18 Oct 2017 07:00
AIM ANNOUNCEMENT | 18 October 2017 |
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Maiden Ore Reserve for Miraflores
Metminco Limited (ASX: MNC, AIM: MNC) ("Metminco" or the "Company") is pleased to announce a maiden NI 43-101 and JORC 2012-compliant Ore Reserve for its 100%-owned Miraflores Gold Project in Colombia.
The Ore Reserve has been estimated using a gold price assumption of US$1200/oz and a cut-off grade of 1,53g/t Au. It is contained entirely within the Miraflores Deposit constrained Mineral Resource Estimate and is based entirely on the Measured and Indicated Resources.
The estimate represents a conversion rate of approximately 50% of Measured and Indicated Resources and has been based on information derived from the Feasibility Study (FS) for Miraflores, which will be released to the ASX today.
Miraflores Mineral Reserve Estimate as at October 2017
Reserve Classification | Tonnes (t) | Gold (g/t) | Silver (g/t) | Contained Metal (Koz Au) | Contained Metal (Koz Ag) |
Proven | 835,606 | 4.84 | 2.73 | 130 | 73 |
Probable | 2,142,741 | 4.16 | 3.21 | 287 | 221 |
Proven + Probable | 2,978,346 | 4.35 | 3.08 | 417 | 295 |
Planned dilution | 1,347,867 | 0.91 | 1.42 | 39 | 62 |
Source: Ausenco, 2017
The Company's Ore Reserve estimates for the Miraflores Gold Project have been independently reviewed and signed off by Mr Boris Caro who is a Member of Australasian Institute of Mining and Metallurgy and a Registered Member of the Chilean Mining Commission.
Mr William Howe, Managing Director, said: “The release of the maiden Ore Reserve for the Miraflores Gold Project marks a significant step towards our goal of near-term production in South America and the culmination of many months of dedicated work by our team. It also cements our confidence in the projects location on the prolific Western Cordillera Andean Cauca trend. We look forward to releasing the results of the Feasibility Study later today which will demonstrate that this is an economically robust project.”
The information communicated in this announcement includes inside information for the purposes of Article 7 of Regulation 596/2014
This announcement is an abridged version of the full announcement, including appendices which provide additional details of the JORC Reserve estimate, which is available on the Company's website at www.metminco.com.au.
William Howe
Managing Director
Miraflores Gold Project
Mineral Resources
The Miraflores Measured and Indicated Mineral Resources are reported at a gold cut-off grade of 1.20 g/t Au. The resources are based on 25,884 meters of drilling in 73 diamond drill holes and 236 meters of underground channel samples. This includes 3,624m in 10 holes carried out by AngloGold Ashanti and B2Gold in 2006-2007.
Statistical and visual checks were performed by Metal Mining Consultants of the estimated block model to ensure there were no discrepancies in the grade estimation routines and to ensure the geometry of mineralization meets the configuration that the geologists expected for estimated mineralization. The Mineral Resources are reported inclusive of the Ore Reserves.
Measured Mineral Resources; 2.958Mt @ 2.98g/t Au and 2.48g/t Ag
Indicated Mineral Resources; 6.311Mt @ 2.74g/t Au and 2.90g/t Ag
Measured and Indicated Mineral Resources; 9.269Mt @ 2.82g/t Au and 2.77g/t Ag
Inferred Mineral Resources; 0.487Mt @ 2.36g/t Au and 3.64g/t Ag
Competent Person
Mr Boris Caro visited the site in August 2017 for 3 days as part of the study team to review all aspects of the study including an investigation of the mine, plant and site layouts.
Type of Study Completed
A feasibility study has been completed for the Miraflores Project. Metminco engaged GR Engineering Services to complete the processing, infrastructure and feasibility study management aspects of the feasibility study. Ausenco Chile were engaged to complete all aspects of the mine design, mine scheduling, geotechnical analysis and ventilation system design to support the mine design, including capital and operating costs for the mine. Surface geotechnical design for the plant, infrastructure and tailings facility was undertaken by Dynami Geo Consulting (a Medellin based consulting company) and Grana y Montero Engineering, a Lima, Peru based engineering and contracting group assisted in the design of the Tailings Storage Facility. This study provided sufficient technical and economic support to back up the Ore Reserve estimate.
