TIDMSOLG
RNS Number : 6712I
SolGold PLC
20 April 2022
20 April 2022
SolGold plc
("SolGold" or the "Company")
Pre-Feasibility Study supports long-life, high-value Cascabel
project
The Board of Directors of SolGold (LSE & TSX: SOLG) is
pleased to announce the results of the Pre-Feasibility Study
("PFS") for the Cascabel project, held by Exploraciones Novomining
S.A. ("ENSA"), an 85% owned subsidiary of SolGold.
The PFS confirms the Cascabel project's world class, Tier 1
potential to be a large, low-cost, and long-life mining operation
that is based on achievable, proven, and tested mining and
processing assumptions. Once constructed, Cascabel is expected to
be a top 20[1] South American copper & gold mine benefiting
from a high-grade core, advantageous infrastructure and an
increasingly investor friendly government. The mine is expected to
produce a clean copper-gold-silver concentrate, to be sold to Asian
and European smelters as part of a project construction financing
package.
KEY HIGHLIGHTS
Ø Estimated US$5.2bn pre-tax Net Present Value ("NPV") and 25.3%
Internal Rate of Return ("IRR")
Ø Estimated US$2.9bn after-tax NPV, 19.3% IRR and 4.7 year
payback period from start of processing[2](, [3], [4], [5])
Ø After-tax NPV would be US$4.1bn (US$7.9bn pre-tax) and IRR
23.4% (30.5% pre-tax) at current spot commodity prices[6]
Ø Estimated average production[7] of 132ktpa of copper, 358kozpa
of gold and 1Mozpa of silver - 212ktpa copper equivalent
("CuEq")[8] - with peak[9] copper production of 210ktpa (391ktpa
CuEq(8) )
Ø Initial project Life-of-Mine ("LOM") All-In-Sustaining Cost
("AISC") of US$0.06/lb of copper, placing Cascabel well within the
first decile of the copper industry cost curve(1)
Ø On achieving nameplate capacity, average of approximately
190ktpa of copper, 680kozpa of gold and 1.3Mozpa of silver
(>330ktpa CuEq(8) ) over initial 5 years at an average negative
AISC of US$(1.38)/lb
Ø Estimated pre-production capital expenditure of US$2.7bn for
the initial cave development, first process plant module and
infrastructure
Ø Initial Mineral Reserve of 558Mt containing 3.3Mt Cu @ 0.58%,
9.4Moz Au @ 0.52g/t and 30Moz Ag @ 1.65g/t over an initial 26-year
mine life
Ø Potential mine life upside in excess of 50 years following
initial LOM[10]
Ø Annual after-tax free cash flow ("FCF") to average US$740m(5,
7) , peaking at over US$1.6bn(5, 9)
Ø Average annual EBITDA[11] of nearly US$1.2bn(5, 7) , peaking
at over US$2.4bn(5, 9)
Ø Additional optimisations being progressed for a PFS Addendum
planned for completion in H2 CY22
Ø Cascabel project Definitive Feasibility Study ("DFS") planned
for completion in H2 CY23
Ø SolGold will host a PFS presentation on 20 April 2022 at
9:30am London time. Please register at:
https://www.investormeetcompany.com/solgold-plc/register-investor
SolGold's MD & CEO, Darryl Cuzzubbo, commented on the
PFS:
"I am extremely pleased to announce the results of the
pre-feasibility study for the proposed Cascabel mine in Ecuador. In
essence, it supports what we have believed all along - that this
project is no ordinary mining asset. Cascabel will be a
significant, multi-decade and very low cost producer of copper that
can help enable Ecuador's emergence as the next copper frontier at
a time when the world needs copper the most as we transition to a
net zero carbon emissions future.
This project is economically attractive and based upon
assumptions that we believe can be delivered upon. There is further
upside that will be explored over the coming months and the next
phase of the project as we seek the necessary Government approvals
to move into early works and execution.
Such a project will create over 6,000 indirect and direct jobs,
not to mention will bring significant royalty and tax revenue
benefiting all Ecuadorians."
SolGold's Chair of the Cascabel Project Steering Committee,
Keith Marshall, commented on the PFS:
"I am very encouraged with the pre-feasibility study. It offers,
what I consider to be, a robust but flexible solution for the
development of the underground mine at Cascabel. The study focused
on the "right sizing" of the project, with the objective of
reducing the technical and execution risk. It also provides a
straightforward approach to mining the deposit that optimises
selectivity, without compromising any of the resource and
maintaining optionality.
I am confident that the study lays the solid groundwork for the
next steps in the Cascabel project. I am particularly looking
forward to progressing the study work and being able to expand our
operational activities in Ecuador."
