PMI Set for Q3, 2012 Development Decision on 205,600oz/pa Obotan Gold Project Following Outstanding Pre-Feasibility Study Results
VANCOUVER, Jan. 12, 2012, 2012 (Canada NewsWire via COMTEX News Network) -- /THIS NEWS RELEASE IS NOT FOR DISTRIBUTION IN THE UNITED STATES OR TO
U.S. NEWS AGENCIES/
Pre-Feasibility Study Shows After-Tax NPV of US$416m and IRR of 31%
TSX Venture Exchange: PMV
Australian Securities Exchange: PVM
Frankfurt: PN3N.F
PMI Gold Corporation (TSX-V: PMV) (ASX: PVM) ("PMI" or "the Company") is pleased to report
the results of the NI 43-101 compliant Pre-Feasibility Study ("PFS")
for its flagship 100% owned ObotanGold Project in Ghana, West Africa, through its wholly owned subsidiary Adansi Gold Company Ghana Limited ("Adansi"). The PFS was completed by GR Engineering Services Limited ("GRES").
Highlights:
-- Independent NI 43-101 compliant Pre-Feasibility Study report on Obotan Gold Project (Ghana) outlines a robust gold project development opportunity, with: o Pre-tax Net Present Value ("NPV") of US$680.5M and post-tax NPV of US$416.4M assuming a US$1,300/oz gold price, 5% discount rate and contract mining scenario o Pre-tax IRR of 42% and post-tax IRR of 31% (2.9 years payback post commencement of gold production) o Initial capital costs of US$183.5M (excluding pre-strip mining cost of US$68.3M) o Maiden Proven and Probable Mineral Reserves of 30.3Mt at 2.32g/t for 2.26Moz of gold across four deposits o Hard rock CIL plant capacity of 3.0Mtpa with capacity of up to 3.84Mtpa for soft oxides o Average annual forecast gold production of 205,600oz pa over an initial 11.2 year mine life o Forecast life-of-mine total cash cost of US$690.2/oz (including royalties, refining costs and pre-strip mining) -- Key elements of definitive Feasibility Study ("FS") already underway, with FS targeted for completion by end of Q2, 2012, leading to a development decision in Q3, 2012. -- Discussions underway with several leading banks which have expressed strong interest in financing the Obotan Project. -- Further JORC/NI 43-101 resource update for Obotan Project due in Q1, 2012, incorporating the results of 28,800 metres of additional diamond core drilling
The strong economics of the proposed development - including a pre-tax
NPV of US$680.5 million and post-tax NPV of US$416.4 million - provide a strong foundation for the definitive Feasibility Study on
the Obotan Project (see Figure 1), which is already underway and
targeted for completion by the end of June 2012, paving the way for a
development decision in the September 2012 Quarter.
Post completion of the FS, the financing, construction and development
of the Obotan Project can proceed. This will be PMI's first gold
operation in West Africa and, contingent on the outcomes of the FS, the
Project development is planned to proceed in Q3, calendar 2012, with
initial mine development activities scheduled to commence in Q1,
calendar 2013 and targeting full production for calendar 2014.
The Obotan PFS, which was independently compiled by GRES a leading
experienced engineering company of Perth, Western Australia, based on
work by four leading international geological and engineering
consultants, resulted in a life-of-mine production of 2.10 million recovered ounces of gold over an initial 11.2 years (inclusive of 1 year pre-strip operations).
This Project is based on a NI 43-101/JORC compliant estimate of combined
Proven and Probable Mineral Reserves of 2.26 million ounces at 2.32g/t gold (1.06 million ounces at 2.36g/t gold in the Proven category and 1.20
million ounces at 2.28g/t gold in the Probable category).
Annual gold production is forecast at 205,600oz at an estimated life-of-mine total cash operating cost of US$690.2 per oz including royalties, refining costs and pre-strip mining, positioning
the Obotan Project at the lower end of the global cash cost curve.
The estimated production profile is based on processing 3Mtpa of ore for
10 years with a total of 30.3Mt of ore mined. Initial capital costs are
estimated at US$183.5 million, including a contingency of US$23.2million. Deferred and sustaining
capital is estimated at US$21.9 million.
