VANCOUVER, BRITISH COLUMBIA--(Marketwire - Jan. 14, 2011) - Timmins Gold Corp. ("Timmins" or the "Company") (TSX VENTURE:TMM) announces the completion and filing of the technical report titled NI 43-101 F1 updated resources and reserves and mine plan for the San Francisco Gold Mine, Sonora, Mexico, dated November 30, 2010, prepared by Micon International Limited of Toronto (Micon). The Technical Report was prepared to update the previous technical report dated March 31, 2008 (as amended on January 13, 2009), and to provide a base case scenario for increased production at the San Francisco Mine as a result of rising gold prices and a 28% increase in the estimated mineral reserves at the mine.
Highlights
- Total gold production of 539,699 ounces from 2011 to 2016
- Average annual production of approximately 100,000 ounces of gold
- Base case life of mine cash costs of USD 489 per ounce
- Strip ratio of 1.73
- Increase of crushing capacity to 18,000 tonnes per day
Commenting on the Technical Report results, Timmins Gold President Arturo Bonillas said: "The Technical Report confirms the robust economics of the San Francisco Mine. The increase in the mineral reserves at the San Francisco Mine has been obtained from the successful drilling undertaken up to June 30, 2010 and higher gold prices. The decision to increase the capacity of the crushing system to 18,000 tonnes per day by adding one more module has been derived from a number of factors including the successful startup of the mine, rising gold prices and the commensurate decrease in cutoff grade, and management's conviction that additional reserves will be established in and around the pit as a result of the extensive drilling program planned for 2011. We are confident that the base case scenario is conservative and that we will be able to achieve lower cash costs in actual operations."
RESOURCE AND RESERVE ESTIMATES
Mineral Resource
The updated mineral resource estimate was initially published on November 16, 2010. Figures have been rounded to reflect that they are estimations. Mineral Resources that are not Mineral Reserves do not, however, have demonstrated economic viability.
For open pit resources, Timmins utilized Lerchs Grossman pit shell geometry at reasonable long term prices, costs and recovery assumptions. The resource is based on a pit shell constructed at a gold price of USD 1,100 per ounce. Pit optimization was based on Measured, Indicated and Inferred resources which includes undiluted mineral reserve material based on data available as at August 31, 2010.
Mineral Reserve
Proven and Probable Reserves derived from the Measured and Indicated mineral resources including mine recovery and a dilution factor of 12% have been estimated within the ultimate pit outline commensurate with a gold price of USD 900 per ounce. Figures have been rounded to reflect that they are estimations.
The strip ratio is estimated to be 1.73.
ECONOMIC EVALUATION
Metal Price Forecast
Revenue projections are based on a constant gold price of USD 1,000/oz in real terms, closely approximating the 3-year trailing average price but significantly lower than current spot prices. Accordingly, the sensitivity of the project to a gold price in a range of up to USD 1,400/oz has also been evaluated. For minor silver content, a price of USD 17/oz has been used.
The undiscounted base case cash flow evaluates to approximately USD 273.6 million before tax and USD 207.1 million after tax. The base case Net Present Value (NPV) at a discount rate of 8%/y (NPV) evaluates to approximately USD 216.8 million before tax and USD 163.1 million after tax. As pre-2011 capital costs have been treated as sunk, no internal rate of return has been calculated. The average cash cost of production equates to USD 489 per ounce of gold, or USD 7.88 per tonne treated.
Base Case
The base case evaluation has been made for a nominal through put rate of 18,000 tonnes per day, which is expected to be achieved by July, 2011. A summary of the base case life-of-mine statistics and annual cash flows are summarized in the table below.
Sensitivity Study
Sensitivity of the NPV to changes in gold price, operating and capital costs has been analyzed. Revenues are directly proportional to gold price, recovery and grade. With an adverse change of 30% (i.e., a reduction in gold price to USD 700 per ounce), NPV remains strongly positive; economic break-even occurs with a gold price of around USD 510 per ounce. At USD 1,300 per ounce, NPV before tax is estimated at approximately USD 349 million.
Sensitivity of the project NPV has also been determined for a specified range of gold prices.
The project is moderately sensitive to operating costs. As the bulk of project capital costs are already sunk, sensitivity to capital expenditures is negligible.
CONCLUSIONS
The following is a summary of Micon's conclusions:
"Micon has reviewed Timmins' operational plans for the San Francisco mine and believes that the mine plan and operational parameters have been well thought out. It is Micon's opinion that the San Francisco mine is a well-run operation. Micon supports the further economic studies to determine the impact of increasing the crusher throughput to 18,000 tonnes per day.
Micon has reviewed the proposed exploration program for San Francisco. It is Micon's opinion that Timmins' proposed exploration plans are properly conceived and justified for the San Francisco Mine and property.
Given the known extent of mineralization on the property, compared to the amount of mining activity, the San Francisco Mine and property has the potential to host further deposits or lenses of gold mineralization, similar in character and grade to those exploited in the past, outside the present resource base."