent to the current proposed open pit;
4. Evaluating the potential of the Esso and Sumac resources as
potential sources of supplemental feed, possibly by ramp access out
of the proposed open pit, extending the mine life;
5. Extensive metallurgical testing in order to determine the
potential for improved metallurgical recoveries and improved
concentrate grades;
6. Possible recovery of free gold in a gravity circuit;
7. Conducting more ABA testing to better define the extent of
potentially acid generating rock;
8. Geotechnical and hydrogeological evaluations to optimize open
pit planning;
9. Re-engage the regulatory agencies to advance the Kutcho
copper project through the permitting process.
10. Re-engage the Tahltan and Kaska First Nations to attain
meaningful and equitable IBA agreements.
An updated PEA is planned for the fall of 2008, incorporating
some or all of the results from items #1, #3, #4 and #5 above, and
a feasibility study in the first half of 2009 (depending on
timeliness of work programs required to support a feasibility
study).
Resource Estimation Methodology
Kirkham Geosystems Ltd. prepared the mineral resource estimate
for the Kutcho deposit. Mr. Kirkham has reviewed pertinent
geological information in sufficient detail to support the data
incorporated in the resource estimate. Garth Kirkham, P.Geo. of
Kirkham Geosystems Ltd. is the Independent Qualified Person under
National Instrument 43-101 responsible for the resource
estimate.
The estimates for copper, zinc, silver and gold were completed
for the PEA Report dated June of 2008 using the MineSight(TM)
3-dimensional mine planning software system. The estimate was based
upon a database comprised of 346 drill holes supplied by Kutcho
Copper. The estimation process was constrained by a solid model
based on lithological boundaries combined with grade contours.
Assays were then composited into 2.5m intervals for statistical and
geostatistical analysis to be performed within the constraining
domains. A 5m by 5m by 5m orthogonal block model was created and
Ordinary Kriging was used as the method to interpolate grades into
each block within the solid domain. Bulk density measurements were
supplied within the drill hole database and also interpolated into
each block using Inverse Distance to the 3rd power as the
interpolator. Individual blocks were then classified into indicated
and inferred categories based on number of drillholes, number of
composites, average distance to composite, distance to nearest
composite and relative error. The grades and tonnages reported in
the resource estimate represent the material contained within the
mineralized portion (as a percentage) of the classified block below
topography.
Mineral resources that are not mineral reserves do not have
demonstrated economic viability. Mineral resource estimates do not
account for mineability, selectivity, mining loss and dilution.
These mineral resource estimates include inferred mineral resources
that are normally considered too speculative geologically to have
economic considerations applied to them that would enable them to
be categorized as mineral reserves. There is also no certainty that
these inferred mineral resources will be converted to measured and
indicated mineral resource categories through further drilling, or
into mineral reserves once economic considerations are applied.
Technical Report
A National Instrument 43-101 compliant technical report will be
filed within the next week on SEDAR and, once filed, can be
accessed under Sherwood's profile at www.sedar.com.
Diagrams
Kutcho PEA - Claim area showing schematic of proposed mine site
- http://media3.marketwire.com/docs/swc612a.pdf
Kutcho PEA - Proposed project layout -
http://media3.marketwire.com/docs/swc612b.pdf
Kutcho PEA - Computer Generated Image of the Three Known Massive
Sulphide Deposits, Drill Holes, and Surface Topography (Wardrop
2007) - http://media3.marketwire.com/docs/swc612c.pdf
Kutcho PEA - Proposed phasing of open pit on Main deposit
(looking south) - http://media3.marketwire.com/docs/swc612d.pdf
About Sherwood Copper
Sherwood's objective is the profitable production of base and
precious metals from high grade, open pit mines in Canada.
Sherwood's first operating mine, the high grade Minto copper-gold
mine in Yukon, Canada, was built on budget and ahead of schedule.
The Minto Mine is one of the highest-grade open pit copper-gold
mines in the world, and is forecast to be a low cost producer.
Aggressive exploration on the Minto property has yielded
significant success, providing Sherwood the opportunity to 'grow
from within' by expanding the mineral resource and mineral reserve
base, potentially leading to further production increases. To
further accelerate its production growth, Sherwood intends to
pursue merger & acquisition opportunities that fit its business
model and, in May 2008, Sherwood acquired 100% ownership in Western
Keltic Mines Ltd., owner of the high-grade Kutcho
copper-zinc-gold-silver deposit in northwestern British Columbia.