Further analysis and test work is recommended for the stope filling sequence and stability analysis prior to any decision to commence with the project construction.
Cut-off grade determination
An underground cut-off grade (CoG) of 1.53 g/t- for gold was applied to underground diluted resources constrained by the final underground design. This grade delineated the Ore Reserve estimate. The cut-off grade was utilized for the stope optimization and the mining schedule.
Reserves are based on a gold price of US$1,200/oz;Reserves are defined within an underground mine plan generated from diluted Measured and Indicated Mineral Resources;An underground CoG of 1.53 g/t-Au was applied to underground resources constrained by a final underground design;Underground reserves assume a total dilution of 31%;In-situ Au ounces disregard metallurgical recovery of 92%;28% of the mined out stopes and drifts will use backfill including waste and filtered tailings material. Backfilling operations will commence in the 2nd year of operation; Detailed ventilation designs were applied; andReserves are based on topography received from Metminco on January 26, 2017.
Ore Reserve Estimation Factors
For stope optimization, Stope Optimizer from Vulcan™ mine planning software was used. A post analysis of the optimisation confirms that for a life of mine of around 10 years, ore to plant of 1,300 tpd producing 4,000 oz Au per month, the cut-off grade would be 1.75 g/t Au. Therefore this cut-off grade was used in the optimization algorithm.
The mining method selected for the MIraflores deposit is the retreat longhole open stope method with partial backfill. The decision of which stopes require to be backfilled was made taking into consideration the geotechnical analysis and the mining sequence.
Only the underground resources contained within the mining stopes or underground development drives were included in the Ore Reserve estimate.
Underground reserves assume a total dilution of 31%.
Ore loss has been accounted for by removing areas that will not be mined as they are either too remote from other potential ore to pay for additional development, or the potential value has been diluted to a point where the material is eliminated from consideration. No other ore loss has been considered.
Mine development and stope production were scheduled using Vulcan Gantt Scheduler™. The scheduler package developed the schedule following a logic sequence of development drives with a maximum monthly rate of 270 meters per horizontal development drill jumbo.
Ramps; 4.5 x 4.5 meters
Drifts and cross-cuts; 4 x 4 meters
Stoping minimum width; 2.5 meters
Stoping average width; 7 meters
Production will start in year 1, focusing on high-grade areas and the early level development from the secondary ramps. The production will ramp up relatively quickly, allowing the processing of 1,300 tonnes per day during the first year of the mine schedule.
The mine operating and capital cost estimate was also constructed using first principles and an Excel™ cost model.
The geotechnical study included the data collection through drilling and mapping, rock mass classification, structural analysis, stability analysis and ground support recommendations.
The mine operation includes in-fill drilling activities for stope delineation and ore control purposes.
The planned dilution material will contain a small amount of Inferred Resources, However, this material contributes less than 1% of the total material above the cut-off grade.
The mining production schedule developed by Ausenco requires approximately 20% of the process tailings and all waste material mined for stope backfill purposes. Further backfill material (up to 50% of the total tailings), will be placed underground for cost and environmental benefit. Conceptually, Ausenco considers this strategy as adequate to improve either the stability of the stopes and for reducing the size of the tailing storage facility. However, it will be necessary to revisit the mining production schedule to achieve the proposed stope backfill targets prior to mining commencing.
Metallurgical Factors
The feasibility study metallurgical testwork program was conducted by Inspectorate Exploration and Mining Services (Inspectorate) of Vancouver, Canada, and ALS Laboratories (ALS) and was designed to evaluate a process flowsheet that included:
Three-stage crushing;Grinding;Gravity concentration of the coarse gold;Gold flotation of the gravity tailing;Cyanide leaching of the gold flotation concentrate;Cyanide detoxification of the cyanidation residue; andTailing thickening and filtration.
This flow sheet as tested has resulted in a gold recovery of 92% and silver recovery of 60% being utilised in the process plant design.
The process facility is designed to treat 474,500 tonnes of ore per annum (1,300 tonnes per day). The wet plant is scheduled to operate seven days per week at a nominal treatment rate of 59 dry t/h.
Environmental Studies
Baseline environmental studies were initiated by the previous owner in order to advance the development and preparation of an Environmental Impact Assessment study needed for regulatory permitting in Colombia. Given the current revision to the mine plan, some additional studies may be required for the areas to which the mine facilities have been relocated. This will be determined once the final mine plan is developed and the aforementioned gap analysis has been completed but some of this information has already been gathered to date.
