RE:RE:RE:RE:RE:RE:RE:RE:Connecting Otso Gold ARTICLE 4
We are just warming up to get real with risk-reward. Ultimately one would reach the 8x bet but before getting on to the real stuff, the initial articles are intended to separate wheat from chaff. Throw and rip apart kindergaten tripe at best management punts and get real with moneys already invested and burnt, moneys that needs to be invested and preserved and the intertwined complexities involved with addressing risk-reward equations (or inequations) for the risk taker.
Base case for through-put and availability : 250 tph @ 91.3% avail = 2.0 Mtpa. A bottom-up process on identifying the investment required to both improve the performance of the mill and to maintain the plant and equipment in good working order. A total investment requirement over the life of the mine of €22 million to meet the targeted improvement to 2.0 million t/pa. Mine life estimated is 8 years. The most significant investments in this period are: HG Pond no. 2 (€1 million)
– Maintenance Stop (Liners) December (€1.8 million) – Winterisation (€185,000)
– Paste Expansion II (South) (€270,000). The investment is front loaded with a total of €13.2 million or 60% of the total spend forecasted to be invested in the first two years of the mine life. So do hell with any kind of gold production schedule before one gets the absolute basics in place. As has been covered in earlier articles management punts to fund agency costs at the hands of risk money needs to be very seriously considered and protected.
Environmental Risks and Liabilities : There is increased focus in Finland from environmental authorities regarding limiting pollution to the surrounding area and reclaiming the natural environment at the end of the life of mine. The legal requirements are difficult to interpret. Guidance from local authorities is always an ongoing process. Given the uncertainty relating to the extent of reclamation activities that will be required for certain areas of the Laiva site (especially around the water reservoir and settling pond) a range of costs needs to be forecasted. Total forecast costs are €9.7 million in the low case and €14.1 million in the high case (net of ELY cash reserves at the end of the mine). The mid-point of the cost range is a total of €11.9 million over the life of mine. Closure activities are likely to last a minimum of four years beyond the LOM end date with potential water quality monitoring obligations extending to up to 20 years. Given the difficulties in substantiating the period of time and costs involved in this activity risks have to account for ongoing monitoring beyond LOM date. A high level assumption of the plant’sscrap value is €1.5 million.
Granite Dilution : Large granite bodies (+10m width) have been historically modelled as physical wireframes and assumed to be waste. Drill hole intercepts within these bodies have not been sampled on the supposition that they are barren. However there are a large number of small granite/aplite/ pegmatite intrusives occurring as sub-metre to ~5m bodies. These are logged in the drillcore and in some cases have been sampled. Wider intersections have not been historically sampled but upon data mined, a background value of 0.01g/t to these intersections have been applied, as part of the compositing procedure in order to prevent smearing of high grades into these “barren” zones. The small scale granitic intrusives cannot be physically modelled. They also vary in dip and strike from vertical to horizontal and can be abruptly terminated or form short scale pinch and swell structures. The current drill spacing is not sufficient to accurately predict continuity of these small scale structures and they are therefore included within the resource mineralisation model as “intentional” dilution. It would be virtually impossible to physically model the granites and pegmatites at this scale. So one would simply apply a low grade value to these intersections. Because they are composites there will be some composites which code as granite but which will contain a percentage of mineralised interval within the composite length: therefore these will carry grade, albeit low grade. The grade of the blocks immediately surrounding or intersected by those granite holes would reduce in grade. The grades fairly closely adhere to the general distribution of grade in the
There is more granite within the ore in the South pit than in the North pit, and that the percentage of granite intervals in the South pit inside the LF wireframe is approximately 22%. Granite intersections have to be adequately accounted for in the resource model as intentional dilution. Note that this is grade dilution that needs to be built into the resource model and is not mining dilution. Also note that the low percentage but high grade of the North Pit granite intervals reflects the relatively narrow nature of the intervals in this pit.