| This new development scenario outlines a great project which is capable of producing over 300,000 ounces of gold per year at first decile AISC. With the onboarding of key project personnel and completion of a successful drill campaign, 2020 presented us with the opportunity to dig deep into the technical and social elements of the project and evaluate all aspects. Following an initial review of the viability for a surface mining operation, discussions were held with key national stakeholders and authorities to confirm the endorsement for a project of this scale in Guatemala. Bluestone is committed to adopting world class responsible mining practices for the future of sustainable mining. | | |
Preliminary Economic Assessment Highlights
Unless otherwise indicated, all dollar amounts are stated in U.S dollars (“$”). The Base case was completed at a gold price of $1,550/oz and a silver price of $20/oz. - Peak production of 334,000 ounces and average annual production of 231,000 ounces gold over the life of mine (“LOM”).
- Average life of mine all-in sustaining costs (“AISC”) of $642/oz (net credits).
- Average annual free cash flow of $186 million per year and LOM total free cash flow of $2 billion.
- Net present value (“NPV5%”) of $907 million after-tax.
- After-tax internal rate of return (“IRR”) of 28.5%.
- Initial capital of $548 million with an after-tax payback period of 2.6 years.
- Life of mine production of approximately 2.4 million ounces of gold and 10.3 million ounces of silver over an initial 11-year mine life.
- Measured & Indicated Resources of 3.0 million ounces of gold and 13.2 million ounces of silver (61.5 million tonnes at 1.5 g/t Au and 6.7 g/t Ag).
- At $1,800/oz gold, the NPV5% increases to $1.3 billion and the IRR to 36% with a payback of 2.2 years.
David Cass, Vice President of Exploration commented: | | | The pivot to surface mining is a culmination of our increased understanding of the geology and grade distribution that will realize the full potential of the Cerro Blanco low-sulphidation mineralization. The inverted wedge shape of the deposit with its upper half forming the Cerro Blanco hill lends itself to surface mining with a low strip ratio. The extensive drilling undertaken to date of the high-grade vein swarms and their surrounding low-grade mineralized envelopes show impressive intercepts, including 203.8 meters grading 2.3 g/t Au and 4.1 g/t Ag (CB20-420) and 87.2 meters grading 5.3 g/t Au and 26 g/t Ag (UGCB18-89). The low-grade mineralization present in the Salinas cap rocks, where we currently have five drill rigs operational, make up a fifth of the M&I ounces and show excellent potential to further grow the resource by additional drilling. | | |
Cerro Blanco Preliminary Economic Assessment Study
The Cerro Blanco Gold Project is located in south-eastern Guatemala and currently hosts 3.0 million ounces (“Moz”) of gold in the Measured and Indicated Mineral Resource category and 0.25 million ounces of gold in the Inferred Mineral Resource category, as set out in Table 3.
The PEA evaluates recovery of gold and silver from a 15,000 tonne-per-day (“tpd”) open pit operation, with a conventional process plant that will include crushing, grinding, and agitated leaching followed by a carbon-in-pulp recovery process to produce dor bars.
Table 1 – Summary of the Economics of the Cerro Blanco PEA | | *all in sustaining cash costs (net credits) = (operating costs + offsite costs + royalties + sustaining and closure capital – value of payable silver ounces) / payable gold ounces
Table 2 – Economic Sensitivities, Leverage to Gold Price | |
Permitting and Environmental Baseline Data
Bluestone continues to advance the Cerro Blanco Project application through the national processes, which is well understood and defined. The Company is supported by a reputable in-country expert with extensive experience in permitting natural resource and industrial projects in Guatemala.
The Company’s goal is to prepare a coordinated Environmental and Social Impact Assessment document that aligns with the International Finance Corporation Performance Standards, Equator Principles, as well as national requirements. Engagement with local communities and other stakeholders is essential to Bluestone and will remain on-going throughout the permitting process.
Bluestone plans to advance the development of the Environmental Impact Assessment (“EIA”) document in 2021 for submittal prior to the end of this year.
Jack Lundin, CEO, commented, “The timeline and path to production is being worked through in detail. We plan to follow the well-defined process in Guatemala to advance an EIA application, in parallel with completing a bankable Feasibility Study by the end of 2021 and early in 2022, respectively. This Feasibility Study will serve as the blueprint for our development which we are targeting to initiate in late 2022, when we anticipate receiving our EIA permit.” | |
PRELIMINARY ECONOMIC ASSESSMENT DETAILS | |
Geology and Mineral Resource
Cerro Blanco is a classic hot springs-related low-sulphidation epithermal gold-silver deposit comprising both high-grade vein and low-grade disseminated mineralization. Most of the high-grade mineralization is hosted in the Mita unit as two upward-flaring vein swarms (North and South Zones) that converge downwards and merge into basal feeder veins where drilling has demonstrated significant widths of high-grade mineralization, e.g. 15.5 meters 21.4 g/t Au and 52 g/t Ag. Bonanza gold grades are associated with ginguru banding and carbonate replacement textures. Sulphide contents are low, typically <3 volume %.
