Astur Gold Corp ATRGF

Technical Insight - Very Bullish

[guerreiro]

BGD is selling at a big discount to its net assets as shown in the report.

Black Dragon pegs Salave pretax NPV at $296.2M (U.S.)

2019-02-11 11:11 ET - News Release

Mr. Paul Cronin reports

BLACK DRAGON GOLD CORP.: POSITIVE PRELIMINARY ECONOMIC ASSESSMENT FOR SALAVE UNDERGROUND

Black Dragon Gold Corp. has released the positive results of the preliminary economic assessment (PEA) completed on its 100-per-cent-owned Salave gold project located in Asturias in northern Spain. The PEA is based on the recently completed mineral resource estimate completed by CSA Global (see Oct. 25, 2018, news release). All figures are in U.S. dollars unless otherwise stated.

The PEA demonstrates robust economics for an underground mining operation with a 14-year mine life.

Paul Cronin, managing director and chief executive officer of Black Dragon, commented: "The completion of the PEA is a major milestone on the path to development of the Salave project and the metrics support our belief that Salave can potentially generate strong returns for shareholders. It forms the first step in our permitting process, presenting a new optimized process on a zero-discharge basis that minimizes the visual and surface impact of the project.

"The robust results of this PEA underline the potential economic viability of the current Salave resource to be mined over an initial 14-year mine life, and our successful drilling campaign last year indicates strong potential for growth in mine life at Salave.

"This study supports that Salave can produce over 1.1 million ounces (560,000 tonnes of concentrate averaging over 59 grams per tonne gold), providing a number of marketing options for export and refining, minimizing the need for additional plant and equipment and hence reducing the project's footprint. The relatively low upfront capex also opens alternative financing opportunities which will ensure that both shareholders and the local community benefit from the success of this project."

Key PEA outcomes:

 

• Pretax NPV (net present value) at 5-per-cent discount rate -- $296.2-million;
• After-tax NPV -- $230-million;
• Pretax internal rate of return (IRR) -- 28 per cent;
• After-tax IRR -- 25 per cent;
• After-tax payback -- 3.8 years;
• Preproduction capital cost, including contingency: $95.3-million;
• Life-of-mine (LOM) sustaining capital cost -- $19.3-million;
• Estimated average LOM total cash cost -- $729 per ounce gold;
• Estimated average LOM all-in sustaining costs (AISC): $752 per ounce gold.

 

Cautionary statement:

 

• The PEA is a preliminary technical and economic study of the potential viability of the Salave gold project. It is preliminary in nature and includes inferred mineral resources that are considered too speculative geologically to have economic considerations applied to them that would enable them to be categorized as mineral reserves. There can be no assurance, and there is no certainty, that the preliminary economic assessment contained therein will be realized. Further exploration and evaluation work and appropriate studies are required before Black Dragon will be in a position to estimate any ore reserves or to provide any assurance of an economic development case.
• The production target and forecast financial information referred to in this PEA comprise measured and indicated mineral resources (73 per cent) and inferred mineral resources (27 per cent). The proportion of inferred mineral resources is not determinative of the project viability and does not feature as a significant proportion early in the mine plan.
• Metallurgical recoveries have been based on test work data and costs have been estimated by independent consultants generally from budget quotations, factored estimates or cost data from similar operations/projects. Cost estimate accuracy for the PEA is in the order of plus or minus 35 per cent.
• The PEA is based on the material assumptions outlined herein and in the report. These include assumptions about the availability of funding. While Black Dragon considers all of the material assumptions to be based on reasonable grounds, there is no certainty that they will prove to be correct or that the range of outcomes indicated by the PEA will be achieved. To achieve the range of outcomes indicated in the PEA, among other things, financing of in the order of $100-million will likely be required. Investors should note that there is no certainty that Black Dragon will be able to raise that amount of financing when needed.
• It is also likely that such financing may only be available on terms that may be dilutive to or otherwise affect the value of Black Dragon's existing shares. It is also possible that Black Dragon could pursue other value realization strategies such as a sale, partial sale or joint venture of the project. If it does, this could materially reduce Black Dragon's proportionate ownership of the project. Given the uncertainties involved, investors should not make any investment decisions based solely on the results of the PEA.

 

Next steps:

 

• Submission of the project description for the environmental and social impact assessment (ESIA) in February, 2019;
• Additional geophysics over the entire investigation permit at Salave -- April, 2019;
• Issuance of the ESIA terms of reference in June, 2019;
• Soil geochemistry testing on potential drill targets -- June, 2019;
• Prefeasibility study -- October, 2019.

