The Magino mine property, is a past producing underground gold mine located 40 kilometres northeast of Wawa, Ontario, in Finan Township, approximately 14 kilometres southeast of the town of Dubreuilville. The property consists of seven patented mining claims, four leased mining claims and 63 unpatented mining claims totaling 1,910 hectares, shown on the map below. Magino is being evaluated by Prodigy as an open-pit mining opportunity with the potential for deeper, higher grade gold production. The recently completed updated resource estimate for the project (see below) will be the basis for a Preliminary Economic Assessment (PEA) establishing the economic parameters of an open pit mining operation. The PEA will provide the framework for a full bankable feasibility study expected in the first quarter of 2012. Bringing the Magino Mine project through the feasibility process and towards production has the potential to add substantial value to Prodigy share holders.
Geology
The Magino property lies within Wawa Subprovince of the Archean Superior Province. The Wawa Subprovince contains several greenstone belts including the Michipicoten, Manitouwadge and Hemlo-Schreiber belts in the east, and the Shebandowan and Vermilion belts to the west. These greenstone belts are composed of tholeiitic basalt and andesite with minor komatiite, cal- alkalic and tholeiitic felsic, intermediate and mafic volcanic rocks, metasedimentary rocks, and minor alkalic and shoshonitic volcanic rocks. The Magino mine itself is within Michipicoten greenstone belt, a structurally and stratigraphically complex assemblage of volcanic, sedimentary and intrusive rocks that were metamorphosed to green schist and amphibolite facies. A variety of plutonic rocks, ranging in composition from gabbro to monzogranite and syenite, are associated with the Michipicoten greenstone belt.
The Magino mine is in the Goudreau-Lochalsh gold district of the Wawa gold camp. The local stratigraphy of the Goudreau-Lochalsh district consists of felsic to intermediate pyroclastic metavolcanic rocks overlain by banded iron formation. North of the mine site, massive and schistose, mafic to intermediate metavolcanic rocks are common. Multiple medium- to coarse- grained quartz dioritic to dioritic sills and/or dikes intrude all metavolcanic rocks. Gold mineralization at the Magino mine is mostly hosted by the Webb Lake stock, a felsic granodiorite intrusion. The east-northeast long axis of the Webb Lake stock is parallel to the regional stratigraphy and structural fabric and has a steep northerly dip. The Webb Lake stock is cut by a myriad of carbonate, quartz, tourmaline, pyrite ± gold veins that have multiple orientations.
Gold was discovered in the Goudreau-Lochalsh district in 1918. The Magino Mine property was the site of numerous exploration and test mining programs from the mid-1930's through the early 1980's. The Magino gold mine, operated by Muscocho Explorations Ltd., was in production from 1988 until the summer of 1992. During that time, the mine produced 697,190 tonnes or ore at a recovered grade of 4.70 gpt gold yielding 105,543 ounces of gold. All production was from underground operations utilizing both shrinkage and long hole stoping.
Gold Resources
Prodigy Gold has just released an updated NI 43-101 compliant mineral resource estimate for the Magino mine project (please see Press Release dated February 28, 2011). The updated mineral resource estimate, reported within a conceptual pit shell, was completed by Snowden Mining Industry Consultants Inc. (Snowden) of Indicated gold resources of 1,924,200 ounces grading 1.16 gpt gold (51.6M tonnes), a more than four-fold increase in Measured and Indicated gold resources over the previous resource estimate that was focused on higher grade underground mineable zones (InnovExplo Technical Report issued 28 May, 2009). Using the same cut off grade (0.35 gpt gold), the Magino deposit is also estimated to contain 587,100 ounces of Inferred gold resources grading 1.04 gpt gold (18.3M tonnes). A complete Technical Report will be filed on SEDAR within 45 days of the distribution of the press release. The resource estimate is set out in the table below and reported at a series of cut off grades.