As of July 2017, Baseline Study and Environmental Impact Assessment programs have recommenced. The bulk of the Baseline activities previously completed will be used as background information, however, local regulations requires all environmental and social baseline data to be no older than 12 months since its collection, thus new monitoring programs are underway starting Q3 of 2017.
The monitoring and environmental inventories consist of:
Fauna and flora characterization;Underground and surface water characterization;Noise, vibration and air pollution; andPotential contaminants from extracted minerals and stored tailings.
This data along with the mineralogical, geological, social and economic aspects of the new project will be used to complete the Environmental Impact Assessment, as per the Terms of Reference received by Miraflores from the local environmental agency Corporacion Autonoma Del Risaralda (CARDER) in July 2017.
The Environmental Management Plan (EMP) will be drafted once the environmental impacts are completed and finalized in late 2017.
Acid rock drainage characterization data obtained to date includes ABA, multi-element analyses, and mineralogical analyses. Column testing was conducted for waste rock and low-grade stockpile materials. Geochemical evaluation of flotation tailings and cyanide leach tailings was also conducted. Preliminary results indicate that the flotation tailings and the majority of waste rock are non-PAG (non-potentially acid generating); whereas the low-grade stockpiles and cyanide leach tailings are PAG (potentially acid generating). Potential for metal leaching is indicated in the static test data, but further evaluation is in progress to acquire kinetic data for use in geochemical modelling.
The current mine plan does not include low grade stockpiling on surface. The cyanide leach tailings will be placed underground as part of the mine backfilling requirements.
The current mine plan includes the use of a large fraction of the expected tailings flow as underground backfill material. The remaining filtered tailings will be sent to the tailings management facility where they will be spread and mechanically compacted to achieve an unsaturated, dense and stable tailings deposit. No pond or water impoundment will exist so there is no potential for infiltration to native soils from the tailings materials.
Miraflores has received a mine development permit from the CARDER for the development of 2,000 meters of underground exploration development which includes 2 permanent waste dumps and water discharge licence (Resolution 1505 of 7 September 2017).
Infrastructure
The area is well serviced with respect to roads. The site is located approximately 7km from the Panamerican highway that runs along the Cauca River. The road connecting the Panamerican Highway with the town of Quinchia passes within a few kilometers of the site and is currently being upgraded with 4 of the 7km of road now newly sealed and with the remaining portion of the road expected to be completed prior to construction commencing. From the newly sealed road access to the site is via an unsealed road which will require upgrading to allow access for large bulk loads. The feasibility capital estimate allows for the upgrade to this access road, the mine haul roads and other proposed internal roads for the operation.
Sufficient labour is readily available throughout the region but specifically in Quinchia and in communities immediately surrounding the site. Professional and experience labour will be sourced from both within and outside of Colombia. The town of Quinchia and surrounding towns have an adequate supply of suitable accommodation for any labour brought into the area. It is Miraflores's intention to employ labour locally and where labour is brought into the area from outside, the Company will require that labour to relocate to Quinchia.
Power Supply to the site will be via a new overhead power line from Quinchia. The incoming supply voltage will be 33 kV, with step-down transformers to the site distribution voltage of 13.8 kV. A medium voltage distribution board installed at the incoming HV switchyard will distribute power to the outgoing feeders. The new power line will be approximately 8km in length and will be a dedicated line.
Water supply needs for the Project (processing plant and camp) have been assessed and the water balance summary has been carried out. The processing plant will require a total of 500 m3/day of water to operate.
The accommodation camp will require 30 m3/day of freshwater which will be trucked to site from the local community water supply. The surplus water from mine dewatering operations will be used for construction works, dust suppression and drilling and/or will be sent to the water treatment plant.
Capital and Operating Costs
The capital and operating cost estimates produced for the establishment of the mine is considered to be an AACE class 3 estimate with a level of accuracy within -10% and +15%. Costs are presented in United States dollars (US$) and are based on prices in effect during the second quarter of 2017; no escalation factors have been applied.
The exchange rate applied for the operating and capital cost estimates are:
US$1.00 = A$0.80 (Australian Dollar);US$1.00 = €0.86 (Euro); andUS$1.00 = 3,000 COP (Colombian Pesos).