The PFS was based on a gold price of US$1,300 per ounce, 5% discount
rate and contract mining scenario, with the Project generating a
pre-tax NPV of US$680.5 million and post-tax NPV of US$416.4million. The pre-tax IRR is 42% and the post-tax IRR is 31% with a capital
payback of 2.9years from commencement of first gold production.
Commenting on the PFS results, PMI's Managing Director and CEO, Collin
Ellison, said:
"Our focus is now moving on to complete the definitive Feasibility Study
- the key elements of which actually commenced in the second half of
last year and are already well underway. We are on target to complete
the next resource estimate update before the end of February and the FS
by the end of Q2, 2012, putting us in a position to make a development
decision on Obotan in Q3, calendar 2012."
"PMI has an objective of commencing plant commissioning in Q4, calendar
2013 and gold production by the start of calendar 2014. It is
anticipated that the project will start pre-strip mining in Q1,
calendar 2013, requiring the issue of tender documents to preferred
contractors in Q1, calendar 2012. Furthermore, we shall also review
the delivery times for key plant and equipment and if necessary place
orders for their supply."
"This timetable will enable PMI to join the ranks of leading West
African gold producers by early 2014 . We are now well placed to make
the transition from explorer to producer on an exciting project which
has been significantly de-risked through the earlier successful mining
that was carried out at gold prices less than US$350 per ounce."
"Our target now is to identify and develop new shallow oxide resources
within trucking distance of the Nkran processing plant at Obotan and
the adjoining Asanko (Asankrangwa) concessions, as part of an increased
regional exploration push the details of which will be announced in the
near future."
"With exploration ramping up at Obotan and across our regional tenement
holdings at Kubi and Asanko, we are looking forward to a period of
strong news flow from drilling as well as a further upgrade of the
JORC/NI 43-101 resource base at the Obotan Project next month."
"Finally, in order to facilitate the expansion of exploration activities
PMI has recently introduced changes to its drilling fleet with the
addition of two multipurpose Reverse Circulation (RC)/Diamond core (DD)
drill rigs and one Rotary Air Blast (RAB)/AirCore drill rig
complementing the existing dedicated diamond drill rig. The
establishment of a dedicated sample preparation facility at Obotan in
October 2011, operated by AMS/MinAnalytical, has also shortened the
turn-around of assay results which is providing significant support to
our expanded exploration drive."
Pre-Feasibility Study Basis and Options
The PFS report has been prepared by GRES for PMI based on work by the
following independent international consultants:
-- CSA Global ("CSA") -- Knight Piésold Consulting ("KPC") -- SRK Consulting ("SRK") -- BizGeo Company ("Bizgeo")
The PFS report summarizes the geology, mining and mine production
schedule completed by SRK; metallurgy, process plant, design,
infrastructure design, capital and operating cost estimates and
financial modeling completed by GRES; the tailings storage facility
design completed by KPC and the baseline environmental and sociological
evaluation completed by Bizgeo.
The PFS has been completed to a +25/-25% level of accuracy based on a
production profile of processing 3.0Mtpa of ore for 10 years.
Study Summary
A life-of-mine study summary is outlined below. The mine plan was
developed using a lower cut-off grade of 0.5 g/t and a gold price of
US$1,300 per ounce:
Key Data
___________________________________________________ |Fresh Ore Mined | Mt | 29,710| |_______________________________|___________|_______| |Oxide Ore Mined | Mt | 635| |_______________________________|___________|_______| |Waste Mined | Mt |230,020| |_______________________________|___________|_______| |Total Material Mined | Mt |260,365| |_______________________________|___________|_______| |Total Mill Feed Processed | Mt | 30,270| |_______________________________|___________|_______| |Open Pit Mining Life | years | 11.2| |_______________________________|___________|_______| |Contained Gold | koz Au | 2,256| |_______________________________|___________|_______| |Recovered Gold | koz Au | 2,097| |_______________________________|___________|_______| |Average Strip Ratio |(waste/ore)| 7.6| |_______________________________|___________|_______| |Average Grade | g Au /t | 2.32| |_______________________________|___________|_______| |Average Gold Recovery | % | 93.0| |_______________________________|___________|_______| |Average Annual Tonnes Processed| Mtpa | 2,957| |_______________________________|___________|_______| |Average Annual Production |oz Au / yr |205,637| |_______________________________|___________|_______|
The initial capital cost estimate for the Project is US$183.5 million in
Q3, calendar 2011 USdollars. Sustaining and deferred capital over the
life of mine is estimated at US$21.9 million and is primarily for the
subsequent lifts of the tailings impoundment facility equipment
replacement and generalallowances for mining processing and
administration. The capital cost does not include the pre-strip mining
cost of US$68.3M.