|
|
Indicated |
|
|
|
Inferred |
|
|
|
|
|
|
|
|
|
|
|
Cut off
(gpt Gold) |
Tonnes |
Grade
(gpt Gold) |
Grams
Gold |
Ounces
Gold |
|
Tonnes |
Grade
(gpt gold) |
Grams
Gold |
Ounces
Gold |
| 2.00 |
6,991,000 |
2.86 |
19,969,200 |
642,000 |
|
1,807,000 |
2.79 |
5,043,900 |
162,200 |
| 1.50 |
11,635,000 |
2.41 |
28,036,500 |
901,400 |
|
2,711,000 |
2.43 |
6,599,300 |
212,200 |
| 1.00 |
20,192,000 |
1.90 |
38,336,900 |
1,232,600 |
|
5,854,000 |
1.77 |
10,343,100 |
332,500 |
| 0.75 |
31,532,000 |
1.53 |
48,105,600 |
1,546,600 |
|
10,113,000 |
1.39 |
14,017,800 |
450,700 |
| 0.50 |
46,939,000 |
1.23 |
57,785,400 |
1,857,800 |
|
15,579,000 |
1.12 |
17,422,900 |
560,200 |
| 0.35 |
51,633,000 |
1.16 |
59,850,000 |
1,924,200 |
|
17,494,000 |
1.04 |
18,260,400 |
587,100 |
| 0.01 |
53,269,000 |
1.13 |
60,346,500 |
1,940,200 |
|
18,198,000 |
1.02 |
18,473,100 |
593,900 |
Prodigy believes that the revised Magino resource estimate is significant for several reasons:
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Prodigy anticipates that the new resource estimate will have a significant positive impact on the planned, upcoming PEA, due in April 2011.
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The Magino project has a good average gold grade by open pit mining standards and locally exhibits zones of higher grade gold mineralization that extend to the surface. This geometry should enhance the pit optimization studies that are part of the ongoing PEA process. The PEA will examine mining and processing costs in detail and utilize a lower gold price for the base case economic analysis.
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Deeper gold mineralization, drilled to a depth of only 600 metres and completely open, shows that the Magino gold system has the potential to grow further with additional exploration, not only along strike but at depth as well. The potential for deeper, high grade gold mineralization, has not been tested to date.
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In-fill drilling, guided in part by the results of this resource estimate, can add additional gold resources to Magino.
Data from the on-going in-fill drilling program will be incorporated into a further update to the project gold resource estimate as Prodigy moves the Magino project towards full feasibility.
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The overall size of the Magino gold system as documented by this updated resource estimate confirms the growing gold budget of the district and underscores the exploration upside of the area.
Mineral Resource Estimate Methodology: The mineral resource estimate was prepared by Andrew F. Ross PGeo, FAusIMM, CPGeo, who is a Qualified Person under the definitions established by National Instrument 43-101. He is independent of Prodigy Gold and an Associate of Snowden Mining Industry Consultants Inc., Vancouver.
Prodigy has focused its geological program on the assessment of wide zones of quartz-pyrite-sericite altered granodiorite that host the former underground mine workings at Magino. During 2010, Prodigy relogged existing core, collected samples of previously intact core to provide fuller coverage of sampling throughout the alteration zones, and updated the drill hole and sample database accordingly to ensure consistency. Drilling commenced by Prodigy in 2011 was not been included in the current mineral resource estimate.
The database used by Snowden contains 386 surface diamond drill holes (total of 76,000 metres; average length 200 metres) and 980 underground diamond drill holes (total of 60,200 metres; average length 60 metres). Ninety-four surface drill holes were completed in the period from 1997 to 2009 and comprise HQ and NQ diameter core. All underground drill holes were completed in the period 1984 to 1991 and are dominated by AQ diameter core with some BQ diameter core, clearly clustered around the underground workings and, in some cases subsequently mined out. Since the sample volumes of the underground drill cores are markedly less than the surface drill cores, Snowden elected to use only the assays from the surface drill holes in the grade estimates. Geological information from the underground drill cores however was used to develop the geological interpretation.
A GEMS block model with cell dimensions of 5 metres (X), 5 metres, (Y) 5 metres (Z), was coded to reflect the surface topography, base of overburden, Webb Lake granodiorite contacts, and the late stage diabase dyke. A three dimensional wireframe model of the underground development and stopes was stored as percent volumes in the block model to ensure that the reported mineral resource estimates are depleted for prior mining.
A threshold grade of 0.1 gpt gold was found to generally identify the broad zones of mineralization in the drill cores. This grade threshold was then used to generate a three dimensional categorical indicator model of the mineralized zones, after describing the mineralization continuity by indicator variography. The extents of the mineralized zones were constrained by ensuring any unsampled drill hole intervals were assigned a “zero” gold grade. Mineralized blocks were further limited by ensuring that the amount of extrapolation was set to a maximum of 60 metres from samples and that any blocks not achieving an 80% probability (of being at least 0.1 gpt gold) were subsequently re-categorized as “barren”.
