San Fran press release
Timmins Gold increases 2017 guidance to 92,000 oz Au
2017-05-11 07:27 ET - News Release
Mr. Greg McCunn reports
TIMMINS GOLD / ALIO GOLD ANNOUNCES REVITALIZATION PLAN FOR SAN FRANCISCO MINE, INCREASES 2017 GUIDANCE
Timmins Gold Corp. is proposing to change its name to Alio Gold Inc. at its upcoming annual general meeting of shareholders. If approved, the Company expects to begin trading on both the TSX and the NYSE MKT under the ticker ALO on May 16, 2017. The Company is pleased to announce a revitalization plan for its San Francisco Mine (the "Mine") in Sonora, Mexico. All figures are US$ unless otherwise stated.
HIGHLIGHTS
Increase in 2017 guidance of 86,000 to 92,000 ounces of gold produced (from 70,000 to 75,000);
Production of an average of 103,000 ounces of gold per year for a further six years (2018 to 2023);
Proven and Probable Mineral Reserves of 54.8 million tonnes at 0.53 g/t gold (928,700 ounces of contained gold);
Cash costs of $900/oz (AISC for the site of $935/oz) average over the life of mine; and,
Cash flow from operations of $34 million per year for six years (2018 to 2023 at $1,250/oz gold).
Commenting on the revitalization plan, Chief Executive Officer, Greg McCunn, said, "The San Francisco Mine is a cornerstone asset for the Company located in an excellent mining jurisdiction. Our plan to revitalize the Mine by investing some of the cash flow from operations back into improvements to the operations and capital stripping will result in the Mine generating significant cash flow from operations over the next seven years. The cash flow generated will fully fund the revitalization and be instrumental in executing our growth strategy, including building our high-grade, high margin Ana Paula Project".
The updated Mineral Reserves for San Francisco were estimated at $1,200/oz gold and are shown in the table below:
Classification TonnesGold Grade (g/t)Gold Ounces Proven 29,619,000 0.569 541,600 Probable 17,974,000 0.566 326,900 Low Grade Stockpile 7,199,000 0.260 60,200 Total Mineral Reserves54,792,000 0.527 928,700
The Revitalization Plan will be published as a NI 43-101 compliant Technical Report and will be filed on SEDAR at www.sedar.com on or before June 30, 2017. This will replace the Updated Mineral Resource and Reserve Plan dated September 30, 2016, and amended November 25, 2016. It is the Company's intention to begin a routine process of updating its Mineral Resources and Reserves on an annual basis at the end of every calendar year.
SAN FRANCISCO REVITALIZATION PLAN
Background
The San Francisco Mine is situated in the north central portion of the state of Sonora, Mexico, approximately 150 kilometres north of the state capital, Hermosillo. The Company owns 100% of the mining operation, which consists of 13 mining concessions, multiple open pit mining operations, crushing and heap leaching facilities.
The mineralization at the Mine is granitic gneiss and the deposit contains principally free gold and occasionally electrum. The mineralogy, the possibility of associated tourmaline, the style of mineralization and fluid inclusion studies suggest that the San Francisco deposits may be of mesothermal origin.
The Mine declared commercial production during April 2010. The table below summarizes production from 2010 through 2016:
YearGold Produced (ounces) 201054,011 201172,506 201294,444 2013119,655 2014120,023 201593,353 2016100,322
Updated Mine Plan
The Company has updated the life of mine plan for San Francisco as of April 1, 2017. The mine plan is based on Measured and Indicated Resources, including low grade stockpile material processed at the end of the mine plan. The mine life extends to 2024 with residual gold recovered from the leaching operations following the cessation of mining.