The study is based on costs going forward and does not take into account
historic exploration and development costs of Obotan for which Adansi
(a wholly owned subsidiary of PMI Gold Corporation) will obtain tax
deductions.
Capital costs are summarised below:
Summary Capital Estimate
_________________________________________ |Cost Area |US$ Million| |_____________________________|___________| |Process Plant Direct | 81.8| |_____________________________|___________| |Infrastructure | 47.5| |_____________________________|___________| |Indirect | 21.8| |_____________________________|___________| |Spares and First Fills | 7.4| |_____________________________|___________| |Owners Costs | 25.0| |_____________________________|___________| |Initial Capital | 183.5| |_____________________________|___________| |Deferred & Sustaining Capital| 21.9| |_____________________________|___________| |Total | 205.4| |_____________________________|___________|
The capital estimate includes 14.5% contingency of US$23.2 million in
the initial capital.
Total direct operating cash costs are estimated at US$690.16 per ounce
(including royalties, refining charges and pre-strip mining costs).
Royalties of 7% have been accounted for in the economic analysis.
Operating costs are summarised below:
Summary Cash Costs
_______________________________________________________ |Costs | Project |US$/t |US$/oz Au | | |US$ Million|Milled| Recovered| |_________________________|___________|______|__________| |Mining | 783.4| 25.9| 373.50| |_________________________|___________|______|__________| |Processing | 427.5| 14.1| 203.80| |_________________________|___________|______|__________| |General & Administration | 34.6| 1.1| 16.51| |_________________________|___________|______|__________| |Bullion and Refining | 11.2| 0.4| 5.34| |_________________________|___________|______|__________| |Royalties | 190.9| 6.3| 91.00| |_________________________|___________|______|__________| |Total Cash Operating Cost| 1,447.6| 47.8| 690.16| |_________________________|___________|______|__________|
Alternative treatments of mining pre-strip costs:
____________________________________________________________________ | | |Excluding pre-strip|Including pre-strip| | | | in capital | in capital | |________________|___________|___________________|___________________| |Initial capital |US$ Million| 183.5 | 251.8 | |cost | | | | |________________|___________|___________________|___________________| |Cash operating | US$/oz | 690.16 | 657.61 | |costs (including| | | | |royalties and | | | | |refining) | | | | |________________|___________|___________________|___________________|
Economic Analysis
The economic analysis has been completed on behalf of Adansi and on the
basis that Adansi is the 100% owners of the Obotan Project. It is noted
that the regulations in Ghana stipulate a "Net Profit Interest Royalty"
of 10% be paid to the Government of Ghana at the same time as any
dividends are paid by Adansi.
The proposed new corporate tax rate of 35% has been incorporated into
the analysis together with the proposed new depreciation rates of 20%
per annum. A proposed 10% windfall profit tax has not been included, as the basis for any such tax is not known.
A 5% royalty to the Ghana government and a further royalty of 2% to the
vendor (Goknet Mining Company Limited) are also provided for.
A summary of the Project economic analysis pre-tax at various gold
prices is as follows:
_________________________________ |Gold Price |Pre-Tax NPV |Pre-Tax | | ($/oz) | (5%) | IRR | | |US$ Millions| (%) | |___________|____________|________| | $1,100 | $406.7 | 28% | |___________|____________|________| | $1,300 | $680.5 | 42% | |___________|____________|________| | $1,500 | $954.2 | 54% | |___________|____________|________|
All estimates are based on a US$1,300/oz optimised open pit design.