Sherwood expects to lever off its successful development of the
Minto Mine and rapidly advance the Kutcho Project to a production
decision.
Quality Assurance
The technical information in this news release has been prepared
in accordance with Canadian regulatory requirements set out in
National Instrument 43-101 and reviewed by Stephen P. Quin, P.Geo.,
President & CEO of Sherwood. The following SRK employees are
QPs for this project; Gordon Doerksen, P.E. (WY) - Project
Overview; Dino Pilotto, P.Eng. - Mining;. Garth Kirkham, P.Geo. of
Kirkham Geosystems - Mineral Resource Estimates, Jeff Stibbard
P.Eng. - Capital, G&A and Operating Costs, Dave Hendriks,
P.Eng. - Metallurgy and Mineral Processing, Brad Mercer P.Geo. -
Geology.
The report relies on the work and opinions of non-QP experts
without verification by SRK, including: Roger Nonis and Robert
Johnston, P.Eng., of Sacre-Davey Engineering (mineral processing
and project infrastructure), Mike McGurk of Rescan Environmental
(environmental and permitting), Carl Hovey of All-North Consultants
(access road and site earthworks), Wentworth Taylor of WH Taylor
Inc. (taxation).
Additional Information
Additional information on Sherwood and its Minto & Kutcho
projects can be obtained on Sherwood's website at
http://www.sherwoodcopper.com.
On behalf of the board of directors
SHERWOOD COPPER CORPORATION
Stephen P. Quin, President & CEO
Forward-Looking Statements
This document may contain "forward-looking statements" within
the meaning of Canadian securities legislation and the United
States Private Securities Litigation Reform Act of 1995. These
forward-looking statements are made as of the date of this document
and the Company does not intend, and does not assume any
obligation, to update these forward-looking statements.
Forward-looking statements relate to future events or future
performance and reflect management's expectations or beliefs
regarding future events and include, but are not limited to,
statements with respect to the estimation of mineral reserves and
resources, the realization of mineral reserve estimates, the timing
and amount of estimated future production, costs of production,
capital expenditures, success of mining operations, environmental
risks, unanticipated reclamation expenses, title disputes or claims
and limitations on insurance coverage. In certain cases,
forward-looking statements can be identified by the use of words
such as "plans", "expects" or "does not expect", "is expected",
"budget", "scheduled", "estimates", "forecasts", "intends",
"anticipates" or "does not anticipate", or "believes", or
variations of such words and phrases or statements that certain
actions, events or results "may", "could", "would", "might" or
"will be taken", "occur" or "be achieved" or the negative of these
terms or comparable terminology. By their very nature
forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results,
performance or achievements of the Company to be materially
different from any future results, performance or achievements
expressed or implied by the forward-looking statements. Such
factors include, among others, risks related to actual results of
current exploration activities; changes in project parameters as
plans continue to be refined; future prices of resources; possible
variations in ore reserves, grade or recovery rates; accidents,
labour disputes and other risks of the mining industry; delays in
obtaining governmental approvals or financing or in the completion
of development or construction activities; as well as those factors
detailed form time to time in the Company's interim and annual
financial statements and management's discussion and analysis of
those statements, all of which are filed and available for review
on SEDAR at www.sedar.com. Although the Company has attempted to
identify important factors that could cause actual actions, events
or results to differ materially from those described in
forward-looking statements, there may be other factors that cause
actions, events or results not to be as anticipated, estimated or
intended. There can be no assurance that forward-looking statements
will prove to be accurate, as actual results and future events
could differ materially from those anticipated in such
statements.
Accordingly, readers should not place undue reliance on
forward-looking statements.
The TSX Venture Exchange has not reviewed and does not accept
responsibility for the adequacy or accuracy of this press
release.
Contacts: Sherwood Copper Corporation - Investor Contact Stephen
P. Quin (604) 687-7545 Sherwood Copper Corporation - Investor
Contact Brad Kopp (604) 687-7545 (604) 689-5041 (FAX) Website:
www.sherwoodcopper.com
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