The Mita rocks are overlain by the Salinas Unit, a sub-horizontal sequence of volcanogenic sediments and sinter horizons approximately 100 meters thick that form the low-lying hill at the project. Low-grade disseminated and veinlet mineralization within and as halos around the high-grade vein swarms is well documented in drilling since discovery of the deposit, with grades typically ranging from 0.3 to 1.5 g/t Au. The overlying Salinas cap rocks are also host to low-grade mineralization associated with silicified conglomerates and rhyolite intrusion breccias.
In profile, the inverted wedge-shape of the high-grade veins (upward flaring arrays) and their low-grade halos overlain by the mineralized Salinas cap rocks to surface render the deposit amenable to exploitation by surface methods with a low strip ratio.
The mineral resource has a footprint of 800 x 400 meters between elevations of 525 meters and 200 meters above sea level. The mineral resource estimate is the result of 141,969 meters of drilling by Bluestone and previous operators (1,256 drill holes and channel samples by Bluestone) with the majority of meters drilled after the completion of the current EIA. The 3.4 kilometres of underground infrastructure that was invested as a result of this permit allowed underground mapping, sampling, and over 30,000 meters of underground drilling that was critical to Bluestone’s current understanding and validation of the Cerro Blanco geological model. The mineral resource estimate is based on a scenario that considers open pit mining methods and therefore required improved geological models of the lithologic units. These broad mineralized lithologies are host to the high-grade veins that have been the focus of the potential underground mining scenario. The resulting domain models and estimation strategy was designed to accurately represent the grade distribution.
Table 3 – Cerro Blanco Mineral Resource Estimate at a 0.4 g/t Au Cut-Off | | The mineral resource statement is subject to the following: - Effective date: December 31, 2020. All mineral resources have been estimated in accordance with Canadian Institute of Mining and Metallurgy and Petroleum (“CIM”) definitions, as required under NI 43-101.
- Cut-off grades are based on a price of US$1,600/oz gold, US$20/oz silver and a number of operating cost and recovery assumptions, including a reasonable contingency factor.
- The PEA is preliminary in nature, it includes inferred mineral resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves, and there is no certainty that the PEA will be realized. Mineral resources that are not mineral reserves have not demonstrated economic viability. The mineral resources may be affected by subsequent assessment of mining, environmental, processing, permitting, taxation, socio-economic and other factors.
- Rounding as required by reporting guidelines and may result in summation differences.
Sensitivity to cut-off grade, as shown in Table 4 below, the mineral resource estimates for Cerro Blanco (Base Case in bold).
Table 4 – Cerro Blanco Mineral Resource Estimate Sensitivity Analysis | |
Mineral Resource Estimation Methodology
The mineral resource estimates for Cerro Blanco were prepared to industry standards and best practices and verified by Garth Kirkham, P.Geo., an Independent Qualified Person for the purposes of NI 43-101. The mineral resources were estimated using commercial mine modelling and geostatistical software.
The deposit was segregated into multiple estimation domains based on geologic models for each of the mineralized veins and the Salinas and Mita host lithologies including sinter units. Gold and silver block grades were estimated from capped composited samples in a single pass.
The mineral resources were estimated using inverse distance to the third power interpolation for the continuous vein domains, and the Salinas and Mita host units were estimated using ordinary kriging. Search ellipse anisotropy and orientation were guided by the orientation of the vein solids models and omni-directional ellipsoids were employed in the host and sinter zones. Specific gravities were assigned to individual rock types and assigned on a block-by-block basis.
Cautionary Statement
The PEA is preliminary in nature, it may include mineral resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves, and there is no certainty that the PEA will be realized. Mineral resources that are not mineral reserves have not demonstrated economic viability. The mineral resources may be affected by subsequent assessment of mining, environmental, processing, permitting, taxation, socio-economic, and other factors.
Mining
An open-pit mining scenario is the basis for this PEA. The owner-operated mining fleet will utilize 65 tonne trucks matched with 7.0 cubic meter hydraulic shovels supported by 8.2 cubic meter front-end wheel loaders.
The mine designs and scheduling were engineered to feed 5.04 Mt per year (15,000 tpd) of mill feed to the process plant at a strip ratio of 2.36 and LOM mining cost of $2.95/t. A total of 52.2 Mt of mill feed averaging 1.60 g/t gold and 7.26 g/t silver (1.68 g/t Au Eq.), is to be processed over the life of mine from the main pit area. Mill feed will be trucked to a primary crusher located to the east of the main pit. Waste totalling 123.5 Mt will be placed in a waste storage facility. Open-pit mining dilution has been estimated with a dilution skin of 0.5 meters resulting in 7.2% dilution at a grade of 0.30 g/t gold and 2.29 g/t silver.
Standard pit slopes were applied to the mine design. The pit slopes are designed with inter-ramp angles of 52 degrees with an overall slope angle of 49 degrees. Mining will take place on 5-meter benches.
Table 5 – Cerro Blanco Mill Feed Material | | The mill feed material is subject to the following: - The Qualified Person for the Mill Feed estimate is Antoine Champagne, P. Eng. of G Mining Services Inc.