Former CEO and now Non-Executive Director and a direct and
indirect shareholder with 12.9% of SolGold Nick Mather said:
"The various upsides at Cascabel offered by additional
mineralised porphyry systems still being outlined and assessed,
potential for additional production and treatment plant capacity,
refinements to the mine plan, continued low cost of capital and
what I see as the opportunity for long run higher copper prices as
the world electrifies, suggest that this project indeed has
considerable further upside to be evaluated.
More importantly, SolGold's comprehensive exploration footprint
and ongoing exploration success will, in my view, establish not
just one project of significance but a string of them throughout
Ecuador, defining a globally important copper province and the
potential to have a significant impact on Ecuador's economy. In a
world of visionary enterprise looking to address escalating metal
demand to facilitate global electrification and limit global
warming to 2(o) C in an economically, socially and environmentally
just manner, SolGold's position is unique."
References to figures relate to the version visible in PDF
format by clicking the link below:
http://www.rns-pdf.londonstockexchange.com/rns/6712I_1-2022-4-19.pdf
SUMMARY OF CASCABEL PFS RESULTS
Economic Evaluation
The PFS investigated multiple scenarios in order to identify an
initial base case to take forwards, with additional resources and
upside to be investigated, supporting the next phase optimisations,
and confirming the application of block cave mining to the Alpala
underground resource.
Attractive initial cave project, potentially delivering:
Ø Initial 26-year operating life and 25Mtpa process plant
throughput
Ø Total ore production of 558Mt, containing 3.3Mt Cu, 9.4Moz Au
and 30Moz Ag
Ø Process plant producing 2.8Mt Cu, 7.6Moz Au and 21.7Moz Ag
over the initial 26 year life of the project
Ø Average annual production in five years following initial cave
ramp up of 190ktpa Cu, 680kozpa Au and 1.3Mozpa Ag
Ø Average annual production (7) for initial cave of 132ktpa Cu,
358kozpa Au and 1.0Mozpa Ag
Ø All in sustaining cost of US$0.06 /lb Cu over the initial 26
year mine project
Ø Estimated initial capital expenditure of US$2.7bn for the
initial cave development, first process plant module and
infrastructure
Ø Payback of 4.7 years from start of operations
Ø After-tax NPV and IRR of US$2.9bn and 19.3%, respectively
An initial Mineral Reserve estimate for the Cascabel project of
558Mt, with 0.58% Cu, 0.52 g/t Au and 1.65 g/t Ag for 3.3Mt Cu,
9.4Moz Au and 30Moz Ag.
Exploration success and future potential with unexplored areas
identified for future drilling and extension of additional reported
resources.
The PFS underpins the Mineral Reserve estimate and further
optimisations of the mine and process plant are expected to deliver
additional value.
The availability of low-cost hydropower, on site water
resources, the use of targeted underground mining, process plant
configuration, the potential use of an electric mining fleet,
concentrate transport via a pipeline are expected to deliver a
lower carbon footprint compared to projects which do not have these
benefits.
The Cascabel project DFS is planned for completion in H2 CY23,
with additional optimisations including:
Ø Further investigations into process plant feed rates,
including additional resources such as the Tandayama-Ameríca
resource
Ø Capital cost reduction opportunities
Ø Alpala underground mine design optimisation, mine sequence and
scheduling, application of macro blocks
Ø Process plant design optimisation, following additional test
work
Ø Hydropower project development
Key PFS outcomes Base Case AET - 2 Spot Prices
(100% project basis) [12] (6)
Economic
assumptions Copper (US$/lb) 3.60 4.20 4.74
Gold (US$/oz) 1,700 1,933 1,933
Silver (US$/oz) 19.9 24.5 24.5
Government royalty rate 3% (base & precious metals)
Ecuador tax rates[13] 15% profit share / 25% corporate
Production Throughput 25 Mtpa
Initial project LOM 26 years
Total ore mined 558 Mt
Average copper grade / recovery 0.58% / 87.1%
Average gold grade / recovery 0.52 g/t / 72.1%
Average silver grade / recovery 1.65 g/t / 65.7%
Total CuEq produced(8) 4.5 Mt
Total copper produced 2.8 Mt
Total gold produced 7.6 Moz
Total silver produced 21.7 Moz
Annual CuEq production (peak/average)(7, 391 kt / 212 kt
8, 9, [14])
Annual copper production (peak/average)(7, 210 kt / 132 kt
9, 14)
Annual gold production (peak/average)(7, 829 koz / 358 koz
9, 14)
Annual silver production (peak/average)(7, 1.4 Moz / 1.0 Moz
9, 14)
Capital Pre-production US$2,746m
Post-production US$2,136m
Average net cash cost (US$/lb
Operating Cu) (0.40) (0.66) (0.63)
Average AISC (US$/lb Cu) 0.06 (0.20) (0.17)
Financials Pre-tax NPV (8%) US$5,241m US$6,915m US$7,862m
Pre-tax IRR 25.3% 28.8% 30.5%
After-tax NPV (8%) US$2,907m US$3,781m US$4,083m
After-tax IRR 19.3% 22.2% 23.4%
Capital payback period 4.7 years 4.3 years 4.2 years
Total FCF generation US$14,413m US$16,080m US$16,278m
Average annual FCF US$740m US$856m US$863m
Average annual FCF (first US$1,345m US$1,575m US$1,699m
5yrs post ramp-up)
Total EBITDA US$24,003m US$29,178m US$32,249m
Average annual EBITDA US$1,156m US$1,396m US$1,540m
Average annual EBITDA (first US$2,040m US$2,419m US$2,622m
5yrs post ramp-up)
Table 1 : Economic and operating summary
An accelerated energy transition ("AET") would increase copper
demand growth with a faster uptake of electric vehicles and
renewable energy generation, both industries having high copper
intensities. The Cascabel project concentrate is expected to be a
clean high value concentrate, with low levels of deleterious
elements, sought after by smelters globally. Wood Mackenzie's AET-2
long-term copper price forecast is US$4.20/lb and is based on
projections that conform to a 2-degree or lower global warming
scenario. At this price, and assuming current spot prices for gold
and silver, SolGold estimates an after-tax project NPV of US$3.8bn
and 22% IRR.
