Last checked at 8 Apr 2013 07:00
Ortac Resources Ltd / Epic: OTC / Market: AIM / Sector: Mining & Exploration
8 April 2013
Ortac Resources Ltd ('Ortac' or 'the Company')
Completion of Šturec Project Pre-Feasibility Study
Ortac Resources Ltd, the AIM listed exploration and development company focussed on natural resource based projects in Europe, is pleased to announce the results of thePre-Feasibility Study ('PFS') on its Šturec gold and silver deposit, located in Central Slovakia ('Šturec' or 'the Project').
This announcement focuses on the gold and silver production potential for the Šturec deposit - which is one of the components in the concept of a combined precious metals centre, geothermal heating and integrated tourism project ('the Combined Project') to be unveiled later this month.
HIGHLIGHTS
·; Successful completion of Pre-feasibility Study examining the Šturec project, building on the scoping study completed in 2012;
·; The results confirm a strong economic motor for the Combined Project and readies the proposal for public assessment;
·; Maiden Ore Reserve of 13.97Mt at 1.90g/t gold equivalent ('Au Eq') containing 873,000 oz Au Eq reported in accordance with the JORC Code (2004). This represents the portion of the 1.3Moz Au Eq Mineral Resource, as reported in April 2012, that has transferred through to the Proven and Probable Ore Reserve categories;
·; Šturec project base case demonstrates good economic viability:
o Net Present Value ('NPV') at 8% discount rate (pre tax) of US$195 million (post tax US$145 million) and Internal Rate of Return ('IRR') of 30% (at US$1,343/oz Au Eq net price) confirms potential robust value creation for the shareholders and the local region;
o Cash operating costs US$555 per oz Au Eq (excluding royalties, local synergetic projects and partnerships);
o Projected project life of 11 years with average annual production of 71,000 oz Au Eq;
o Pre-production Capital Expenditure of US$124 million (including 15% contingency on processing and infrastructure items);
o Life of project revenue of circa US$1,046 million (€817 million); and
o Approximately US$150 million (€117 million) payable to Slovak Authorities over project life US$98 million (€77 million) of taxes and US$52 million (€41 million) of royalties).
·; Direct employment for approximately 278 people in the first year rising to a maximum of approximately 334 employees, significant direct and indirect benefits available to the local region; and
·; Recommendation to progress to the bankable feasibility stage in order to assess the potential environmental, social and economic impacts and further define the engineering, environmental and social capital requirements for funding.
Ortac Resources CEO Vassilios Carellas said, "We are pleased with the results of this Pre-feasibility Study which recommends we move to public assessment and consultation. The results of the PFS highlight the potential of the Šturec project to act as an economic engine with the opportunity to drive further local development and co-created businesses. Our focus now is to build on the locally viable ideas and undertake an economic, social and environment assessment to help identify potential locally acceptable options to incorporate this economic engine into local development and conservation measures in a way that benefits all stakeholders alike."
The Šturec Deposit
The Šturec deposit is located in Central Slovakia close to the historical mining and minting town of Kremnica. Past mining of the deposit has yielded an estimated 1.5 million ounces ('Moz') of gold and 6.7Moz of silver. The Šturec deposit occupies approximately 1.2km of strike length within a 6.5km long mineralised structure. Within the Šturec deposit, the known mineralisation is up to 120m wide and extends from surface to approximately 300m depth. The deposit is amenable to surface mining methods and remains open at depth and along strike.
The geology of the Šturec deposit is well established. The Mineral Resources, as estimated by Snowden Mining Industry Consultants ('Snowden') in April 2012, in accordance with the requirements of the JORC Code (2004), are 15.4Mt of ore at a grade of 1.75g/t Au and 14.9g/t Ag in the Measured and Indicated categories, with a further 9.7Mt of ore at a grade of 0.89g/t Au and 5.1g/t Ag in the Inferred category (all at a 0.40g/t Au cut-off grade). The Pre-Feasibility Study is based on these Mineral Resources.
Background and Discussion of the Pre-Feasibility Study
Ortac Resources Limited, through its wholly owned subsidiary, engaged SRK Consultants UK Ltd ('SRK') to undertake a Pre-Feasibility Study of the Šturec project and estimate Ore Reserves for the deposit is accordance with the requirements of the JORC Code (2004). The base case PFS project builds upon the knowledge derived from and the options examined in the Scoping Study that SRK completed in January 2012.
Over the last year, Ortac and SRK have re-examined the geotechnical, hydrological and geochemical properties of the Šturec deposit and incorporated the results of these studies into the PFS design. The study features processing and waste management facilities that incorporate the processing activities, tailings and waste rock storage in a single fully managed location. This approach to the design means that there are no waste rock dumps in the vicinity of the open pit, which reduces the environmental impact of the project through reducing its footprint, and reduces the visual impact of the operations on the surrounding communities, by moving the processing, tailings and waste rock activities to a temporary industrial area away from the towns and villages. SRK has put forward a closure plan that allows all impacted areas to be fully rehabilitated after the processing phase of the project ceases. The final closure scenario, however, is part of Ortac's combined project and cannot be decided without stakeholder consultation.