 

PEA key assumptions and inputs:

 

• Assumed gold price -- $1,250 per ounce
• Exchange rate of $1.15 per euro;
• Life of mine -- 14 years;
• Main underground mining method -- vertical retreat and sublevel stoping;
• Average diluted head grade -- 3.87 grams per tonne gold;
• Total underground dilution -- 43 per cent;
• LOM plant throughput -- 9.19 million tonnes;
• Access ramp gradient of 15 per cent at a 5.0-metre-by-5.5-metre profile;
• Mineralized zone development at a 4.0-metre-by-4.5-metre profile;
• Average mining and processing throughput -- 2,000 tonnes per day;
• Flotation plant recoveries -- 97 per cent
• Average annual production (LOM) -- 79,200 ounces gold in concentrate at an average grade of 59.7 grams per tonne gold;
• LOM recovered gold in concentrate production -- 1,108,420 ounces;
• Refining and processing charges -- $368 per tonne concentrate or $188 per ounce gold.

 

 

  PEA SUMMARY PARAMETERS Input Unit Physical parameters Total mineralized material tonnes mined (LOM) Mt 9.19 Average annual throughput (LOM) ktpa 656.3 Head grade Au g/t 3.87 Gold recovery to concentrate % 97% Mine life years 14 Gold grade of concentrate Au g/t 59.71 Total concentrate produced kt 560.5 Total ounces in concentrate koz 1,108.4 Average annual production (LOM) koz 79.2 Cost parameters Mining costs US$/t 40.68 Processing costs US$/t 14.00 General and administrative US$/t 2.71 Total costs US$/t 57.39 Preproduction capital costs Mine development and infrastructure US$m 29.7 Mining equipment US$m 11.2 Tailings US$m 1.3 Process plant US$m 28.3 Owners costs and EPCM US$m 12.5 Contingency (15 per cent) US$m 12.4 Total preproduction capital US$m 95.3 Sustaining capital US$m 19.3 LOM cash costs US$/oz 729.15 LOM AISC US$/oz 752.80 

 

Mineral resource estimate

An updated National Instrument 43-101 mineral resource estimate, effective Oct. 22, 2018, is included in this PEA and has been filed on SEDAR and the Australian Securities Exchange market announcements platform (see Oct. 25, 2018, news release).

 

 Category Tonnes Au Au (Mt) (g/t) (koz) Measured 1.03 5.59 185 Indicated 7.18 4.43 1,023 Measured and indicated 8.21 4.58 1,208 Inferred 3.12 3.47 348

 

Notes:

 

1. Rounding may cause apparent discrepancies.
2. The resource estimate was conducted by CSA Global of Perth Australia (CSA) with an effective date of Oct. 22, 2018. Classification of the mineral resource estimate was completed based on the guidelines presented by Canadian Institute for Mining (CIM) (May, 2014), adopted for technical reports which adhere to the regulations defined in Canadian NI 43-101. The mineral resource estimate was also prepared in accordance with the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves, 2012 edition (2012 JORC Code).
3. The mineral resource estimate was first announced on Oct. 25, 2018. Black Dragon confirms that it is not aware of any new information or data that materially affect the information in the previous announcement and that all material assumptions and technical parameters underpinning the mineral resource estimate continue to apply and have not materially changed.
4. A cut-off grade of two grams per tonne gold has been applied when reporting the mineral resource estimate.
5. Mineral resources that are not mineral reserves do not have demonstrated economic viability but do have reasonable prospects for eventual economic extraction.
6. The quantity and grade of reported inferred resources in this estimation are conceptual in nature and there has been insufficient exploration to define these inferred resources as an indicated or measured resource. It is uncertain if further exploration will result in upgrading them to an indicated or measured resource category, although it is reasonably expected that the majority of the inferred resources could be upgraded to indicated mineral resources with further exploration.
7. The mineral resource estimate underpinning the production targets in this announcement was prepared by a competent person under the 2012 JORC Code.
8. The title of the report is "Salave Gold Project Mineral Resource Update for Black Dragon Gold Corp.," with an effective date of Oct. 22, 2018, and it was written by Ian Stockton, BSc (geology), MAusIMM, FAIG; Dmitry Pertel, MSc (geology), MAIF, GAA; and Galen White, BSc, FAusIMM, FGS.

 

Potentially extractable portion of mineralization for mine planning

The mine plan supported by the PEA demonstrates that approximately 81.1 per cent of the total 2018 updated mineral resource tonnage is amenable to underground extraction. For purposes of mine planning, the potentially extractable portion of the mineral resources comprise 9.19 million tonnes at a diluted grade of 3.87 grams per tonne gold, containing just over 1.1 million ounces of gold. The mineralized material modelled to be mined in the PEA contains mineral resources classified in the inferred category (28 per cent) that are too speculative geologically to have economic considerations applied that would enable them to be categorized as mineral reserves. These inferred resources will require further exploration and definition to meet the criteria to be classified as indicated or measured mineral resources before being considered for conversion to mineral reserves at the next level of detailed economic study.

