30 Jun 2010 11:58
30 June 2010 for Immediate Release CLF/TSX: CFG
Cluff Gold plc
("Cluff Gold" or the "Company")
RESULTS OF THE PRELIMINARY ASSESSMENT FOR BAOMAHUN GOLD PROJECT
Cluff Gold, the dual AIM/TSX listed West African-focused gold mining company, announces the results of the Preliminary Assessment (Scoping Study) at its 100% owned Baomahun Gold Project ("Baomahun") in Sierra Leone.
The Preliminary Assessment, which was undertaken by various independent consultants (see below for details), has confirmed the commercial viability of Baomahun. On 4 June 2010, the Company announced that the Measured and Indicated mineral resources at Baomahun had increased to 1.42 million ounces of gold (15.1Mt at 2.92g/t).
The highlights of the Preliminary Assessment are:
·; Total cash flow of US$438 million, a pre-tax net present value ("NPV") of US$172 million and an internal rate of return ("IRR") of 31% using a gold price of US$1,100/oz and a discount rate of 10%
·; Average production of 157,000 oz per annum over the 8 year initial mine life which has been outlined from the current defined resources
·; Total cash cost per ounce of US$500 over the 8 year mine life
·; Capital expenditure of US$195 million with a 2.3 year pay-back from the start of production
Mr Douglas Chikohora, Technical Director of Cluff Gold plc, commented:
"The results of the Preliminary Assessment are very encouraging and indicate that Baomahun will become Cluff Gold's flagship asset. With a net present value of US$172 million and forecast average gold production of 157,000 ounces per annum, the project has continued to confirm our expectations. At the current gold price of US$1,240/oz the project would deliver over US$600m of total cash flow with a net present value of US$263m over the eight year life. Our focus is now on further improving Baomahun's economics by expanding the resource base and optimising various aspects of the project. We believe that Cluff Gold will be able to develop Baomahun and transition the Company to a 250,000 ounces per annum producer."
The feasibility study work is now well advanced, with significant areas including metallurgical testwork and the processing methodology nearing completion. Our in-fill drilling programme is continuing, which has to date delivered excellent results in converting Inferred resources to Measured and Indicated categories. The final feasibility study is planned to be completed in 2011.
Significant opportunities exist to improve the overall economics of the project prior to completion of the feasibility study. These include:
·; Considerable exploration potential exists at Baomahun, with the current resources located in only 3km of the total 12km prospective trend, which was covered by the recently completed VTEM (Versatile Time-Domain Electromagnetic) geophysical survey
·; Initial interpretation results from the VTEM survey have identified potential prospective locations for further exploration on the 12km trend. The final results and detailed report of this survey are expected in August 2010
·; Further exploration drilling to increase the resource base for Baomahun continues with a second rig expected at site in due course
·; Further optimisation of key project parameters to further reduce operating costs, for example open pit and underground mining will be studied to reduce the anticipated strip ratio for the open pit
·; The Preliminary Assessment is based on a heavy fuel oil power plant. However, there is good hydroelectric potential in the general area of Baomahun which has the potential to significantly reduce power costs. A heavy fuel oil power facility would still be required to augment hydro-electric generation during the dry season. A hydro-electric facility would also deliver a lasting and environmentally sustainable benefit for Sierra Leone
The Preliminary Assessment has been prepared with input from a number of independent consultants including SRK Consulting, Johannesburg (mining), AMEC, UK (environmental), SGS South Africa, Johannesburg (metallurgical testwork), and SENET, Johannesburg (processing and infrastructure).
Mineral Resources
Baomahun's Mineral Resources (which are set out in the following table) have been derived from resource drilling and assays received before June 2010 and are as reported in the Company's press release dated 4 June 2010. These Mineral Resource estimates were prepared in accordance with National Instrument 43-101.
Baomahun Mineral Resources
|
|
| Tonnes | Au (g/t) | Ounces |
| Measured |
| 5,454,000 | 2.90 | 508,000 |
| Indicated |
| 9,642,000 | 2.93 | 909,000 |
| Total Measured and Indicated |
| 15,096,000 | 2.92 | 1,417,000 |
| Inferred |
| 12,168,000 | 2.64 | 1,033,000 |
(Using a 1.0 g/t Au cut-off).