Project Description
Cascabel is located in northern Ecuador approximately three
hours' drive north of Quito, the capital city of Ecuador. Access is
via sealed highways through the closest major centre of Ibarra,
located approximately 80 km south of the property. Infrastructure
in the region and throughout Ecuador is generally of a high
standard, with excellent road access, power, and water sources
readily available in the local area.
The PFS process commenced in 2020 with a revision to scope in
2021 to investigate the 'right' capacity block cave for the Alpala
underground, and corresponding right sizing and expansion of the
process plant to suit. Extension opportunities, alternate mine
access methods and tailings storage facility options were also
considered during the PFS.
The block cave will be mined with Load Haul and Dump equipment
to one of two primary crushing stations on the trucking level. Both
diesel and battery electric vehicles ("BEV") were assessed during
the PFS, including the potential benefits for mine ventilation
requirements. For the PFS the block cave design was based on diesel
vehicles in all applications except BEV for the production trucking
loop. Further investigations for electrification are proposed in
the DFS.
Mineral Resource Estimate ("MRE") [15]
The Alpala porphyry copper-gold-silver deposit, at a cut-off
grade of 0.21% CuEq, comprises 2,663 Mt at 0.53% CuEq[16] in the
Measured plus Indicated categories, which includes 1,192 Mt at
0.72% CuEq in the Measured category and 1,470 Mt at 0.37% CuEq in
the Indicated category. The Inferred category contains an
additional 544 Mt at 0.31% CuEq.
The MRE comprises a contained metal content of 9.9 Mt Cu and
21.7 Moz Au in the Measured plus Indicated categories, which
includes 5.7 Mt Cu and 15.0 Moz Au in the Measured category, and
4.2 Mt Cu and 6.6 Moz Au in the Indicated category. The Inferred
category contains an additional 1.3 Mt Cu and 1.9 Moz Au.
Cut-off Mineral Mt Grade Contained metal
grade Resource
category
CuEq Cu Au Ag CuEq Cu Au Ag
(%) (%) (g/t) (g/t) (Mt) (Mt) (Moz) (Moz)
0.21% Measured 1,192 0.72 0.48 0.39 1.37 8.6 5.7 15.0 52.4
Indicated 1,470 0.37 0.28 0.14 0.84 5.5 4.2 6.6 39.8
Measured
+ Indicated 2,663 0.53 0.37 0.25 1.08 14.0 9.9 21.7 92.2
Inferred 544 0.31 0.24 0.11 0.61 1.7 1.3 1.9 10.6
Planned
dilution 5 0.00 0.00 0.00 0.00 0.0 0.0 0.0 0.0
Table 2 : Cascabel project Alpala underground mineral resource
estimate
Notes:
1. Mrs. Cecilia Artica, SME Registered Member, Principal Geology
Consultant of Mining Plus, is responsible for this Mineral Resource
statement and is an "independent Qualified Person" as such term is
defined in NI 43-101.
2. The Mineral Resource is reported using a cut-off grade of
0.21% CuEq calculated using [copper grade (%)] + [gold grade (g/t)
x 0.613].
3. The Mineral Resource is considered to have reasonable
prospects for eventual economic extraction by underground mass
mining such as block caving.
4. Mineral Resources are not Mineral Reserves and do not have
demonstrated economic viability.
5. The statement uses the terminology, definitions and
guidelines given in the CIM Standards on Mineral Resources and
Mineral Reserves (May 2014) as required by NI 43-101.