Mine plan

Given environmental and community considerations, the PEA has only evaluated underground mining operations. The primary mining method selected for detailed analysis in this study was the vertical retreat mining (VRM). Sublevel stoping was considered as a secondary method applicable to specific vertical thin geometries (under 15 metres in length). Rock and paste fill will be used as backfill to maximize mining recovery.

The mine design was based on basic economic assumptions to create minable stope outlines. A value of two grams per tonne was assumed as mine cut-off grade. Mining dilution and mineralized material loss factors were also applied to each mining shape to reflect the selected mining method.

The mine production rate targets 700,000 tonnes per year of run of mine. A conceptual mine layout was designed, including stopes and development, with 60-metre levels and three 20-metre sublevels. The total mineralized material from stopes, drives and sill pillar recovery (50 per cent) will total 9.2 million tonnes at 3.87 grams per tonne gold.

A long-term mine schedule was created integrating stopes and development. Mineralized zones were sequenced to prioritize higher grades at lower operating costs.

Mineral processing

In order to minimize potential social and environmental issues, processing of Salave mineralized material has been limited to crushing, grinding and flotation, with concentrates exported through local ports. Mine feed will be crushed on surface at a rate of 700,000 tonnes per year and then be processed by conventional SAG (semi-autogenous grinding) and ball milling followed by sulphide flotation and thickening.

The run of mine will feed a primary jaw crusher with a capacity of 400 tonnes per hour with a physical availability of 70 per cent with a design factor of 20 per cent.

From an intermediate stockpile, the coarse material will feed the mill circuit, which consists of a conventional SAG and ball mill configuration working in close circuit with the cyclones.

The flotation circuit consists of a number of cells of 300-to-400-cubic-metre capacity (nine to 10 cells of 40 cubic metres each) with two conditioning tanks for pH stabilization and reagents.

The final stage consists of tailings thickening to minimize the fresh water consumption and to recycle process water. A paste thickener will achieve a product of 70 per cent to 75 per cent of solids.

Based on flotation test work conducted to date, it is assumed that 97 per cent of the gold head grade will be recovered in the flotation concentrate that will be thickened, filtered and bagged for shipping to customers.

Infrastructure and tailings

Power to the project is available from Tapia, which is linked to the Asturias main distribution grid, and an existing network of power lines enters the property, which is connected to the Spanish national transmission grid. Water for both domestic and plant usage can be sourced from wells, the Porcia River (2.5 kilometres east of the property) or the reticulated water supply that is currently in place near the plant location.

A tailings management facility (TMF) will be constructed at surface for temporary storage of plant tailings. The paste and backfill of the mine will minimize the amount of tailings storage at surface, and various options for complete tailings disposal are being evaluated. The TMF design will involve water recovery in the processing plant and transportation to a geo-membrane-lined facility, eliminating any risk for potential surface and groundwater contamination.

Surface facilities to support the Salave project will include an administration and engineering building, security, warehouse, fuel and explosive storage, fire protection, and maintenance shops, with a site design to accommodate for 50 full-time staff.

 

  CAPITAL COSTS AND SENSITIVITIES Input (US$M) Preproduction Sustaining LOM Development $29.7 $15.7 $45.3 Equipment and infrastructure 11.2 3.6 14.8 Tailings 1.3 0.0 1.3 Process plant 28.3 0.0 28.3 Owner costs and EPCM 12.5 0.0 12.5 Contingency (15%) 12.4 0.0 12.4 Total capex 95.3 19.3 114.6 

 

 

  SENSITIVITY ANALYSIS Parameter After-tax NPV (US$M) % relative to the base case -20% Base case +20% -20% Base case +20% Gold price $ 95.8 $230.0 $361.0 -58% 0% 57% Processing costs 244.5 230.0 163.4 6% 0% -29% Mining costs 296.1 230.0 192.3 29% 0% -16% Capex 245.3 230.0 214.6 7% 0% -7% 

 

 

  GOLD PRICE SENSITIVITIES Macro parameters Unit -20% Base case +20% Gold price US$/oz 1,000 1,250 1,500 Pretax NPV5% US$M 122.2 296.2 469.2 IRR % 16% 28% 40% After tax NPV5% US$M 95.8 230.0 361.0 IRR % 14% 25% 36% Payback Years 6.3 3.8 2.6 

 

Project financing

The board of Black Dragon believes there is a reasonable basis to assume the necessary financing for the Salave gold project will be obtained for the following reasons:

 