Mine Plan
SRK Consulting (Johannesburg office) prepared a mine plan based on Baomahun's Mineral Resources delineated to date. Open pit and underground optimisations were calculated based on the following parameters:
Gold price: US$950 per ounce
Diesel fuel price: US$0.75/litre
Metallurgical recovery: 92%
Open pit Underground
Mining dilution: 5% at zero grade 15% at zero grade
Mining recovery: 95% 80%
Cut-off grade: 0.6g/t 2.7g/t
In addition to the open pit, the mine schedule proposes that the underground ore will be accessed from the first year of production at a rate increasing to 400,000t per annum in the fourth year of operation. The following mined tonnages were estimated to be contained in the engineered open pit and underground design:
Baomahun Mined Tonnage Contained Within Mine Plan
|
| Tonnes ore | Au (g/t) | Ounces | Tonnes waste |
| Open pit | 12,010,866 | 2.67 | 1,032,633 | 147,289,495 |
| Underground | 2,425,167 | 4.28 | 333,403 | 1,095,797 |
| Total | 14,436,033 | 2.94 | 1,366,036 | 148,385,292 |
Processing
Metallurgical testwork, including recovery and comminution studies, has been undertaken by SGS South Africa in Johannesburg to a standard suitable for inclusion in the feasibility study. The results indicate that the gold ores are non-refractory. Metallurgical results to date indicate an overall metallurgical recovery of 92% for all ore types.
Based on this testwork, SENET of Johannesburg scoped a conventional Gravity-CIL (carbon-in-leach) processing facility with annual throughput of 1.9 Mtpa, resulting in a currently defined initial mine life of 8 years.
Power
The Preliminary Assessment has been completed assuming a heavy fuel oil power plant for the project. Studies have also been initiated for a run-of-river hydroelectric facility, which could result in lower operating costs. Follow-up site investigations including the installation of flow gauges and detailed hydrology studies are ongoing as part of the feasibility studies.
The Company will open discussions with third parties to invest in a run-of-river hydro-electric facility subject to an off-take agreement for the life of the project. This option would still require the Company to invest in a heavy fuel oil power plant for the dry season.
Capital Costs and Infrastructure
The following table summarises expected capital costs for the Baomahun project estimated by the independent consultants, which are considered to be accurate within 15% and includes preliminary discussions with equipment providers together with knowledge gained from current projects in Africa. Costs currently assume an owner operated mining fleet.
Baomahun Project Capital Costs
|
| US$ million |
| Process plant direct costs | 69.9 |
| Infrastructure costs | 35.2 |
| Owner's costs | 9.8 |
| EPCM | 24.5 |
| Open pit mining fleet | 16.8 |
| Underground mining equipment | 8.6 |
| Underground pre-production costs | 1.9 |
| Tailings management facility | 10.0 |
| Contingency | 18.0 |
| Total Project Initial Capital Costs | 194.7 |
|
|
|
| Ongoing Capital | 52.3 |
Operating Costs
The following operating costs were estimated and incorporated into the financial analysis:
Life of Mine Total Operating Costs Per Ounce
|
| (US$/ounce) |
| Mining | 325.49 |
| Processing | 152.56 |
| G & A | 18.38 |
| Refining | 3.20 |
| Total | 499.63 |
Project Economics and Financial Analysis
The Company has produced a cash flow valuation model for the Baomahun project based upon the geological and engineering work completed to date. The base case was developed using a long-term gold price of US$1,100 per ounce and includes applicable royalties in accordance with Sierra Leonean law.
Calculated sensitivities show the robust nature of the projected economics to operating assumptions.