6. MRE is reported on a 100 percent basis within an optimised shape.
7. Figures may not compute due to rounding.
Mineral Reserve Estimate
The Mineral Reserves have been estimated for a block caving
method and take into account the effect of mixing of indicated
material with dilution from low grade or barren material
originating from within the caved zone and the overlying cave
backs. The initial Mineral Reserve represents only 21% of Measured
and Indicated Resources tonnes and approximately 38% of contained
metal.[17]
Mineral Mt Grade Contained metal
Reserve
category
Cu Au Ag Cu Au Ag
(%) (g/t) (g/t) (Mt) (Moz) (Moz)
Probable 558 0.58 0.52 1.65 3.26 9.37 30
Total 558 0.58 0.52 1.65 3.26 9.37 30
Table 3 : Cascabel project Alpala underground mineral reserve
estimate
Notes:
1. Effective date of the Mineral Reserves is 31 March 2022.
2. Only Measured and Indicated Mineral Resources were used to
report Probable Mineral Reserves.
3. Mineral Reserve reported above were not additive to the
Mineral Resource and are quoted on a 100% project basis.
4. The Mineral Reserve is based on the 18 March 2020 Mineral Resource.
5. Totals may not match due to rounding.
6. The statement uses the terminology, definitions and
guidelines given in the CIM Standards on Mineral Resources and
Mineral Reserves (May 2014) as required by NI 43-101.
7. The Mineral Reserve Estimate as of 31 March 2022 for Alpala
was independently verified by Aaron Spong FAusIMM CP (Min) who is a
full-time employee of Mining Plus. Mr Spong fulfils the
requirements to be a "Qualified Person" for the purposes of NI
43-101 and is the Qualified Person under NI 43-101 for the Mineral
Reserve.
Mining
Access to the Alpala underground mine is expected to be via twin
declines commencing from a boxcut located near the surface and the
first lift near the 300mRL. Mining is planned to be a Block Caving
mining method, whilst all horizontal development will be undertaken
utilising conventional drill and blast practices. The vertical
development for the main ventilation rises will be excavated using
blind sinking methods.
Mine production design for the block cave incorporated findings
from detailed geotechnical and hydrogeological assessments, to
determine the height of draw based on recommended draw bell
spacing. Lower grade draw points on the west of the footprint were
included in preference to those in the east to generate a smaller
span option. Current geotechnical guidelines inform to commencing
the cave on the eastern side, expanding to the west, causing a
small delay in higher grade draw points in the centre.
Initial access to the footprint will be via an early access
blind sunk shaft to the southwest of the deposit. This will link to
a twin decline mined from the north of the deposit with a portal
adjacent to the process plant. In the longer term the decline will
be the main access path.
The shaft is used to gain early access to the footprint, where
it is used to mine long lead time excavations on the footprint,
primarily the crusher chamber and access to the collection chamber
under the crusher chamber.
The declines are accessed from two separate portals. The second
portal location is for the conveyor only, located in proximity to
the process plant location. The first portal is located further to
the south to reduce the critical path distance to the footprint. An
overview concept of the lateral and vertical accesses is shown in
the figure below.
Figure 1 : Isometric view of the lateral and vertical accesses
in the Cascabel project Alpala underground mine
The portals are located in a boxcut approximately 3,000m from
the orebody. They have been positioned in close proximity to major
surface infrastructure including the processing plant due to the
nature of the surrounding terrain. It allows a direct route for the
ore to the processing plant without the requirement to build
surface haulage routes in mountainous terrain. This eliminates
material handling issues that would be apparent if the portals were
located elsewhere.
The mine design has been developed to enable all infrastructure
including the primary crushers to be off set from the cave abutment
zone in accordance with geotechnical recommendations. The
infrastructure design in this PFS has assumed loader tramming from
drawpoint to ore pass, to loadout stations for a truck haulage
loop, terminating at the tip points for the crusher feed bin/s,
located outside the caving zone.
Figure 2 : In footprint proposed truck haulage level
In addition to the initial access shaft and the access and
conveyor declines, the PFS design includes shafts for ventilation.
Each of these shafts is designed to suit the ventilation
requirements for the steady-state operating mine. The early access
shaft will also become a source of fresh air intake once all early
access requirements are completed, and the decline development
reaches the footprint.
Sufficient refuge chambers will be located in disused stockpiles
and cuddies to accommodate the number of personnel working
underground (expected to be highest during the construction phase
when mechanical/civil works are being undertaken to install the
materials handling system in addition to underground miners).
The twin decline provides a second means of egress, with the
early access shaft another potential egress method. During the
development of the footprint, small boxholed escapeway rises may be
required between the undercut and extraction levels depending on
the schedule.
Process Plant
The crushed ore from the underground primary crushers will be
conveyed to the surface and fed to the secondary crushing circuit.
The product from the secondary crushing area will be conveyed to
the fine ore stockpile, and subsequently reclaimed to the
high-pressure grinding rolls ("HPGR") circuit. The product from the
HPGR circuit will report to a grinding circuit consisting of ball
mills, each operating in closed circuit with a hydrocyclone
cluster.