- The cut-off grade for mill feed material was estimated using a $1,500/oz gold price and gold cut-off grade (CoG) of 0.48 g/t AuEq. Other costs and factors used for gold cut-off grade determination were process, G&A, and other costs of $20.21/tonne, a royalty of $30.64 /oz Au and a gold metallurgical recovery of 91%, and a silver metallurgical recovery of 85%.
- Bulk density of mineralized material is variable but averages 2.68 t/m3.
- The average strip ratio is 2.36:1.
- Tonnages are rounded to the nearest 1,000 tonnes, metal grades are rounded to two decimal place. Tonnage and grade measurements are in metric units; contained gold and silver are reported as thousands of troy ounces.
- Rounding as required by reporting guidelines and may result in summation differences.
Processing
The PEA is based on treating 5.04 million dry tonnes mineralized material per year at an average feed grade of 1.60 g/t gold and 7.26 g/t silver through a conventional cyanide leach process plant to produce dor. The flowsheet is very similar to the previous underground mine option and includes primary crushing, single train semi-autogenous (SAG) mill and ball mill to produce a target grind size of 80% passing 53 microns, atmospheric pre-oxidation, 48-hour cyanide leach, carbon-in-pulp carousel adsorption circuit, Zadra elution circuit, gold room and filtered tailings. Based on PEA metallurgical test work, the expected recoveries are 91% for gold and 85% for silver.
Filtered tailings will be configured in a dry stack facility and eliminate the need for the construction and operation of a traditional tailings impoundment. The adoption of this technology puts the Cerro Blanco Project at the forefront of responsible mining practices being adopted for the future of sustainable mining globally.
Capital & Operating Costs
Initial capital to fund construction and commissioning is estimated at $548 million. The Cerro Blanco Gold Project benefits from a significant amount of infrastructure already in place including a water treatment plant, maintenance and warehouse facilities, offices, and communications systems. The project benefits from being located eight kilometres from the Pan American Highway.
Table 6 – Cerro Blanco Capital Cost Estimate | |
Table 7 – Cerro Blanco Operating Cost Estimate | |
Table 8 – All-in Cash Costs Including Sustaining Capex | | All-in sustaining costs are presented as defined by the World Gold Council less corporate G&A. Calculated as: (refining costs + third party royalties + operating costs + sustaining capital costs + closure capital costs – payable silver ounces value) / payable gold ounces.
Infrastructure
The project is located approximately 160 kilometres southeast of Guatemala City. The site is accessible via the Pan-American Highway (CA1) through the town of Asuncin Mita. Existing infrastructure is in place to provide year-round access, an upgraded access road, bridge, and a new power transmission line will be installed as part of the construction of the project. Guatemala has 400 kilometres of coastline, with the closest deep-water port (Puerto Quetzal) on the Pacific Ocean, which is connected by good highway access to the project.
Corporate Social Responsibility and Economic Benefits
Bluestone is a values-based company where environmental and community stewardship are integral to our core values. We live in the communities we operate in and follow best practices to maximize benefits for our stakeholders. The project and local team have been part of the local community for over a decade and Bluestone is active in engaging with the stakeholders around the project.
The development of the project is expected to provide substantial economic benefits to Guatemala, both locally and at a national level. The project is expected to generate direct employment of over 500 people once in operation. It is estimated that during production the mine will contribute about $160 million annually and approximately $1.8 billion over the life of the mine to the Guatemalan economy through direct employee wages, consumables, taxes, and royalties. In addition, the project is expected to generate several thousand additional indirect jobs with local suppliers and service providers.
A key priority will be to continue to train and develop skills of the local workforce as the project advances which is in line with Bluestone’s philosophy of working with our stakeholders and communities.
In 2020, Bluestone engaged a third-party consultant to complete an updated environmental social impact assessment that was used as the basis to complete environmental and social due diligence to International Finance Corporation Performance Standards.
In addition, Bluestone completed an initial Sustainable Development Summary, chronicling environmental, social, and governance (ESG) performance. Our goal is to build stakeholder trust by providing a transparent account of our contributions, impacts, and relationships over time. We are working toward alignment with Global Reporting Initiative, the Equator Principles, and the International Finance Corporation Environmental and Social Performance Standards.
For further information on Bluestone’s Sustainable Development Summary, please click HERE.
Technical Information
Bluestone engaged a consortium of independent consultants, led by G Mining Services Inc., an international engineering firm with extensive experience in both the construction and operation of mining projects, to complete the Preliminary Economic Assessment.
The Technical Report summarizing the results of the Preliminary Economic Assessment is being prepared in accordance with NI 43-101 and will be filed under the Company’s profile on SEDAR within 45 days of this press release. The Qualified Persons have reviewed and verified that the scientific and technical information in respect to the PEA in this press release is accurate and approve the written disclosure of such information.
The Qualified Persons who will prepare the Technical Report are: | | Other than as set forth above, all scientific and technical information contained in this press release has been reviewed, verified, and approved by David Cass, P.Geo., the Company’s Vice President Exploration, a Qualified Persons under NI 43-101.
Bluestone will be hosting a webinar on March 1, 2021 at 8:00 am EST.
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