Gold grades were estimated from one metre length-weighted un-cut composites into the interpreted mineralized blocks by multiple indicator kriging, using parameters established from multiple indicator variography. The impact of clustered high gold grades was controlled by using a combination of “sample per hole” restrictions, octant search and maximum distance extrapolation restrictions for grades above 7 gpt and 77 gpt gold. Any target blocks that remained uninformed after the first pass search were identified as “Inferred”. Grades for these blocks were subsequently estimated using a broader search ellipse. Minimum and maximum numbers of composites used for estimation were set to 12 and 40 per block respectively. Discretisation was set to 3 x 3 x 3. Density factors of 2.87 and 2.77 gm/cc were assigned to granodiorite and mafic – felsic country rock.
In order to constrain the resource estimate, a conceptual pit shell was developed using Whittle software in order to identify those parts of the block model that have reasonable prospects for eventual economic extraction. Parameters used were: 50 degree (overall pit slope); $1.25 /tonne mining cost; $1400 per oz gold price; 95% process recovery; $7 /tonne process cost. A detailed pit model using more selective criteria will be used for the PEA.
After considering the distribution of composites in the deeper parts of the deposit through the examination of kriging variance, Snowden has applied an Inferred classification to all blocks in the mineral resource that lie beyond depths of 300 metres but within the limit of the conceptual pit shell.
Above a depth of 300 metres, resource blocks that lie within the median indicator range of continuity and have been estimated by at least 12 samples have been classified as Indicated resource blocks. Snowden has not classified any Measured blocks after considering the uncertainty in geological interpretation, the high nugget environment, short ranges of gold grade continuity, use of assigned densities and the current drill spacing. Snowden notes that Prodigy has an ongoing drill program to in-fill the existing drill pattern.
Mineral resources are not mineral reserves and do not have demonstrated economic viability. There is no certainty that all or any part of the mineral resource will be converted into mineral reserves. In the above mineral resource table there may be inconsistencies due to rounding. Estimates are rounded since the figures are not precise calculations.
Preliminary Economic Assessment
On April 4, 2011, Prodigy Gold Incorporated announced results from a Preliminary Economic Assessment (PEA) of its Magino mine gold project in northern Ontario. The PEA, completed by CWA Engineers Inc., in a consortium including Snowden Mining Industry Consultants Inc. (Snowden) and Knight Piésold Canada, has established strong economics for the proposed open pit gold mining project at Magino. The complete NI 43-101 compliant Technical Report will be filed on SEDAR shortly. (All figures are in Canadian dollars except where noted)
Highlights of the PEA (base case using US$1,000/oz gold):
- Pre-tax Net Present Value (NPV) of $351 million at a 5% discount rate generating an Internal Rate of Return (IRR) of 49%; payback period is 1.8 years
- At a US$1,300/oz gold price, the project generates a pre-tax NPV of $691 million and an IRR of 80%
- Pre-tax cash flow from operations over the proposed Life of Mine (LOM) is estimated to be $796 million, net cash is projected to be $520 million LOM
- Start-up capital costs are estimated to be $242 million with an additional $34 million in sustaining capital
- Average annual gold production is estimated to be 166,500 ounces per year over a nine year operating life producing 1.50 million ounces of gold, recovery is estimated to be 95%
- Average LOM cash operating costs (exclusive of sustaining capital) are estimated to be US$496 (Cdn$521) per ounce
- During the first two years of proposed mine operations, the average grade processed will be 1.60 gpt gold
- Total minable resources of 41.8 million tonnes grading 1.18 gpt gold with a strip ratio of 2.8:1
- Ongoing in-fill drilling to date is targeted at increasing the gold resource by converting internal waste to resources; the PEA to be updated upon completion of the drilling
Project Assumptions and Parameters:
| Assumptions: |
|
| Base gold price (US$/oz) |
1,000 |
| Exchange Rate (Cdn$/US$) |
1.05 |
| Milling rate (tpd) |
15,000 |
|
--No royalty
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|
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--No sunk costs
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|