Figure 3 : Process plant proposed secondary and HPGR crushing
system
The ground product will report to conventional rougher
flotation. The rougher concentrate will be reground using stirred
mills and will be subsequently upgraded within the cleaner
flotation circuit to produce a saleable flotation concentrate.
Cleaner flotation tailings are further processed through
conventional flotation cells to recover gold and silver contained
within pyrite. Pyrite concentrate is thickened and subjected to a
conventional cyanide leach/carbon in pulp ("CIP") extraction
followed by an Anglo American Research Laboratory ("AARL") gold
recovery circuit. Sludge electrowinning cells recover gold and
silver from eluate for smelting to doré bars in the gold room.
The flotation concentrate will be thickened using a high-rate
thickener and then pumped via a pipeline to the Esmeraldas port
facility. Two tailings streams will be produced from the flotation
circuit, namely the rougher tailings and the cleaner scavenger (or
pyrite) tailings, requiring disposal within the tailings storage
facility ("TSF"). These tailings streams will be thickened
separately using high-rate thickeners prior to independent pumping
to, and disposal to at the TSF. The TSF design is based on
regulatory and best practice standards and guidelines, including
ANCOLD 2019 and the Global Industry Standard on Tailings Management
established by The International Council on Mining and Metals
("ICMM"), the United Nations Environment Programme ("UNEP") and the
Principles for Responsible Investment ("PRI").
Figure 4 : Simplified processing flowsheet for Cascabel
project
The concentrate slurry will be received by an additional
thickening stage at the Port facility. The concentrate will then be
dewatered using Larox continuous cloth vertical tower filters. The
resulting filter cake will be stockpiled within a covered facility
until reclaimed for seaborne transportation.
Process water will be recycled from the thickener overflows and
supplemented with treated water from the underground mine.
Additional make-up water to the process water system will be
provided from the raw water supply drawn from the on-site catchment
dam. Raw water will be also used for potable water production,
gland seal service for the slurry pumps, cooling water make-up,
reagent preparation, and fire water supply.
Indicative Production Profile
Following mining optimisation studies, the production profile
for the Cascabel project is based on a process plant nameplate
capacity of 25Mtpa from the underground block cave at the Alpala
deposit. The project is expected to reach nameplate capacity in the
fourth year from the start of process plant operations with first
ore expected in mid-2029.
Initial process plant production totalling 2.8Mt of copper,
7.6Moz of gold and 21.7Moz of silver.
Figure 5 : Production profile
The PFS mine plan targets the Alpala high grade core with copper
grades expected to average over 0.75% (1.35% copper equivalent)
over the first 10 years of production.
Figure 6 : Feed grade profile
Metal recoveries to the copper gold flotation concentrate are
based on equations fitted to the locked cycle test work ("LCT")
results and in general indicate good to very good fits of the
data.
Copper concentrate grade is based on mass recovery to
concentrate and copper recovery to concentrate.
Metal recoveries to doré are estimated based on limited test
work results. Whilst the pyrite concentrate is amenable to
cyanidation, but further test work is required to further define
the metal recovery to the pyrite concentrate and the metal
recoveries to doré.
Capital Cost Estimate
The capital cost estimate meets the requirements for a
pre-feasibility study consistent with the Association for the
Advancement of Cost Engineering ("AACE International") cost
estimating guidelines for a Class 4 estimate. The estimate accuracy
range of +/-25% is defined by the level of project definition, the
time available to prepare the estimate and the amount of project
cost data available.
The total capital cost estimate for the Cascabel project is
summarised in Table 4 .
Area Pre-Production Post-Production
US$M US$M
Mine 900 748
Process plant 465 219
Tailings storage facility 309 695
Port facility 39 15
Surface infrastructure 175 42
Indirect costs 467 113
Contingency 391 304
Total 2,746 2,136
Table 4 : Cascabel project capital cost estimate
Pre-production capital totals US$2.7bn and includes all costs up
to first ore to the process plant. Post-production costs required
to achieve production ramp-up to design capacity and sustaining
capital are estimated to total US$2.1bn.
Operating Cost Estimate
The Cascabel block cave operation is estimated to have a low
unit mining cost (operating and sustaining) of US$6.51/t. Total
average gross unit cash costs inclusive of treatment charges and
government royalties are US$1.72/lb of payable copper. AISC costs
inclusive of gold and silver by-product credits are estimated at
US$0.06/lb Cu over the 26-year mine life and averaging US$(1.38)/lb
in the first five years from achieving nameplate capacity,
positioning Cascabel well within the first decile of the global
copper industry cost curve. Net cash costs are estimated at
US$(0.40)/lb Cu. Negative cash costs reflect significant precious
metals by-product contributions, primarily gold, providing downside
protection to lenders.
