RE:OceanaGold announces robust economics from Haile.This is great news which will attract more attention. You sure can't accuse management of sitting on their thumbs. Diane Garrett always said she thought that this would be an underground mine. The big mystery to me is why she sold her shares.
6 September 2016
MEDIA RELEASE
(All financial figures in US Dollars unless otherwise stated)
(MELBOURNE) OceanaGold Corporation (TSX/ASX/NZX: OGC) (the “Company”) is pleased to announce the results of its recently completed Preliminary Economic Assessment (“PEA”) on a potential underground operation at the Haile Gold Mine.
Key Highlights of the Haile Underground PEA
• After-tax, undiscounted cash flows of US$861 million based on an open pit with incremental underground cash flows beginning in 2019.
• After-tax IRR improvement of approximately 40%, based on previous NI 43-101 Technical Report economics and incremental impact of the underground at a $1,250 per ounce gold price.
• Payback period of 3 years on underground capital expenditure.
• Average annual production of 80,000 to 100,000 ounces of gold from the underground (2019 to 2025) to complement approximately 150,000 ounces of annual gold production from the open pit (2017 to 2030).
• Estimated LOM All-In Sustaining Costs of US$554 per ounce with open pit and incremental impact from underground.
“I am pleased to report the results of the Haile underground PEA that demonstrates the technical viability of an underground operation with strong economics that has the potential to complement the current plan for the Haile Gold Mine,” said Mick Wilkes, President and CEO. “We are now working on the optimisation study which will incorporate the results of the Haile underground PEA and the extensive drilling data that we have collected this year. The optimisation study will determine the optimal mine design for both the open pit and underground while utilising updated commodity assumptions for reserves. We expect this study to be completed by the middle of next year.”
The purpose of the Haile underground PEA was to determine whether an underground mining operation at Haile is viable, and can be done concurrently with the existing open pit life of mine plan, which is based on existing mineral reserves. The PEA is modelled on mineralisation located beneath the open pit reserves (Figure 1), almost all of which is included within the open pit resources reported by the Company in the Haile NI 43-101 Technical Report dated October 13, 2015 (“2015 Technical Report”).
The open pit resources in Horseshoe, Mustang and Mill Zone Deeps areas have all been re-evaluated as underground targets (Figure 1), representing 95% of the mineralisation in the PEA. Their individual resource contributions are presented in Table 1. The remaining 5%, totalling approximately 45,000 ounces of gold and located beneath the Horseshoe open pit resource, is in addition to the resources presented in the 2015 Technical Report.
The results of the Company’s extensive drill program at Haile in 2016 have not been included in the PEA.
Figure 1 – East - West Section with UG Resources, Reserve Pits, and OP Resource Reporting Shell
Table 1 – Inferred Resource above cut-off grade
The focus of the Haile underground PEA has been on identifying potential mining methods, a high-level capital and operation cost estimate and potential cash flow generation. In addition, the Company has included a high-level review of plant modifications required to increase throughput rates from 6,350 to 8,274 tonnes per day (7,000 to 9,120 short tons per day).
Open stoping with rock backfill was chosen as the most appropriate mining method, on the basis of relatively high recovery and productivity and low cost. Mining has been assumed to progress bottom-up with the design including a sill pillar at the mid-point of the Horseshoe resource and two concurrent mining phases at Horseshoe. The upper limit of the Horseshoe deposit is approximately 150 metres below surface and has a vertical extent of about 280 metres (Figure 2). For Mustang, mining (not including declining for access) commences 300 metres below surface and extends 80 metres vertically, while for Mill Zone Deeps, mining commences 150 metres below surface, at the base of the Mill Zone pit, and extends 55 metres vertically. Importantly, mining of the underground mineralisation as stipulated by the PEA, would not impact mining of the open pit reserves as set out in the 2015 Technical Report.
Figure 2 – Horseshoe Underground Layout
The Company expects that mill feed will be a blend of open pit and underground material and would require a plant expansion from 6,350 to 8,274 tonnes per day (7,000 to 9,120 short tons per day). The incremental mill feed of 1,924 tonnes (2,120 short tons) would be sourced predominately from underground ore.
The Company expects that a modification to Haile’s mining permit would be required before commencement of underground operations.
The Haile underground PEA is based on inferred resources only and as such, the economic analysis which assumes the start of the underground development in the first quarter of 2018 is only preliminary. Nevertheless, the PEA demonstrates robust economics that support further investigation of an underground operation to complement the open pit. The Company has commenced an optimisation study to determine an optimised plan for combined open pit and underground mines at Haile.
Based on the PEA, the total pre-production capital expenditure required for underground development and the procurement of underground equipment would be approximately $53 million with life of mine sustaining capital cost requirements of approximately $45 million (Table 2).
Table 2 – Capital Cost Estimates – Underground
Table 3 – Operating Costs - Underground
With the completion of the PEA, the Company will update its 2015 Technical Report to include the results of the PEA in a new section 24 “Other Relevant Data and Information”. The Company expects the updated technical report to be released within 45 days.
In the meantime, the optimisation study will focus on enhancing the Net Present Value of the entire Haile project through potential modifications to the open pit design, incorporation of an underground mine and upgrade to the Reserves and Resources based on the extensive drilling carried out in 2016 coupled with the use of higher gold price assumptions to reflect current market conditions. Upon completion of the optimisation study, which is expected in the middle of 2017, the Company expects to provide a more comprehensive technical update on the Haile Gold Mine.
- ENDS -
For further information please contact:
Investor Relations
Sam Pazuki
Tel: +1 416 915 3123
Jeffrey Sansom
Tel: +61 3 9656 5300