Nth Kao Deposit generates $118M in after-tax free cash flow True Gold Mining Inc. (TSX VENTURE:TGM) ("True Gold" or the "Company") is pleased to announce that the North Kao Deposit ("North Kao") will generate an additional US$118M in after-tax free cash flow to the Karma Gold Project ("Karma"). As a result of its high gold grades, low capital costs, and synergies to be realized by sharing future infrastructure, North Kao yields an after-tax IRR of over 200%.
True Gold has advanced North Kao from blind discovery to an independent Preliminary Economic Assessment ("PEA") in a little over a year. This demonstrates the tremendous prospective upside, and potential economic viability of the Karma mining district, and how True Gold could potentially phase new discoveries into a future mine plan. North Kao adds approximately US$70 million to Karma's after-tax net present value.
"The North Kao PEA provides us with a blueprint on how to expand our mine life and production profile at Karma as we look to the future of our district," stated Mark O'Dea, True Gold's Executive Chairman. "We have deployed a modest amount of capital in discovering and delineating these ounces and the return on our investment is exceptional. This PEA, together with the recent long-term cement contract, represents a significant increase in project value since September 2014."
PEA HIGHLIGHTS AND PROJECT PERFORMANCE:
-- Gold price: US$1,250/oz
-- Inferred Resources(i): 9.9 Mt @ 0.98 g/t containing 312,000 oz Au
-- Production Rate: 118,000 oz Au/year on average over 2.5-year mine life
-- Initial CAPEX: US$17.7M (including contingency)
-- Cumulative After-tax Cash Flows: US$118.6M
-- NPV @ 5% (after tax): US$69.6M (discounted from 2022-2026)
-- IRR (after tax): 213%
-- Payback (after tax): approx. 5 months
-- All-in Sustaining Cash Costs(1): $652/oz
1. Includes operating costs, refining and royalties, plus sustaining
capital.
The economic highlights throughout this release represent True Gold's effective interest in the North Kao deposit, after allowing for the Burkina Faso Government's carried interest and all government and third-party royalties. It is presented on an unlevered basis. The PEA is preliminary in nature and is based on Inferred resources which are considered too speculative geologically to have economic considerations applied to them that would enable them to be categorized as mined reserves. There is no certainty the results of the PEA will be realized. (i)Refer to Inferred resources captured in PEA.
True Gold undertook a number of trade-off studies to ultimately arrive at the potential economic results reported in the PEA. True Gold considered alternatives such as ramping up throughput, supported by a stand-alone heap leach pad adjacent to the Kao / North Kao deposits, conveying mineralization from Kao / North Kao to the central processing facility at Goulagou, and an optimized mine plan that would see the higher grade North Kao mined as an extension of the Kao reserve pit. However, until the Inferred resources from North Kao have been upgraded to reserves, for which there is no certainty they will be converted, the only scenario the PEA could contemplate today is to conceptually mine North Kao at the end of the Feasibility mine plan, starting in year 9. The NPV results are thus discounted cash flows from the end of year 11 to September 2014. True Gold plans to carry out infill drilling to upgrade the Inferred resources at North Kao, which is the northern extension of the existing Kao deposit. Upon upgrading of the resource category, True Gold will be able to advance further mine schedule optimizations.
"Our Feasibility Study published in December 2013 did not include the leachable ounces from the recently discovered North Kao Deposit," said Dwayne Melrose, President and CEO, True Gold. "The North Kao PEA is our conceptual Phase II. It demonstrates the potential to build on the 8.5 year mine life outlined in the Feasibility Study to develop West Africa's next high margin gold district. North Kao represents just one of the six new discoveries made by our exploration team in 2013, and moving forward we see the potential for additional discoveries and resource growth."
The PEA supports a heap leach mine scenario from the defined North Kao open pit deposit containing 312,000 ounces of Inferred mineral resources. The centralized heap leach pad remaining from the Feasibility mine plan has the capacity to process oxide and transition mineralization from the North Kao Deposit, which would be delivered overland by haulage truck.
The proposed North Kao implementation schedule is over a period of six months and consists mostly of pre-stripping, the addition of an inter-lift heap leach pad liner, and community relocation. The project requires capital of US$17.7M (including contingency) to support the preparation of the mine and associated facilities with a process capacity of 4.0 Mtpa. The future North Kao mine would produce an average of 118,000 ounces of gold per year over 2.5 years, with direct cash operating costs of approximately US$577 per ounce.
It is anticipated that the North Kao Deposit would extend the employment duration of approximately 300 personnel at Karma, and represents significant additional economic benefits in an area of Burkina Faso that has seen little foreign investment.
SENET Pty Ltd. ("SENET") led the North Kao PEA, which included input from leading consultants P&E Mining Consultants Inc.
North Kao Operating Highlights and Project Performance (US$1,250 per ounce gold)