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--Total capital costs include initial and sustaining capital
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|
| --100% equity financing |
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| --Costs are estimated in 2011 first quarter dollars |
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| Mine and Mill Parameters: |
|
| Total resource milled (million tonnes) |
41.82 |
| Waste moved (million tonnes) |
115.55 |
| LOM strip ratio |
2.76:1 |
| Average gold grade (gpt) |
1.18 |
| Total contained gold (million oz) |
1.57 |
| Estimated gold recovery (%) |
95 |
| Total recovered gold (million oz) |
1.50 |
| Project life (years) |
9 |
| Average annual production (oz) |
166,500 |
|
|
| Costs and Capital Requirements: |
|
| Mining costs ($/tonne) |
2.25 |
| Transportation costs ($/tonne) |
0.50 |
| Milling costs ($/tonne) |
9.17 |
| G and A ($/tonne) |
1.13 |
| Pre-production capital ($ million) |
242 |
| Sustaining capital ($ million) |
34 |
| Average cash cost (US$/oz) |
496 (Cdn$521) |
|
|
| Financial Analysis: |
|
| Average annual pre-tax cash flow ($ million) |
57.8 |
| NPV 5% discount rate pre-tax ($ million) |
351 |
| NPV 5% discount rate post-tax ($ million) |
259 |
| IRR pre-tax (%) |
49 |
| IRR post-tax (%) |
41 |
| Pre-tax payback period (years) |
1.8 |
Magino Mine Resources: The Magino mine resources used in the PEA were previously reported in a Prodigy Gold press release dated February 28, 2011. The resource estimate, completed by Snowden, contained Indicated gold resources of 1,924,200 ounces grading 1.16 gpt gold (51.6 million tonnes) and 587,100 ounces of Inferred gold resources grading 1.04 gpt gold (17.5 million tonnes) using a 0.35 gpt cut off grade.
Potentially open-pit minable resources were calculated by Snowden using Snowden’s resource model. This resource model as well as the cost parameters mentioned above, and an average pit wall slope assumption of 45o were used to develop an optimum final pit shell using Whittle 4D. After determining the optimal pit shell Snowden then used lower revenue factor shells to select appropriate push backs to assist in scheduling the operation. Snowden then developed a life of project schedule for the resource which utilizes an extensive low grade stockpile to increase the average mill feed grade, maximizing value in the early years of the project's life. The schedule developed supports an average mill feed rate of 15,000 tonnes per day, for about nine years. To support this mill feed, total material movement from the open pit peaks at about 62,500 tonnes per day in year three with a typical material movement requirement of about 55,000 tonnes per day of combined waste and process feed.
Using the final pit shell from Whittle, Snowden designed a conceptual final pit design as well as associated waste dumps, low grade stockpile, and ramps. Mining is assumed to be undertaken by a contractor. The financial analysis includes a mobilization allowance of $5 million for the contractor.
Mining and Production: The pit design, optimization and production schedule prepared by Snowden resulted in a potential production schedule containing 41.82 million tonnes grading 1.18 gpt gold. Total gold recovered over a nine year project life is 1.50 million ounces, averaging 166,500 ounces per year. The LOM average strip ratio is estimated to be less than 2.8 to 1. A summary of the annual mine production is outlined below.
Processing Facility: The PEA contemplates using a conventional carbon-in-leach (CIL) processing facility operating at 15,000 tpd with 95% availability. The crushing consists of a three stage crushing plant and a fine ore stockpile. The fine ore will be reclaimed to feed two ball mills in parallel. Each ball mill will be in a closed circuit with cyclones.
The cyclone overflow from each ball mill will be fed to a train of leach tanks with sodium cyanide and carbon (carbon-in-leach process) for 48 hours to extract 95% of the contained gold. The loaded carbon will be washed and stripped in a hot caustic solution at an elevated temperature and pressure. The pregnant solution exiting from the stripping circuit will be cooled and pumped to a set of electrowinning cells where the gold will be plated out on steel wool. The gold laden steel wool will be smelted on site to produce dore.
The stripped carbon will be reactivated and returned to the CIL circuit. The residual cyanide in the tailings from the leach will be destroyed using sulphur dioxide, copper sulphate and lime before the tailings are pumped to the storage area. The supernatant from the tailings will be reclaimed and re-used in the process plant.