The feasibility study delivered a total estimated Initial Capital cost of bringing the project into production of US$71.8 million excluding all contingency. This cost is based upon an EPCM approach whereby Miraflores assumes general risk. Contingencies of US$6.2 million was estimated for the project development. Contingencies have been estimated at 7.67% of initial capital.
Sustaining capital requirements associated with the mine and owner cost of US$18.5 million were included into the financial model.
The Operating cost was based on a high productivity operation, this will demand a high efficient environment for productivity and cost controls. No contingency was embedded into the operating cost.
The feasibility study delivered the following results for the operating costs:
Mining cost of US$27.94 /processed t;Processing cost of 20.54/processed t;Tailing cost of US$0.62 /processed t; andG&A cost of US$4.36 / processed t;
The total site operating cost is US$53.46 /processed t.
Government Royalty of US$52.18 / payable ounce.
Refining charges, transport and insurance of US$4.50 / payable ounce.
Total Cash Costs of US$599 / payable ounce.
The operating cost estimate did not include Corporate overheads and exploration activities.
Revenue Factors
The revenue estimate was conducted as per industry standards taking into consideration the annual metal production, commercial terms and predicted metal prices.
The revenue estimate utilized the following assumptions:
A gold and silver prices of US$1,300/oz and US$18 /oz respectively (Within the range of industry expectations and Broker and Bank predictions. The gold price used is close to the moving 5 year average gold price);The average processed head grade of 3.29 g/t and 2.56 g/t for gold and silver respectively (from the mine and processing schedules);Metallurgical recoveries of 92 % and 60 % for gold and silver production respectively (determined from metallurgical testwork);Metal payability factors of 96.6 % and 99.0 % for gold and silver respectively (from historical figures and discussions with refiners); Refinery and transport and insurance charges of US$4.50/ payable ounce (based on previous study estimates); andRoyalty of 4% of the net smelter return (based on the Miraflores licence and Existing Aporte contract expiry (2019) prior to commencement of production in late 2019 when the licence will revert to the normal system of concession contracts which are subject to a 4% royalty only).
Economic Analysis
Metminco developed a comprehensive financial model for the economic evaluation of the Miraflores Gold Project. The financial model incorporates the modifying factors delivered by the Miraflores Feasibility Study.
The key assumptions utilised in the financial model are listed as follows:
Gold and silver prices of US$1,300 /oz and US$18 /oz respectively;Net smelter return as per the Revenue estimate;Operating and capital costs as per industry standards;Working capital and inventory management as per industry standards;Debt and financing activities are excluded from the net present cost estimate;All cash flows were treated in real terms, therefore, no inflation or escalation factors were applied;Discount Rate of 8%;Site operating cost of US$ 53,46 /processed t; andIncome tax of 33%.
The Miraflores Feasibility Study delivered a Net Present Value of US$72.3 million after tax and an Internal Rate of Return of 25%.
Social Licence
According to the social base line information for the project carried out in 2013, there were 289 families in the direct influence area, with a total population of 1,152 inhabitants. The village that has the largest number of inhabitants was Miraflores with 410 inhabitants.
Community base line studies, social impact assessments and community development plans will be complete by the end of 2017.
The Company has an existing agreement with the artisanal miners at Miraflores that will provide education, training and jobs for some of the certified miners while others will receive compensation when the project enters construction and artisanal mining ceases.
The Company maintains excellent relations with the local community, municipality and government agencies.
Project Risks and Operating Licences
The main risks for the development of the Miraflores Gold Project identified by the feasibility study are described as follows:
Social disruptions or community unacceptance of the project;Gold price;Increase of the predicted capital or operating cost;Not achieving the target production because of mining or processing issues. E.g. reduced ore grade, not achieving the design processing throughput or gold recovery, etc.Existing Miraflores licence contract is not renewed or the licence does not revert to the normal system of concession contracts which are subject to a 4% royalty only);Geotechnical instability; andUnpredicted water levels in the underground mine.
Other than the Aporte contract for the Miraflores licence no other material agreement is in effect at this time.