The open pit contains Ore Reserves totalling 13.97Mt grading 1.70g/t gold and 14.22g/t silver (or 1.90g/t gold equivalent) classified in the Proven and Probable categories as per the table below:
Šturec Ore Reserves Classified in Accordance with the JORC Code (2004) - SRK, April 2013*
Grade | Contained Metal | |||||||
Reserve Category | Tonnes (kt) | Density (t/m3) | Au (g/t) | Ag (g/t) | Au Eq (g/t) | Au (koz) | Ag (koz) | Au Eq (koz) |
Proven | 3,084 | 2.17 | 1.62 | 13.05 | 1.80 | 161 | 1,294 | 184 |
Probable | 10,881 | 2.24 | 1.73 | 14.55 | 1.93 | 604 | 5,091 | 689 |
Proven + Probable | 13,965 | 2.23 | 1.70 | 14.22 | 1.90 | 765 | 6,385 | 873 |
*Notes:
Gold equivalent (Au Eq) grades based on a gold price of US$1,350/oz and average 92% recovery and a silver price of US$25/oz and average 65% recovery.
The Ore Reserves are based on the Measured and Indicated Open Pit Mineral Resources as estimated by Snowden in April 2012, and reported in Ortac's RNS dated 8th May 2012, as per the table below:
Šturec Open Pit Mineral Resources at a 0.40g/t Au Cut-Off Grade
Classified in accordance with the JORC Code (2004) - Snowden, April 2012*
Grade | Contained Metal | ||||||||
Resource Category | Tonnes (kt) | Density (t/m3) | Au (g/t) | Ag (g/t) | Au Eq (g/t) | Au (koz) | Ag (koz) | Au Eq (koz) | |
Measured | 3,000 | 2.17 | 1.69 | 13.50 | 1.96 | 161 | 1,291 | 187 | |
Indicated | 12,400 | 2.24 | 1.76 | 15.20 | 2.07 | 702 | 6,044 | 823 | |
Measured + Indicated | 15,400 | 2.23 | 1.75 | 14.90 | 2.05 | 863 | 7,335 | 1,010 | |
Inferred | 9,700 | 2.33 | 0.89 | 5.10 | 0.99 | 279 | 1,587 | 310 | |
Total | 25,100 | 2.27 | 1.42 | 11.10 | 11.64 | 1,141 | 8,922 | 1,320 | |
*Notes: Open pit resource is defined by an economic pit shell with a cut-off grade of 0.26g/t Au; Gold Equivalent (Au Eq) grades are calculated using a 50:1 ratio of silver to gold values; and Mineral Resources are inclusive of Ore Reserves. | |||||||||
Approximately 86% of the Measured and Indicated Mineral Resources have transferred through to the Proven and Probable Ore Reserve categories. There is scope, through further exploration, to improve the geological certainty of the current Inferred Mineral Resources and potentially increase the Ore Reserves in future.
Technical Economic Model Results
The results of the economic analysis conducted by SRK are shown in the table below. The base case considers the classified ore reserves only. The alternative case demonstrates the effect of stockpiling and processing ore grade material that is currently classified as inferred but is contained within the current pit shell and would be mined as part of the waste rock inventory.
Parameter | Units | Base Case | Including Inferred |
Recovered gold | (koz) | 703 | 767 |
Recovered silver | (koz) | 4,084 | 4,388 |
Average Net Au price | (US$/oz) | 1,343 | 1,343 |
Average Net Ag price | (US$/oz) | 24.9 | 24.9 |
Recovered Au Eq | (koz Au Eq) | 779 | 849 |
Net Revenue | (US$M) | 1,046 | 1,140 |
Cash costs (excl royalty) | (US$M) | 432 | 488 |
(US$/oz Au Eq) | 555 | 575 | |
Total cash costs | (US$M) | 485 | 545 |
(US$/oz Au Eq) | 622 | 642 | |
Project Capital Sustaining Capital | (US$M) (US$M) | 124 0* | 124 0* |
Pre-tax | |||
Payback | (year) | 3.5 | 3.5 |
NPV (at 8% discount rate) | (US$M) | 195 | 209 |
IRR | (%) | 30% | 31% |
CIT | (US$M) | 98 | 105 |
Post-tax | |||
Payback | (year) | 3.5 | 3.5 |
NPV (at 8% discount rate) | (US$M) | 145 | 156 |
IRR | (%) | 26% | 27% |
*No sustaining capital has been estimated as all mining equipment is leased for which the cost falls under the operating costs. All plant maintenance is covered under operating costs.
The base case economic evaluation uses straight line net commodity prices of US$1,343/oz of gold and US$24.88/oz of silver produced. Current Slovak legislation requires the payment of a 5% royalty on net revenues and profits are taxed at 23%. A base case discount rate of 8% was applied for net present value calculations. An NPV sensitivity analysis to discount rate is presented in the table below:
NPV Sensitivity to Discount rate at Base Case Metal Prices (Post Tax)
Discount rate | Base Case (US$M) |
0% | 340 |
2% | 276 |
4% | 224 |
6% | 181 |
8% | 145 |
10% | 116 |
12% | 92 |
14% | 71 |
16% | 54 |
A sensitivity analysis of metal prices is presented in the table below:
NPV Sensitivity to Metal Prices at 8% Discount Rate (Post Tax)
Gold/Silver Price | NPV (US$M) | IRR (%) |
World Bank January 2013 Price Forecast1) | 110 | 24% |
Flat line US$1,350/oz Au, US$25/oz Ag (Base Case) 2) | 145 | 26% |
Flat line US$1,450/oz Au, US$30/oz Ag 2) | 182 | 30% |
Current Spot Price US$1,590/oz Au, US$28.9/oz Ag 2) | 220 | 34% |
1). World Bank price forecast is a nominal forecast adjusted by SRK for inflation. Average prices over modelled period are US$1,208/oz for Au and US$22.8/oz for Ag (prior to deduction of refining charges).
2). Straight line metal price applied (prior to deduction of refining charges).
Pre-Feasibility Study Conclusions and Recommendations
SRK has concluded that "This report demonstrates that the Šturec deposit contains an economic gold resource which can be successfully processed using EU approved technology. As a result, SRK estimates that the Šturec deposit contains 13.97Mt of ore grading 1.70g/t Au and 14.22g/t Ag (1.90g/t Au Eq) that can be classified as Proved and Probable Ore Reserves, in accordance with the requirements of the JORC Code (2004)."
"Based on the pre-feasibility level technical work undertaken and the assumptions made by SRK for this study, the Šturec project is financially viable and its processing is economic at gold prices below the current spot price. The results warrant progression to the next level of technical study."
Competent Persons
The information in this release that relates to Mineral Resources is based on information presented in the report entitled Ortac Resources Kremnica: Project No. 2019 Mineral Resource Estimate - April 2012. The competent person for the estimate is Mr Ivor Jones (BSc (Hons), MSc FAusIMM(CPgeo)), Group General Manager - Geosciences, Snowden Mining Industry Consultants. By virtue of his education, membership of a recognised professional association and relevant work experience, Mr Jones is a Competent Person as defined by the JORC Code (2004) and consents to the inclusion in this announcement of the matters based on his information in the form and context in which it appears.
The Pre-Feasibility Study was prepared by SRK Consulting UK Ltd. The competent person responsible for the Pre-Feasibility Study report and Ore Reserve Estimate is Mr Mike Beare (CEng, MIMMM, ACSM, BEng), Principal Mining Engineer, SRK Consulting UK Ltd. By virtue of his education, membership of a recognised professional association and relevant work experience, Mr Beare is a Competent Person as defined by the JORC Code (2004) and has reviewed and approved the technical information in this release based on their information in the form and context in which it appears.
The technical information in this press release was compiled and prepared by Mr Owen Mihalop (MCSM, BSc (Hons), MSc, MIMMM, CEng), Technical Director, Ortac Resources Limited. By virtue of his education, membership of a recognised professional association and relevant work experience, Mr Mihalop is a Competent Person as defined by the JORC Code (2004). Mr Mihalop consents to the inclusion in this announcement of the matters based on his information in the form and context in which it appears.
**ENDS**
For further information please visit www.ortacresources.com or contact:
Vassilios Carellas Ortac Resources Ltd Tel: +44 (0) 20 7389 9050
Charles Wood Ortac Resources Ltd Tel: +44 (0) 20 7389 9050
Stewart Dickson Cantor Fitzgerald Europe Tel: +44 (0) 20 7107 8000
Catherine Leftley Cantor Fitzgerald Europe Tel: +44 (0) 20 7107 8000
Jeremy Stephenson Cantor Fitzgerald Europe Tel: +44 (0) 20 7107 8000
Caspar Shand-Kydd RFC Ambrian Limited Tel: +44 (0) 20 3440 6800
Klara Kaczmarek RFC Ambrian Limited Tel: +44 (0) 20 3440 6800
Jen Boorer RFC Ambrian Limited Tel: +44 (0) 20 3440 6800
Susie Geliher St Brides Media & Finance Ltd Tel: +44 (0) 20 7236 1177
Lottie Brocklehurst St Brides Media & Finance Ltd Tel: +44 (0) 20 7236 1177