Operating Costs: Operating cash costs, excluding sustaining capital, over LOM are projected to average US$496/oz (Cdn$521). Costs are summarized below:
|
|
$/tonne milled |
$/tonne mined |
$/oz gold |
|
| Average mining costs |
8.31 |
2.25 |
232 (US$221) |
| Stockpile reclaim |
0.50 |
- |
2 (US$2) |
| Processing cost |
9.17 |
- |
256 (US$244) |
| G and A |
1.13 |
- |
31 (US$29) |
|
| Total: |
19.11 |
- |
521 (US$496) |
|
Capital Cost Estimates: The PEA is based upon capital pricing as of the first quarter of 2011. The level of accuracy of the capital cost estimate is ± 40% for this PEA. Pre-production capital costs are estimated at $242 million. Because mining is assumed to be undertaken by a contractor, the mining fleet capital is limited to $5 million for the contractor mobilization. Sustaining capital, principally staged additions to the capacity of the tailings pond, is estimated to be $34 million. The cost breakdown for pre-production capital expenditures, assuming contract mining, is shown below.
|
| Description |
Pre-production Capital ($ million) |
Sustaining Capital ($ million) |
|
| Mining |
5 |
|
| Process Plant |
142 |
|
| Tailings |
17 |
34 |
| Infrastructure |
4 |
|
|
| Total direct costs |
168 |
34 |
|
| Other Indirect |
2 |
|
| EPCM |
16 |
|
| Contingency (30%) |
56 |
|
|
| Total indirect costs |
74 |
|
|
| Total |
242 |
34 |
|
Financial Analysis: The financial analysis for the Base Case evaluation utilizing a gold price of US$ 1,000 per ounce indicates a pre-tax NPV at a 5% discount rate of $351 million with an IRR of 49% and a payback period of 1.8 years. On an after tax basis, the NPV at a 5% discount rate is $259 million with an IRR of 41% at a gold price of US$1000 per ounce. The project generates an undiscounted pre-tax cash flow from operations of $796 million over the LOM. The table below outlines NPV and IRR at a variety of gold prices and discount rates (DR) on a pre-tax basis.
|
| Gold Price (USD$) |
1,000 |
900 |
1,200 |
1,300 |
|
| Cash flow from operations ($ million) |
796 |
638 |
1,112 |
1,269 |
| NPV 0% DR ($ million) |
520 |
362 |
835 |
993 |
| NPV 5% DR ($ million) |
351 |
237 |
578 |
691 |
| NPV 7.5% DR ($million) |
289 |
192 |
484 |
581 |
| IRR Base Case (%) |
49 |
38 |
70 |
80 |
|
Note on Mineral Resources: Mineral resources that are not mineral reserves do not have demonstrated economic viability. This assessment is preliminary in nature as it includes inferred mineral resources that are considered too speculative geologically to have the economic considerations applied to them that would enable to them to be categorized as mineral reserves. At this time there is no certainty that the preliminary assessment and economics will be realized.
Qualified Persons for the PEA: The PEA was prepared by leading independent industry consultants, all Qualified Persons (QP) under National Instrument 43-101. The QPs have reviewed and approved the content of this news release. The following consultants and QPs participated in the PEA:
- CWA Engineers Inc, under the direction of Frank Yu, P. Eng. Mr. Frank Yu is the Technical Director, Mining of CWA Engineers Inc. He supervised and reviewed the process design and infrastructure update requirement, capital and mill operating cost estimate and financial analysis of this project.
- Snowden Mining Industry Consultants Inc., under the direction of Anthony Finch, MAusIMM. Mr. Anthony Finch is the Divisional Manager Mining Engineering and Principal Consultant at Snowden Mining Industry Consultants Inc. He supervised and reviewed all the mining design aspects of this project.
- Knight Piésold Canada, under the direction of Daniel Y. Yang, P. Eng. Mr. Daniel Yang is a Senior Engineer of Knight Piésold Canada. He supervised and reviewed the tailings storage facility for this project.
Prodigy Evaluation and Exploration Plans
Prodigy has carefully reviewed all the available geologic data for the Magino mine property including the gold resource estimate, PEA and block model, past historic resource estimates, the drill hole data base, detailed underground mine maps, metallurgical studies, and environmental reports. For 2011, Prodigy has the following work program for Magino:
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Continue refining the geologic model of the deposit to enhance the resource interpretation, guide exploration and in-fill drilling, and develop new targets for additional gold mineralization.
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We have initiated a 20,000+ metre diamond drilling program to upgrade and expand the existing gold resource. This data will be used to update the resource model and the PEA as part of the feasibility process.
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Begin planning of an exploration program to evaluate extensions of the deposit below the proposed open pit, along strike and potentially gold mineralized parallel structures.
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Continue to consolidate exploration properties in the district to develop a comprehensive regional exploration program.