Figure 7 : 2032 Copper industry cash cost curve[18]
Cash flow generation
Cascabel's indicative production profile and low operating costs
are expected to support strong after-tax free cash flow generation
totalling nearly US$14.5bn over the 26-year initial mine life and
averaging US$740m annually.
Figure 8 : After-tax free cash flow profile
Environmental, Social and Governance ("ESG")
SolGold is committed to the social and environmental
sustainability of its projects and being a leader in this space
within Ecuador. As SolGold advances the Cascabel project, clearly
defined criteria will be reported as studies advance into
development and operations.
As a minimum, SolGold considers the following criteria
immediately applicable not only from a corporate perspective but
also to its activities within countries where SolGold has
interests:
-- Environment: managing carbon footprint and use of renewable resources
-- Social: encourages diversity and pays fair wages
-- Governance: Committed to complying with UK Corporate Governance Code from mid-2022
SolGold has built strong community partnerships over the last
decade in the country and has an extensive engagement process that
will be continued through the Environmental Impact Assessment
("EIA") stage.
Ecuadorian law requires that an EIA be conducted prior to
authorisation of construction and operations. In addition to
Ecuadorian requirements, SolGold will ensure that the EIA is
compliant with appropriate international standards. At minimum,
these would include consideration to the applicable Equator
Principles, the International Finance Corporation ("IFC")
Performance Standards and Environmental, Health, and Safety
Guidelines, as well as Sustainable Development Goals ("SDG") which
align with the development of the Cascabel project and the effected
regions.
In anticipation of advancing the permitting processes within
Ecuador, environmental baseline studies within the Cascabel
tenement are well advanced.
SolGold will be evaluating several options as part of the DFS to
manage and minimise the project's overall carbon footprint. These
include maximising power from hydro generation sources, further
investigations on electrification, assessing process integration to
optimise operational efficiency, among other initiatives.
SolGold is continuing on its journey toward compliance with the
UK Corporate Governance Code and intends to be compliant with all
aspects of the code from mid-2022.
Sensitivity Analysis
A sensitivity analysis was performed on the base case after-tax
NPV to examine the sensitivity to commodity prices, capital costs
and operating costs.
The Cascabel project is most sensitive to changes in the copper
and gold prices as well as capital costs; less sensitive to changes
in operating costs, and least sensitive to changes to silver
prices. Figure 9 and Table 5 show the results of the after-tax
analysis.
Figure 9 : After-tax sensitivity analysis (NPV(8%) )
After-tax NPV Copper Price (base US$3.60/lb)
of project
(US$M)
-30% -20% -10% 0% +10% +20% +30%
Discount
Rate 5% 3,177 3,795 4,398 5,007 5,615 6,119 6,263
6% 2,597 3,134 3,659 4,189 4,718 5,168 5,336
7% 2,105 2,574 3,033 3,496 3,958 4,360 4,541
8% 1,687 2,098 2,501 2,907 3,312 3,672 3,857
9% 1,331 1,693 2,047 2,405 2,762 3,084 3,268
10% 1,028 1,347 1,660 1,976 2,291 2,581 2,760
Gold Price (base US$1,700/oz)
-30% -20% -10% 0% +10% +20% +30%
Discount
Rate 5% 3,829 4,223 4,615 5,007 5,399 5,800 6,030
6% 3,148 3,497 3,843 4,189 4,534 4,888 5,111
7% 2,574 2,882 3,189 3,496 3,801 4,114 4,327
8% 2,088 2,362 2,634 2,907 3,178 3,456 3,657
9% 1,675 1,919 2,162 2,405 2,647 2,894 3,082
10% 1,324 1,543 1,760 1,976 2,193 2,413 2,587
Table 5 : Metal price and discount rate sensitivity analysis
Outstanding Opportunities and Upside Options
The Cascabel project optimisations which will be progressed
include:
Ø Further investigations into process plant feed rates,
including additional resources such as the Tandayama-Ameríca
resource
Ø Capital cost reduction opportunities
Ø Alpala underground mine design optimisation, mine sequence and
scheduling, application of macro blocks
Ø Process plant design optimisation, following additional test
work
Ø Hydropower project development
Next Steps
The Cascabel project DFS is planned for completion in H2 CY23.
SolGold plc is currently progressing additional optimisations in
preparation for the DFS that will be included in a PFS Addendum
planned for completion in H2 CY22.
SolGold plans to engage with the relevant government departments
from Q2 CY22 to commence fiscal discussions and the permitting
process.
SolGold intends to release a National Instrument 43-101 ("NI
43-101") technical report on Cascabel within 45 days of this
release (the "Technical Report").
Qualified Persons
The Qualified Persons for the "Cascabel Project, Ecuador,
NI43-101 Technical Report on Pre-Feasibility Study", that has an
effective date of 31 March 2022, are detailed in the table
below.