• The company has been able to raise financing for its exploration over the past years in order to progress its project. In the last two years, Black Dragon has raised over $14.5-million through equity placements. These raises indicate a clear base of support from new and existing shareholders and third party investors. The company considers it will be able to raise financing for the next stage of the project, which will advance the project to the completion of a detailed feasibility study.
• The positive outcomes delivered by the PEA give confidence to the board in the ability of the company to finance the development capital through conventional debt and equity financing. A mix of debt and equity is the most likely financing model so 100 per cent of the capital expenditure will not need to be borrowed. The board has a strong financing record in financing start-up mining operations, and, in its view, it is reasonably expected that, when the project parameters in this PEA are met, financing will be able to be arranged. Notwithstanding this, the normal risks for the raising of capital will apply to the company, such as the state of equity capital and debt markets, the results of the feasibility study, and the price of gold.
• The company believes that its financing opportunities will be improved at the completion of the feasibility study as a result of:
  1. Confidence in the possibility to increase the mineral resource estimate that would serve to improve the mine life of the project;
  2. Confirmation of earlier metallurgical test work to support, optimize and potentially improve concentrate grades;
  3. Finalization of further engineering studies to improve the accuracy of the assessed capital and operating costs;
  4. Off-take contracts for concentrates to improve revenue and treatment charge assumptions.
• The financing models being considered will depend on the outcomes of the feasibility study, but as set out herein will likely be conventional debt and equity financing, but may include convertible notes, gold streaming, prepayment of royalties and other options for projects of a similar nature.
• The raising of equity by the company may be dilutive to existing shareholders, but that will depend on the price at which the then financing is completed. Where the market capitalization of the company is low as against the amount of equity that is required to be raised at the time, there is a high likelihood that shareholders will be substantially diluted. This is to be balanced against the reasonable expectation of the company that as the project becomes more advanced, the value of the company is more likely to increase, resulting in the actual dilution to existing shareholders being less. The reality is that, in this case, although the percentage holding of each shareholder will be reduced, the value of that holding will be assessed against a company that is anticipated to have a higher market capitalization at the time of the raising.

 

PEA key recommendations

CRS Ingenieria in Madrid was the principal author of the PEA and has made the following recommendations for further evaluation that may improve the economics of the project:

 

• The mineralization style indicates that both vertical retreat mining (VRM) and room and pillar (RP) are applicable to Salave; for this study, a combination of VRM and SLS was selected, configured with 60-metre-height panels; however, CRS recommends assessing the benefits of RP for individual panels.
• The production rate of Salave used for the PEA was 700,000 tonnes per year; while this production capacity is optimal under current assumptions of mining method and cut-off grade, CRS suggests the evaluation of alternative cut-off strategies that may lead to review the production rate;
• Evaluate mining methods by panel and create integrated layouts;
• Develop detailed geotechnical studies to estimate stope and room dimensions and modifying factors such as dilution and mineralized material loss;
• Develop a volume balance of waste and paste over the life-of-mine sequence;
• Further investigate low-grade materials by additional drilling to verify geological continuity;
• Sill pillars may be recovered if specific technical and economic studies demonstrate that economic extraction could reasonably be justified under realistic conditions; CRS recommends the completion of detailed geotechnical studies to confirm the viability of sill pillar recovery;
• Complete an economic study considering obtain free gold through panning before shipment the product;
• Develop a detailed market study to identify potential clients for the Salave gold concentrates.

 

Qualified person and competent person statements

The information in this announcement that relates to the PEA for the Salave gold project is based on and fairly represents information and supporting documentation prepared by CRS Ingenieria and CSA Global. Paulo Laymen, PEng, MAusIMM, BEng, MEng, of CRS Ingenieria supervised the preparation of the PEA; is independent of the company and a qualified person as defined by NI 43-101; and has reviewed and approved the technical disclosure reported herein. Dmitry Pertel, PGeo, MSc (geology), MAIF, GAA, and Belinda van Lente, PGeo, of CSA Global were responsible for the mineral resource estimate and are independent of the company and qualified persons as defined by NI 43-101 and have reviewed and approved the technical disclosure reported herein.

The NI 43-101 technical report will be fined on SEDAR within 45 days of this release.

About Black Dragon Gold Corp.

Black Dragon is the 100-per-cent owner of one of the largest undeveloped gold projects in Europe -- the Salave project. Salave is situated in the north of Spain in the province of Asturias. The Salave project has an updated combined measured and indicated mineral resource of 8.21 million tonnes grading 4.58 grams per tonne gold, containing 1.21 million ounces of gold, plus inferred resources totalling 3.12 million tonnes grading 3.47 grams per tonne gold, containing 348,000 ounces of gold.

We seek Safe Harbor.

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