The Miraflores Project Environmental Impact Assessment Study (2013) did not previously have an official Terms of Reference (ToR), instead, the baseline data collection and impact assessment development was progressed under a generic ToR for open pit mining. This generic ToR was issued by National Authority of Environmental Licenses (ANLA) in 2012. In July 2016, a new ToR was issued by ANLA. The Project submitted a request to Corporacion Autonoma Del Risaralda (CARDER) for an official ToR for the new underground Project concept. The new ToR was obtained in August 2017 and is being used as the basis for the ongoing environmental and social work.
The Environmental Impact Assessment Study is expected to be submitted in late Q4 of 2017 or early Q1 of 2018.
Plan de Trabajos y Obras or (PTO); The PTO licence is issued by the Ministry Of Mines and Energy and must comply with the Terms of Reference set out by the ministry for non seabed minerals and materials.
All projects must obtain an EIA and PTO prior to commencing development of the project. Approvals are expected to take between 4 and 6 months from submission depending on the requirement to provide further data requested by the authorities.
Ore Reserve Estimate
The Ore Reserve estimate of the Miraflores Project is reported as at the effective day of 18 October, 2017.
The Ore Reserves estimate is inclusive of Mineral Resources.
The reserve estimate is supported by the Miraflores Feasibility Study complying with the JORC Code standards.
The Ore Reserve estimate provided appropriately reflects the Competent Person's view of the opportunity for Metminco to develop the Miraflores Gold Project based on the modifying factors derived from the Feasibility Study work and the updated Mineral Resource model.
The key modifying factors of the Ore Reserve estimate are described as follows:
Reserves are based on a gold price of US$1,200/oz and silver price of US$18/oz;An underground cut-off grade (CoG) of 1.53 g/t-Au was applied to underground resources constrained by a final underground design;Reserves are defined within an underground mine plan generated from diluted Mineral Resources;Underground reserves assume a total dilution of 31%;Mining and processing production schedules were developed for assessing the technical viability of the project;Revenue estimates were developed as per industry standards;Operating and capital cost estimates were executed as per industry standards; andThe construction and production schedules formed the basis for a financial model delivering a positive outcome for the economic evaluation.
Proven: 835,606 tonnes @ 4.84g/t Au and 2.73g/t Ag
Probable: 2,142,741 tonnes @ 4.16g/t Au and 3.21g/t Ag
Proven and Probable: 2.978,346 tonnes @ 4.35g/t Au and 3.08g/t Ag
Planned Dilution: 1,347,867 tonnes @ 0.91g/t Au and 1.42g/t Ag
Statement of Accuracy
The Competent Person has recommended that further work be conducted prior to commencement of construction of the Miraflores Project on the following topics:
Geotechnical stability analysis for the underground mine, especially in the areas containing non-backfilled stopes;Stope Backfilling sequence;Develop a detailed mining construction schedule;Understand the predicted underground water levels;Update the environmental and social costs as per the granted permit -still to be granted.
This further work may result in some changes to the modifying factors representing a high risk for the achievement of the technical and economic outcome of the Miraflores Gold Project delivered by the feasibility study.
For further information, please contact: METMINCO LIMITED |
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Brian Jones |
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NOMINATED ADVISOR AND BROKER |
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RFC Ambrian |
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Australia |
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Will Souter / Nathan Forsyth |
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United Kingdom |
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Charlie Cryer |
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JOINT BROKER |
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SP Angel Corporate Finance LLP (UK) |
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Ewan Leggat |
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PUBLIC RELATIONS |
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Camarco United Kingdom |
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Gordon Poole / Nick Hennis |
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Media + Capital Partners |
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Australia |
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Luke Forrestal |
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Forward Looking Statement
All statements other than statements of historical fact included in this announcement including, without limitation, statements regarding future plans and objectives of Metminco are forward-looking statements. When used in this announcement, forward-looking statements can be identified by words such as ''anticipate", "believe", "could", "estimate", "expect", "future", "intend", "may", "opportunity", "plan", "potential", "project", "seek", "will" and other similar words that involve risks and uncertainties.
These statements are based on an assessment of present economic and operating conditions, and on a number of assumptions regarding future events and actions that, as at the date of this announcement, are expected to take place. Such forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties, assumptions and other important factors, many of which are beyond the control of the Company, its directors and management of Metminco that could cause Metminco's actual results to differ materially from the results expressed or anticipated in these statements.