Category Name Company
Mineral Resource Cecilia Artica, BSc MSc (formerly) Mining
Estimate RMSME Plus
Mineral Reserve Estimate Aaron Spong, BEng FAusIMM Mining Plus
CP (Min)
Environment, Social, Tim Rowles, BSc MSc FAusIMM Knight Piésold
Tailings & Water CP RPEQ Pty Ltd
Metallurgy Peter Gron, BSc FAusIMM Wood plc
Process Plant & Infrastructure Steve Klose, BEng MSc Wood plc
FAusIMM
Financial Evaluation Kirk Hanson, MBA PE Wood plc
Marketing Christopher Heath, BSc Wood Mackenzie
Hons PhD FAusIMM
By order of the Board
Dennis Wilkins
Company Secretary
Certain information contained in this announcement would have
been deemed inside information.
CONTACTS
Dennis Wilkins
SolGold Plc (Company Secretary) Tel: +61 (0) 417 945 049
dwilkins@solgold.com.au
Ingo Hofmaier
SolGold Plc (Acting CFO) ihofmaier@solgold.com.au Tel: +44 (0) 20 3823 2130
Fawzi Hanano / Lia Abady
SolGold Plc (Investors / Communication) Tel: +44 (0) 20 3823 2130
fhanano@solgold.com.au / labady@solgold.com.au
Tavistock (Media)
Jos Simson / Gareth Tredway Tel: +44 (0) 20 7920 3150
See www.solgold.com.au for more information. Follow us on
twitter @SolGold plc
CAUTIONARY NOTICE
News releases, presentations and public commentary made by
SolGold plc (the "Company") and its Officers may contain certain
statements and expressions of belief, expectation or opinion which
are forward looking statements, and which relate, inter alia, to
interpretations of exploration results to date and the Company's
proposed strategy, plans and objectives or to the expectations or
intentions of the Company's Directors, including the plan for
developing the Project currently being studied as well as the
expectations of the Company as to the forward price of copper. Such
forward-looking and interpretative statements involve known and
unknown risks, uncertainties and other important factors beyond the
control of the Company that could cause the actual performance or
achievements of the Company to be materially different from such
interpretations and forward-looking statements.
Accordingly, the reader should not rely on any interpretations
or forward-looking statements; and save as required by the exchange
rules of the TSX and LSE or by applicable laws, the Company does
not accept any obligation to disseminate any updates or revisions
to such interpretations or forward-looking statements. The Company
may reinterpret results to date as the status of its assets and
projects changes with time expenditure, metals prices and other
affecting circumstances.
This release may contain "forward--looking information" within
the meaning of applicable Canadian securities legislation.
Forward--looking information includes, but is not limited to,
statements regarding the Company's plans for developing its
properties. Generally, forward--looking information can be
identified by the use of forward-looking terminology 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 state that certain actions, events or results "may",
"could", "would", "might" or "will be taken", "occur" or "be
achieved".
Forward--looking information is subject to known and unknown
risks, uncertainties and other factors that may cause the actual
results, level of activity, performance or achievements of the
Company to be materially different from those expressed or implied
by such forward--looking information, including but not limited to:
transaction risks; general business, economic, competitive,
political and social uncertainties; future prices of mineral
prices; accidents, labour disputes and shortages and other risks of
the mining industry. Although the Company has attempted to identify
important factors that could cause actual results to differ
materially from those contained in forward-looking information,
there may be other factors that cause results not to be as
anticipated, estimated or intended. There can be no assurance that
such information will prove to be accurate, as actual results and
future events could differ materially from those anticipated in
such statements. Factors that could cause actual results to differ
materially from such forward-looking information include, but are
not limited to, risks relating to the ability of exploration
activities (including assay results) to accurately predict
mineralisation; errors in management's geological modelling and/or
mine development plan; capital and operating costs varying
significantly from estimates; the preliminary nature of visual
assessments; delays in obtaining or failures to obtain required
governmental, environmental or other required approvals;
uncertainties relating to the availability and costs of financing
needed in the future; changes in equity markets; inflation; the
global economic climate; fluctuations in commodity prices; the
ability of the Company to complete further exploration activities,
including drilling; delays in the development of projects;
environmental risks; community and non-governmental actions; other
risks involved in the mineral exploration and development industry;
the ability of the Company to retain its key management employees
and skilled and experienced personnel; and those risks set out in
the Company's public documents filed on SEDAR at www.sedar.com .
Accordingly, readers should not place undue reliance on
forward--looking information. The Company does not undertake to
update any forward-looking information, except in accordance with
applicable securities laws.
The Company and its officers do not endorse, or reject or
otherwise comment on the conclusions, interpretations or views
expressed in press articles or third-party analysis, and where
possible aims to circulate all available material on its
website.