Sensitivities
|
| IRR |
| NPV (US$ M) |
| |
|
| (%) | 0% | 5% | 10% | |
| Gold price (US$/oz) |
|
|
|
| |
| 1,000 | 24% | 318.7 | 189.1 | 106.9 | |
| 1,100 | 31% | 438.1 | 276.0 | 171.9 | |
| 1,200 | 38% | 557.5 | 362.9 | 236.9 | |
|
|
|
|
|
| |
| Capital Costs |
|
|
|
| |
| + 10% | 27% | 413.6 | 254.3 | 152.3 | |
| - 10% | 36% | 462.6 | 297.8 | 191.5 | |
|
|
|
|
|
| |
| Operating Costs |
|
|
|
| |
| + 10% | 27% | 375.5 | 230.1 | 137.4 | |
| - 10% | 35% | 500.7 | 321.9 | 206.4 | |
The above financial analysis does not take into account ongoing exploration, feasibility, financing or interest costs and is set out before taxation.
Qualified Person
The Preliminary Economic Assessment was prepared under the supervision of the Company's Technical Director, Douglas Chikohora, a "qualified person", as such term is defined in National Instrument 43-101. Mr. Chikohora has reviewed and approved the contents of this press release.
Full details of the Preliminary Economic Assessment in the form of a National Instrument 43-101 technical report will be filed on SEDAR within the next 45 days.
About Cluff Gold
Cluff Gold is focused on the identification, acquisition and development of gold deposits in West Africa that are amenable to open-pit mining and low cost production techniques. The Company has assembled a portfolio of mineral interests at various stages of development in Côte d'Ivoire, Burkina Faso and Sierra Leone. Cluff Gold progressed from being an explorer to a producer in Q1 2008 and is expected to produce a total of 100,000 ounces of gold in 2010 from its Angovia Gold Mine in Côte d'Ivoire and its Kalsaka Gold Mine in Burkina Faso. Cluff Gold is actively evaluating known satellite deposits to expand the resource base at both mines. The Company has completed a preliminary assessment at its wholly-owned Baomahun project in Sierra Leone where a measured and indicated resource estimated to contain over 1.4 million ounces of gold, in accordance with NI 43-101, has been announced to date (508,000ozs at 2.92g/t Measured; 909,000ozs at 2.93 g/t Indicated; plus an additional 1,033,000ozs at 2.64g/t Inferred).
For further information, please contact:
| Cluff Gold plc J.G. Cluff - Chairman and Chief Executive Douglas Chikohora - Technical Director Tel: +44 (0) 20 7340 9790 | Evolution Securities Limited Rob Collins Tim Redfern Tel: +44 (0) 20 7071 4300 |
| Pelham Bell Pottinger
Investor Relations (Global) Charles Vivian Klara Kaczmarek Tel: +44 (0) 20 7861 3232 | Farm Street Communications Ltd
Press Relations (U.K.) Simon Robinson +44 (0) 7593 340 107 simon.robinson@farmstreetmedia.com |
NO REGULATORY AUTHORITY HAS APPROVED OR DISAPPROVED THE CONTENT OF THIS PRESS RELEASE.
This News Release includes certain "forward-looking information" within the meaning of applicable Canadian securities legislation. All statements other than statements of historical fact, included in this release, including, without limitation, the positioning of the Company for future success, statements regarding potential future production at Angovia and Kalsaka, exploration and drilling results at Baomahun, and future capital plans and objectives of Cluff Gold, are forward-looking information that involve various risks and uncertainties. There can be no assurance that such statements will prove to be accurate and actual results and future events could differ materially from those anticipated in such statements. Important factors that could cause actual results to differ materially from Cluff Gold's expectations include, among others, risks related to international operations, the actual results of current exploration and drilling activities, changes in project parameters as plans continue to be refined as well as future price of gold. Although Cluff Gold has attempted to identify important factors that could cause actual results to differ materially, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such 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. Cluff Gold does not undertake to update any forward-looking statements that are included herein, except in accordance with applicable securities laws.
Douglas D Chikohora has reviewed and approved the information contained within this announcement. Mr Chikohora (MSc., MIMMM., CEng) is the Technical Director of the Company.
A technical report prepared by SRK Consulting (UK) Limited entitled "Technical Review of the Baomahun Gold Exploration Project, Sierra Leone", was filed on 17 February 2009 at www.sedar.com.
Cautionary Statement:
The Preliminary Economic Assessment 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. There is no certainty that the conclusions reached in the Preliminary Economic Assessment will be realized. Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability.