11 Oct 2013 07:00
Tri-K feasibility study update
· Feasibility study work to date confirms technical viability of low cash cost operation
· Mining licence application process commenced, based on technical information submitted to Guinea government in September:
- Maiden Ore Reserve for oxide portion of orebody of 7.9 million tonnes at 1.89 g/t Au for 480,000 contained ounces
- Life of mine strip ratio of 2.6
- 1.2 million tonne p.a. heap leach plant with 7 year mine life
- Average gold recoveries of 80%
- Average annual production of 55,000 ounces at life of mine total cash costs (including royalty) of US$787/oz
- Capital cost, including contingency, of US$88.5 million
· Environmental and social impact assessment (ESIA) completed and submitted to government in July
· Key Koulékoun exploration licence valid for an additional 2 years
· Work underway to further optimise project, including capital and operating costs
· Further potential exists to exploit additional 2.4 million ounces in fresh and transitional material types through second phase of development
David Cather, Chief Executive Officer, commented:
"Our feasibility work to date shows that Tri-K is technically robust, with a low strip ratio, low cash costs, high grades and high recoveries. The technical submissions to the Guinean Government mark an important step in the mining licence application process. Work is now in progress to optimise the project further, including a focus on certain aspects of the capital and operating costs."
FOR FURTHER INFORMATION PLEASE CONTACT
Avocet Mining PLC | Pelham Bell PottingerFinancial PR Consultants | J.P. Morgan CazenoveCorporate Broker | Arctic SecuritiesFinancial Adviser | SEB EnskildaFinancial Adviser |
David Cather, CEOMike Norris, FDRob Simmons, IR | Daniel Thöle | Michael Wentworth-Stanley | Arne WengerPetter Bakken | Fredrik Cappelen |
+44 20 7766 7676 | +44 20 7861 3232 | +44 20 7742 4000
| +47 2101 3100 | +47 2100 8500 |
NOTES TO EDITORS
Avocet Mining PLC is a gold mining and exploration company listed on the London Stock Exchange (ticker: AVM.L) and the Oslo Børs (ticker: AVM.OL). The Company's principal activities are gold mining and exploration in West Africa.
In Burkina Faso the Company owns 90% of the Inata Gold Mine. The deposit at Inata currently comprises a Mineral Resource of 4.7 million ounces and an Ore Reserve of 0.9 million ounces. The Inata Gold Mine poured its first gold in December 2009 and produced 135,189 ounces of gold in 2012.
Other assets in Burkina Faso include eight exploration permits surrounding the Inata Gold Mine in the broader Bélahouro region. The most advanced of these projects is Souma, some 20 kilometres from the Inata Gold Mine, where there is a Mineral Resource estimate of 0.8 million ounces.
In Guinea, Avocet owns 100% of the Tri-K Project in the north east of the country. Drilling to date has outlined a Mineral Resource of over 3.0 million ounces, and in October 2013 the Company announced a maiden Ore Reserve on the oxide portion of the orebody, which is suitable for heap leaching, of 0.5 million ounces. Development of a CIL processing plant to exploit the remaining 2.4 million ounces will be considered once the heap leach feasibility study has been completed.
TRI-K FEASIBILITY STUDY UPDATE
This release is an update on the progress of Avocet's feasibility study for the Tri-K development project in Guinea ('Tri-K' or the 'Project'). Work is at an advanced state and as part of its application for a mining licence, the Company has submitted a significant amount of technical information to the Guinean Government, of which this release contains the most material. The information submitted to the government was prepared in conjunction with Tenova Bateman ('Bateman'), South Africa.
The Project is located within the Mandiana Prefecture in the eastern sector of the Republic of Guinea, 90km northeast of Kankan, the second largest city in Guinea. During 2013, the Company consolidated its exploration licences, including the renewal of the Koulékoun licence, which was due for expiry in October 2013 and is now valid for a further two years. Tri-K now consists of five exploration permits that cover a total area of 486 square kilometres and the project is centred on the two key deposits of Koulékoun and Kodiéran.
Although Tri-K has a resource of over three million ounces, the feasibility study is for the proposed development of Tri-K as a heap leach operation which would process only the uppermost, oxide, or weathered, portion of the orebody. It therefore represents a lower cost means of entering production at Tri-K than constructing a carbon in leach ('CIL') processing plant. A second stage development of Tri-K with a CIL processing plant to exploit the remaining unweathered section of the orebody will be considered once the heap leach feasibility study has been completed.
Key parameters
Total capital expenditure | US$88.5 million |
Total production | 384,000 ounces |
Average annual production | 55,000 ounces |
Mine life | 7 years |
Average head grade | 1.89 g/t Au |
Stripping ratio (waste:ore) | 2.6 |
Gold recovery | 80% |
Average cash costs (including royalty) | US$787 per ounce |
Based on the feasibility study work to date, key project statistics are currently estimated as above. However, certain parameters, including capital expenditure and operating costs, are expected to change as a result of project optimisation work currently in progress.
Geology, Mineral Resources and Ore Reserves
The Koulékoun deposit is part of a NW-striking and steeply dipping porphyry hosted orogenic disseminated style mineralisation system. The dominant geological feature is massive, quartz feldspar porphyry, typically 20-80 metres wide. This has been drilled to a maximum vertical depth of 400 metres and is open along strike and at depth. An important feature is a younger, sub-horizontal dolerite dyke of Mesozoic age, which cuts the mineralised geology and controls the position of the water table and therefore restricts the depth of weathering at Koulékoun to 80 metres. Gold grades are higher in the intersection of the porphyry dyke complex and locally occurring NE striking structures.
The Kodiéran deposit is located in sediments close to the contact of a large diorite intrusive to the west. The bulk of Kodiéran is located in a deeply weathered saprolite profile where the ore is weathered to a depth of up to 100 metres. Mineralisation dips shallowly to the west and is 20-60 metres thick. Mineralisation has been tested over 2,500 metres along strike to date and remains open along strike and at depth.
The feasibility study is being prepared on oxide portion of the Mineral Resource estimate and is shown in the table below.
Total | Classification | Tonnes | Au g/t | Ounces |
Oxide | Indicated | 10,440,000 | 1.62 | 545,000 |
Inferred | 1,083,000 | 1.25 | 43,500 | |
Total Oxide | 11,522,000 | 1.59 | 588,500 | |
Transitional | Indicated | 4,894,000 | 1.47 | 231,000 |
Inferred | 633,000 | 1.23 | 25,000 | |
Total Transitional | 5,527,000 | 1.44 | 256,000 | |
Fresh | Indicated | 25,931,000 | 1.47 | 1,221,500 |
Inferred | 23,436,000 | 1.26 | 951,500 | |
Total Fresh | 49,367,000 | 1.37 | 2,173,000 | |
Total | 66,416,000 | 1.41 | 3,018,000 |
Note: The resources are quoted for blocks with a grade of greater than 0.5 g/t. Differences may occur due to rounding. The information in this press release that relates to in-situ Mineral Resources is based on information compiled by David Williams of CSA. David Williams takes overall responsibility for the press release. He is a Member of the Australian Institute of Geoscientists and has sufficient experience, which is relevant to the style of mineralisation and type of deposit under consideration, and to the activity he is undertaking, to qualify as a Competent (or Qualified) Person in terms of the 'Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves' (JORC Code 2004 Edition). David Williams consents to the inclusion of such information in this press release in the form and context in which it appears.
The maiden Ore Reserve estimate provided below is based exclusively on the oxide portion of the orebody, and assumes a pit shell gold price of US$1,200 per ounce, mining dilution of 5% and mining losses of 3.5%.
Deposit | Classification | Tonnes | Au g/t | Ounces |
Kodiéran | Proven | - | - | - |
(cut off grade 0.45 g/t Au) | Probable | 4,776,000 | 2.00 | 307,000 |
Koulékoun | Proven | - | - | - |
(cut off grade 0.65 g/t Au) | Probable | 3,133,000 | 1.72 | 173,000 |
Total | 7,909,000 | 1.89 | 480,000 |
Notes: The information in this press release that relates to Ore Reserves, estimated in conformance with JORC 2004 Code, is based on information compiled by Clayton Reeves, of Avocet Mining PLC. Clayton is a member of The Southern African Institute of Mining and Metallurgy (SAIMM) and has sufficient experience, which is relevant to the style of mineralisation and type of deposit under consideration, and to the activity he is undertaking, to qualify as a Competent Person in terms of the JORC Code. Estimates are rounded to nearest significant figure. Rounding Errors may occur.
Both Koulékoun and Kodiéran deposits are open along strike and at depth. There is therefore an opportunity, following completion of the feasibility study, and prior to construction, to conduct further drilling with the aim of identifying additional resources. Given its track record of exploration at Tri-K, the Company believes there is a strong possibility that additional oxide material would be added to the existing life of mine plan.
No Ore Reserve has yet been estimated for the transitional and fresh components of the deposits. This will be done when the second stage development of Tri-K is considered.