The Company recognises that the term World Class is subjective
and for the purpose of the Company's projects the Company considers
the drilling results at the Alpala porphyry copper-gold deposit at
its Cascabel project to represent intersections of a World Class
deposit on the basis of comparisons with other drilling
intersections from World Class deposits, some of which have become,
or are becoming, producing mines and on the basis of available
independent opinions which may be referenced to define the term
"World Class" (or "Tier 1").
The Company considers that World Class deposits are rare, very
large, long life, low cost, and are responsible for approximately
half of total global metals production. World Class deposits are
generally accepted as deposits of a size and quality that create
multiple expansion opportunities and have or are likely to
demonstrate robust economics that ensure development irrespective
of position within the global commodity cycles, or whether or not
the deposit has been fully drilled out, or a feasibility study
completed.
Standards drawn from industry experts (1Singer and Menzie, 2010;
2Schodde, 2006; 3Schodde and Hronsky, 2006; 4Singer, 1995;
5Laznicka, 2010) have characterised World Class deposits at
prevailing commodity prices. The relevant criteria for World Class
deposits, adjusted to current long run commodity prices, are
considered to be those holding or likely to hold more than 5
million tonnes of copper and/or more than 6 million ounces of gold
with a modelled net present value of greater than US$1billion.
The Company cautions that the Cascabel project remains an
early-stage project at this time and there is inherent uncertainty
relating to any project at prior to the determination of
pre-feasibility study and/or defined feasibility study.
On this basis, reference to the Cascabel project as "World
Class" (or "Tier 1") is considered to be appropriate.
[1] Wood Mackenzie Q4 2021 Outlook, 2032 forecast
[2] The PFS is subject to an accuracy range of +/-25% in
accordance with AACE class 4 estimates. The findings in the PFS and
the implementation of the Cascabel project are subject to all the
necessary approvals, permits, internal and regulatory requirements
and further works. The estimates are indicative only and are
subject to market and operating conditions. They should not be
interpreted as guidance. The information contained herein is a
summary only and is qualified in its entirety by reference to the
Technical Report (as defined below).
[3] 100% project basis.
[4] Based on a discount rate of 8% (real).
[5] Based on long-term commodity price assumptions of US$3.60
/lb for copper, US$1,700 /oz for gold and US$19.9 /oz for
silver
[6] Spot prices on 4 April 2022 of US$4.74 /lb for copper,
US$1,933 /oz for gold and US$24.5 /oz for silver
[7] Average based on years 4 - 22 at full nameplate capacity
[8] Assumptions for copper equivalent calculations as provided
in Table 1 for commodity prices, grades and recoveries. Copper
equivalent production (by-product basis) = Recovered Cu tonnes +
(Au Price US$/oz) / (Cu Price US$/t) x (Recovered + doré gold
ounces) + (Ag Price US$/oz) / (Cu Price US$/t) x (Recovered + doré
silver ounces).
[9] Peak production, free cash flow and EBITDA in year 5 from start of production
[10] As the Mineral Reserve represents only 21% of the M&I
Resource tonnes the Company believes there is potential further
mine life upside in excess of 50 years.
[11] EBITDA is a Non IFRS Financial Measure and refers to
Earnings Before Interest, Tax, Depreciation and Amortisation.
[12] Wood Mackenzie Accelerated Energy Transition (2 degrees)
long-term copper price forecast of US$4.20/lb. Assuming spot price
for gold and silver.
[13] Profit share: 12% to state, 3% to employees. Corporate tax
applied to EBT (Earnings Before Tax) after deduction of profit
share.
[14] Peak production in year 5 from start of production.
[15] See "Cascabel Property NI 43-101 Technical Report, Alpala
Porphyry Copper-Gold-Silver Deposit - Mineral Resource Estimation,
January 2021" with an Effective date: 18 March 2020 and Amended
Date: 15 January 2021 (the "Amended Technical Report"), filed at
www.Sedar.com on January 29, 2021.
[16] Alpala MRE was reported at a cut-off grade of 0.21% copper
equivalent (CuEq) using a copper equivalency factor of 0 613
(whereby CuEq = Cu + Au x 0.613). Cut-off grades and copper
equivalency used for reporting were based on third party metal
price research, forecasting of Cu and Au prices, and a cost
structure from mining studies data available at the time. Costs
include mining, processing and general and administration
(G&A). Net Smelter Return (NSR) includes metallurgical
recoveries and off-site realisation (TCRC) including royalties and
utilising metal prices of Cu at US$3.40/lb and Au at
US$1,400/oz.
[17] As the Mineral Reserve represents only 21% of the Measured
and Indicated Resource tonnes the Company believes there is
potential further mine life upside in excess of 50 years. Mineral
Reserve contained metal estimated at base case long-term prices of
US$3.60 /lb for copper, US$1,700 /oz for gold and US$19.9 /oz for
silver.
[18] Wood Mackenzie, 2032 Total Cash Cost including by-product contribution
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END
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