The updated Mineral Resources for San Francisco were estimated at $1,350/oz gold and are shown in the table below:
ClassificationTonnesGold Grade (g/t)Gold Ounces* Measured 47.5 0.535 816,000 Indicated 27.3 0.553 485,000 Total M&I 74.8 0.541 1,302,000 Inferred 0.72 0.566 13,000
*Total may not add due to rounding
A detailed mine plan was estimated based on the Measured and Indicated Resources using a gold price of $1,200/oz. The updated Mineral Reserves are shown in the table below:
Classification TonnesGold Grade (g/t)Gold Ounces Proven 29,619,000 0.569 541,600 Probable 17,974,000 0.566 326,900 Low Grade Stockpile 7,199,000 0.260 60,200 Total Mineral Reserves54,792,000 0.527 928,700
The mining and production is shown in the following table:
9 mo 2017 1 2018 2019 2020 2021 2022 2023 2024 Total Ore Mined (Mt) 6.1 8.0 8.0 8.0 8.0 8.0 1.2 - 47.4 Operating Waste (Mt) 14.3 24.6 27.6 34.7 31.9 34.5 2.2 - 169.8 Strip Ratio (W:O) 2.4 3.1 3.4 4.3 4.0 4.3 1.8 - 3.6 Ore Stacked (Mt) 6.1 8.0 8.0 8.0 8.0 8.0 8.0 0.4 54.6 Ore Grade (g/t Au) 0.49 0.55 0.60 0.56 0.57 0.58 0.33 0.26 0.52 Gold Produced (oz) 66,087104,922112,984108,518110,294109,63871,22511,103694,771 2017 is for the 9 months of production remaining in fiscal 2017 (April 1 to Dec 31).
The cash flow from operations for the life of mine was estimated using current operating costs for mining, processing, site administration, transportation and refining as well as sustaining capital. The following table shows the annual cash flow from operations estimations at a spot gold price of $1,250/oz:
9 mo 2017 1 2018 2019 2020 2021 20222023 2024Total Revenue ($M) 83.2132.0142.2136.6138.8138.089.6 14.0874.3 Cash Costs2 ($M) 62.5 88.9 99.3106.9106.0113.841.1 9.0627.5 Cash Costs2 ($/oz) 896 822 852 968 9521,012 6911,200 900 Sust Capital ($M) 7.2 4.0 4.0 4.0 4.0 1.3 - - 24.4 Site AISC ($/oz) 1,004 860 8881,005 9891,024 6911,200 935 Cash Flow from Ops 3 ($M) 13.5 39.1 38.9 25.7 28.8 22.848.5 5.0222.4 Cash costs include silver by-product revenues, metal inventory movements, royalties and realization costs. Cash Flow from Operations is pre-tax.
Sensitivity to Gold Price
The revised mine plan will generate positive cash flow from operations at gold prices as low as $1,000/oz as shown in the table below. All cash flows are shown after royalties and before taxes:
Gold Price ($/oz)Life of Mine Before-Tax Cash Flow from Operations ($M) 1,000 55 1,100 121 1,200 188 1,250 222 1,300 257 1,400 325 1,500 392
Expansion Capital
The updated life of mine plan expands production over the remaining estimated life of mine to 694,771 ounces. The previous life of mine plan envisioned production of approximately 340,000 ounces over the same period. In order to expand production to approximately double the previous life of mine plan, the Company intends to invest expansionary capital over the next three years as shown in the following table:
9 mo 2017 120182019Total* Capital Stripping ($M) 4.320.513.3 38.0 Crushing Modifications ($M) 2.1 2.6 0.2 4.9 Power Upgrade ($M) 1.5 0.5 - 2.0 Total ($M) 7.823.613.5 44.9
*Total may not add due to rounding.
The expansionary capital is predominantly made up of capital stripping to open up the San Francisco main pit and the La Chicharra pit. In addition, modifications will be made to the crushing circuit to provide finer material to the heap leach pads, leading to enhanced gold recovery. Life of mine gold recovery is expected to average 73%. An upgrade to the site power distribution system will eliminate the need for a diesel power generator which has been providing power to a portion of the crushing circuit for a number of years.
Operating Costs
The operating costs for the life of mine were based on current operations and updated pricing from the mining contractor, Peal Mexico SA de CV, for the new life of mine plan:
Area Unit Cost Mining $/t mined$1.80 Processing $/t processed$3.35 Site Administration $M/year$4.16