Timmins News. Mine PlanTimmins Gold Corp.: Updated Mine Plan and Increased Production Schedule for the San Francisco Mine, Sonora, MexicoVANCOUVER, BRITISH COLUMBIA, Jan 14, 2011 (MARKETWIRE via COMTEX News Network) --
TimminsGold Corp. ("Timmins" or the "Company") (TSX VENTURE: TMM) announcesthe completion and filing of the technical report titled NI 43-101 F1updated resources and reserves and mine plan for the San Francisco GoldMine, Sonora, Mexico, dated November 30, 2010, prepared by MiconInternational Limited of Toronto (Micon). The Technical Report wasprepared to update the previous technical report dated March 31, 2008(as amended on January 13, 2009), and to provide a base case scenariofor increased production at the San Francisco Mine as a result of risinggold prices and a 28% increase in the estimated mineral reserves at themine.
Highlights
1. Total gold production of 539,699ounces from 2011 to 2016 2. Average annual production of approximately100,000 ounces of gold 3. Base case life of mine cash costs of USD 489per ounce 4. Strip ratio of 1.73 5. Increase of crushing capacity to18,000 tonnes per day
Commenting on the Technical Reportresults, Timmins Gold President Arturo Bonillas said: "The TechnicalReport confirms the robust economics of the San Francisco Mine. Theincrease in the mineral reserves at the San Francisco Mine has beenobtained from the successful drilling undertaken up to June 30, 2010 andhigher gold prices. The decision to increase the capacity of thecrushing system to 18,000 tonnes per day by adding one more module hasbeen derived from a number of factors including the successful startupof the mine, rising gold prices and the commensurate decrease in cutoffgrade, and management's conviction that additional reserves will beestablished in and around the pit as a result of the extensive drillingprogram planned for 2011. We are confident that the base case scenariois conservative and that we will be able to achieve lower cash costs inactual operations."
RESOURCE AND RESERVE ESTIMATES
Mineral Resource
Theupdated mineral resource estimate was initially published on November16, 2010. Figures have been rounded to reflect that they areestimations. Mineral Resources that are not Mineral Reserves do not,however, have demonstrated economic viability.
Mineral Resource Estimate (Inclusive of Mineral Reserves)
(Cut-off Grade 0.131 g/t Gold, USD 1,100 Gold Price)
--------------------------------------------------------------------------
Gold Contained
Tonnes Grade Gold
Resource Classification (x 1,000) (g/t) (oz)
--------------------------------------------------------------------------
Measured 19,089 0.797 489,000
--------------------------------------------------------------------------
Indicated 23,442 0.658 495,000
--------------------------------------------------------------------------
Total Measured and Indicated 42,531 0.720 984,000
--------------------------------------------------------------------------
Inferred 10,308 0.628 208,000
--------------------------------------------------------------------------
Foropen pit resources, Timmins utilized Lerchs Grossman pit shell geometryat reasonable long term prices, costs and recovery assumptions. Theresource is based on a pit shell constructed at a gold price of USD1,100 per ounce. Pit optimization was based on Measured, Indicated andInferred resources which includes undiluted mineral reserve materialbased on data available as at August 31, 2010.
Mineral Reserve
Provenand Probable Reserves derived from the Measured and Indicated mineralresources including mine recovery and a dilution factor of 12% have beenestimated within the ultimate pit outline commensurate with a goldprice of USD 900 per ounce. Figures have been rounded to reflect thatthey are estimations.
Mineral Reserves after Mining Recovery and Dilution
(Cut-off Grade 0.16 g/t Gold at USD 900/oz)
--------------------------------------------------------------------------
In Pit Reserves In Pit Waste
-------------------------------------------- -----------------------------
Waste Total
Tonnes Grade Contained Tonnes Tonnes Stripping
Classification (x 1,000) (g/t) Ounces (x 1,000) (x 1,000) Ratio
--------------------------------------------------------------------------
Proven 17,194 0.756 418,000
--------------------------------------------------------------------------
Probable 17,738 0.635 362,000
--------------------------------------------------------------------------
Total 34,932 0.695 780,000 60,417 95,349 1.73
--------------------------------------------------------------------------
The strip ratio is estimated to be 1.73.
ECONOMIC EVALUATION
Metal Price Forecast
Revenueprojections are based on a constant gold price of USD 1,000/oz in realterms, closely approximating the 3-year trailing average price butsignificantly lower than current spot prices. Accordingly, thesensitivity of the project to a gold price in a range of up to USD1,400/oz has also been evaluated. For minor silver content, a price ofUSD 17/oz has been used.
The undiscounted base case cash flowevaluates to approximately USD 273.6 million before tax and USD 207.1million after tax. The base case Net Present Value (NPV) at a discountrate of 8%/y (NPV) evaluates to approximately USD 216.8 million beforetax and USD 163.1 million after tax. As pre-2011 capital costs have beentreated as sunk, no internal rate of return has been calculated. Theaverage cash cost of production equates to USD 489 per ounce of gold, orUSD 7.88 per tonne treated.