Mining and processing
The Kodiéran and Koulékoun deposits will be mined using open pit mining methods. Mining will be focused on the weathered oxide material, which is restricted to the uppermost 80 metres of each deposit. Targeting of this near surface material alone results in a low life of mine stripping ratio of 2.6.
The Company intends to use contract mining for its heap leach operations. Mining activities will commence initially at Kodiéran in year one and will take place concurrently at both Koulékoun and Kodiéran from year two onwards. This will allow for the construction of a 22 km haul road linking Koulékoun to the Kodiéran plant area during the first year. The heap leach development of the oxide portion of the orebodies will last for 7 years, with a total of 7.9 million tonnes processed. The rate of mining peaks in years one and two at 4.75 million tonnes per annum, and approximately two thirds of the ore will be sourced from Kodiéran and one third from Koulékoun.
The heap leach pad will be located at Kodiéran, with an annual capacity of 1.2 million tonnes. The heap leach pad and associated plant has been designed in accordance with internationally recognised standards and best practice. After mineral sizing, the ore will be agglomerated prior to stacking on the heap leach pads to ensure sufficient cyanide solution percolation and heap stability.
The project design was based on an assumption of an 80% gold recovery. Test work data from SGS (South Africa) indicate this is conservative as results from column heap leach tests conducted over 60 days indicate Kodiéran samples recording gold recoveries of over 90% and Koulékoun samples reaching over 80%.
The primary project infrastructure, including the camp and office, will be situated at Kodiéran, with additional administration facilities located at Koulékoun for daily management of operations at that deposit. The Project is located adjacent to the Fie River and a suitable valley in one of its tributaries has been identified within the Project area for a 500,000 cubic metre water storage facility to be located. The Project plant will require 2.4 MW of power, which will be supplied by diesel generators.
An ESIA has been completed as part of the feasibility study by Earth Systems of Australia in association with INSUCO of Guinea. The ESIA was completed in line with Republic of Guinea Codes, Policies and Laws. Furthermore, where stricter relevant international policies were identified, those stricter guidelines and policies were used for the assessment (e.g. IFC Performance Standards and Equator Principles).
Please visit www.avocetmining.com for associated graphic
Figure: proposed Tri-K site layout
Total cash costs and capital expenditure
Life of mine cash costs (including royalties) for the Project are currently estimated at US$787 per ounce, as shown in the table below. Key areas in the cost optimisation review that is underway include cement addition rates and general and administration costs.
Category | US$/oz produced |
Mining | 217 |
Processing | 222 |
General and administration | 95 |
Government royalty (5%) | 70 |
Total cash costs | 787 |
Provisional pre-production capital expenditure for the Project, including contingency, is estimated at US$88.5 million, as summarised in the table below. Changes are being investigated as part of optimisation of the Project, including potentially removing the requirement for secondary crushing and cheaper alternatives to the stacking equipment that are currently budgeted.
Category | Cost Area | US$m |
Direct field costs | Infrastructure & Bulk Earthworks | 30.2 |
Civil Works | 5.3 | |
Structural Steelwork | 2.3 | |
Mechanical Equipment | 14.5 | |
Piping & Valves | 4.9 | |
Electrical | 6.0 | |
Instrumentation | 1.2 | |
Transport and other costs | 3.1 | |
Subtotal | 67.4 | |
Indirect costs | EPCM cost | 9.8 |
Other costs, incl. contingency | 9.4 | |
Owner's costs | 1.9 | |
Total construction costs | 88.5 | |
Potential for second stage development
Under the current feasibility study, only 0.6 million ounces of Tri-K's total Mineral Resource is to be exploited through a low capex heap leach project, being the oxide portion. By contrast, over 2.4 million ounces of mineral resources have been identified within the transitional and fresh zones of the Koulékoun and Kodiéran deposits, at a cut off grade of 0.5 g/t Au. At a higher cut off grade of 1.0 g/t Au, the Mineral Resource for this transitional and fresh material would equate to 25.8 million tonnes at 2.13 g/t Au, for 1.8 million ounces contained. A second stage development of Tri-K to install a CIL processing plant at Tri-K would enable processing of this material, and previous metallurgical testwork indicates that Tri-K ore is amenable to a standard CIL process. The Company will consider a second stage development once the heap leach feasibility study has been completed.
Mining licence application process
The Tri-K feasibility study is being completed as part of the Company's application for a mining licence. Following the submission of the technical information and ESIA to the Guinean Government, the Company will update the market as appropriate on further developments.