Base Case
The base caseevaluation has been made for a nominal through put rate of 18,000 tonnesper day, which is expected to be achieved by July, 2011. A summary ofthe base case life-of-mine statistics and annual cash flows aresummarized in the table below.
Project Base Case Annual Cash Flows at USD 1,000 Per Ounce of Gold
----------------------------------------------------------------------------
LOM
USD 000 2011 2012 2013 2014 2015 2016 total
----------------------------------------------------------------------------
Revenue Gross Sales 94,272 103,502 103,042 103,913 86,217 48,744 539,689
----------------------------------------------------------------------------
Bullion
delivery 274 305 278 280 236 124 1,497
----------------------------------------------------------------------------
Bullion
refining 112 123 120 121 101 52 629
----------------------------------------------------------------------------
Net Sales
Revenue 93,885 103,074 102,644 103,513 85,880 48,567 537,564
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Cash Op. Mining
Costs costs 35,528 33,279 29,418 24,260 23,722 13,572 159,779
----------------------------------------------------------------------------
Crushing
costs 8,525 9,455 9,454 9,454 9,439 2,709 49,036
----------------------------------------------------------------------------
Leach
costs 5,666 6,340 6,340 6,340 6,337 1,380 32,405
----------------------------------------------------------------------------
ADR costs 1,442 1,576 1,576 1,576 1,570 428 8,168
----------------------------------------------------------------------------
Metallurgy
& Lab
costs 441 451 451 451 446 193 2,434
----------------------------------------------------------------------------
G&A costs 1,923 1,997 1,997 1,997 1,977 781 10,672
----------------------------------------------------------------------------
Total Cash
Operating
Costs 53,526 53,098 49,236 44,077 43,491 19,065 262,494
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Net Cash Operating
Margin (EBITDA) 40,359 49,975 53,408 59,435 42,389 29,502 275,070
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Capital Initial/
expansion
capital - - - - - - -
----------------------------------------------------------------------------
Sustaining
capital 6,143 690 2,729 393 302 302 10,559
----------------------------------------------------------------------------
Changes in
working
capital 5,915 1,013 -375 -321 -2,247 -13,090 -9,107
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Net cash flow
before tax 28,302 48,273 51,055 59,363 44,335 42,291 273,618
----------------------------------------------------------------------------
Taxation payable 9,082 12,706 13,195 14,370 9,512 7,658 66,523
----------------------------------------------------------------------------
Net cash flow
after tax 19,220 35,567 37,859 44,993 34,823 34,633 207,095
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Discounted Cash Flow
(8%/y) Pre-Tax 27,234 43,010 42,119 45,345 31,357 27,696 216,760
----------------------------------------------------------------------------
Cumulative DCF
(8%/y) Pre-tax 27,234 70,243 112,362 157,707 189,064 216,760
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Discounted Cash Flow
(8%/y) After tax 18,494 31,689 31,233 34,369 24,630 22,681 163,096
----------------------------------------------------------------------------
Cumulative DCF
(8%/y) After tax 18,494 50,183 81,416 115,785 140,415 163,096
----------------------------------------------------------------------------
Sensitivity Study
Sensitivityof the NPV to changes in gold price, operating and capital costs hasbeen analyzed. Revenues are directly proportional to gold price,recovery and grade. With an adverse change of 30% (i.e., a reduction ingold price to USD 700 per ounce), NPV remains strongly positive;economic break-even occurs with a gold price of around USD 510 perounce. At USD 1,300 per ounce, NPV before tax is estimated atapproximately USD 349 million.
Sensitivity of the project NPV has also been determined for a specified range of gold prices.
Sensitivity of NPV to Gold Price
--------------------------------------------------------
Gold Price NPV before tax NPV after tax
US$/oz (US$ 000) (US$ 000)
--------------------------------------------------------
600 40,309 39,764
--------------------------------------------------------
700 84,422 75,151
--------------------------------------------------------
800 128,535 104,487
--------------------------------------------------------
900 172,648 132,981
--------------------------------------------------------
1,000 216,760 163,096
--------------------------------------------------------
1,100 260,873 193,292
--------------------------------------------------------
1,200 304,986 224,666
--------------------------------------------------------
1,300 349,099 256,040
--------------------------------------------------------
1,400 393,211 287,415
--------------------------------------------------------
Theproject is moderately sensitive to operating costs. As the bulk ofproject capital costs are already sunk, sensitivity to capitalexpenditures is negligible.
CONCLUSIONS
The following is a summary of Micon's conclusions:
"Miconhas reviewed Timmins' operational plans for the San Francisco mine andbelieves that the mine plan and operational parameters have been wellthought out. It is Micon's opinion that the San Francisco mine is awell-run operation. Micon supports the further economic studies todetermine the impact of increasing the crusher throughput to 18,000tonnes per day.
Micon has reviewed the proposed explorationprogram for San Francisco. It is Micon's opinion that Timmins' proposedexploration plans are properly conceived and justified for the SanFrancisco Mine and property.
Given the known extent ofmineralization on the property, compared to the amount of miningactivity, the San Francisco Mine and property has the potential to hostfurther deposits or lenses of gold mineralization, similar in characterand grade to those exploited in the past, outside the present resourcebase."