A summary of the Project economic analysis post-tax at various gold
prices and based on a US$1,300/oz pit design is as follows:
_________________________________________________ |Gold Price |Post Tax NPV|Post Tax |Payback Period| | ($/oz) | (5%) | IRR | Years (1) | | |US$ Millions| (%) | | |___________|____________|_________|______________| | $1,100 | $238.5 | 21% | 3.9 | |___________|____________|_________|______________| | $1,300 | $416.4 | 31% | 2.9 | |___________|____________|_________|______________| | $1,500 | $594.4 | 40% | 2.2 | |___________|____________|_________|______________|
Note1: from the commencement of gold production
Mineral Resource Estimate
The NI43-101/JORC compliant Mineral Resource estimate used as a basis
for the PFS, at a 0.5g/t gold cut-off, is shown below:
_____________________________________________________________________ |Mineral Resource (inclusive of Mineral| Tonnes |Average | Gold | | Reserves) |(millions)| Grade |Contained | | | |(g/t Au)|('000 ozs)| |______________________________________|__________|________|__________| |Measured | 14.67 | 2.66 | 1.22 | |______________________________________|__________|________|__________| |Indicated | 27.50 | 2.32 | 2.00 | |______________________________________|__________|________|__________| |Subtotal M+I | 42.17 | 2.40 | 3.22 | |______________________________________|__________|________|__________| |Inferred | 17.54 | 2.35 | 1.29 | |______________________________________|__________|________|__________|
Based on the positive outcome of the PFS, a portion of the Mineral
Resource has been upgraded to Mineral Reserves. Only Measured and
Indicated Mineral Resources were included in the mine plan for the
study.
Mineral Reserves Used in the Mine Plan
(The reported Reserve estimate is shown in the following table:)
___________________________________________________ | | Tonnes | Au | Au ozs | |Reserve Classification |(Millions)|(g/t)|(Millions)| |_______________________|__________|_____|__________| |Proven | 14.0 |2.36 | 1.06 | |_______________________|__________|_____|__________| |Probable | 16.3 |2.28 | 1.20 | |_______________________|__________|_____|__________| |Total Proven + Probable| 30.3 |2.32 | 2.26 | |_______________________|__________|_____|__________|
1. The SRK Mineral Reserve was estimated by construction of a block model within constraining wireframes based on Measured and Indicated resources. 2. The Reserve is reported at lower a cut-off grade of 0.5g/t Au, which defines the continuous/semi-continuous mineralized zone potentially amenable to the low grade, bulk tonnage mining scenario currently being considered by PMI. 3. The grades and Reserve tonnes have been modified by a 95% mining recovery and a 5% allowance for mining dilution at 0.0g/t gold. 4. At 93% metallurgical recovery for Oxide and Transitional material and 94.5% metallurgical recovery for Fresh material was used in defining the optimal pit shell 5. The Mineral Reserves are based on the October 2011 Mineral resource reports for the Nkran, Adubiaso, Abore and Asuadai deposits 6. All tonnes reported are dry tonnes 7. The base case pit optimization utilized a US$1,300/oz gold price 8. Mineral Reserves are reported in accordance with the NI 43-101 & JORC.
Mining Plan
It is proposed that the Obotan Project will initially be an open pit
mining operation providing ore at a nominal rate of 3Mtpa during the
process plant operating life of 10.2 years following a 1-year waste
pre-strip operation.
Annual mine production of ore and waste will peak at 35.0Mtpa, with a
life-of-mine stripping ratio of 7.6. The base case pit design was
optimized at US$1,300/oz gold and a mine recovery of 95% and mining
dilution of 5% at a grade of 0.0g/t.
A mining contractor is proposed for earth moving activities. All
deposits would be mined utilizing conventional truck and shovel
methods.
Approximately one year of waste stripping will be required at Nkran to
expose sufficient ore to maintain a constant ore feed rate of 3.0Mtpa.
The cost of this pre-strip is estimated at US$68.3m and is included in
mine operating costs.
The overall mining sequence is based on commencing operations at Nkran
followed by mining the satellite deposits at Adubiaso, Abore and lastly
Asuadai (see Figure 2). The opening up of each deposit is to be
developed to optimise ore feed to the mill while maintaining throughput
of 3.0Mtpa.
Metallurgy and Mineral Processing
Metallurgy
The PFS has been based on testwork undertaken by the previous operators,
Resolute Mining Ltd ("Resolute") plus operational data from 5-years of
production. New metallurgical testwork is being undertaken by PMI,
supervised by GRES to validate the earlier testwork and operating
results. The original Resolute testwork was carried out by AMMTEC Pty
Ltd, AMDEL Ltd, Supaflow Technologies Pty Ltd, Analabs Pty Ltd and
METCON Research Inc. under the supervision of Lycopodium Pty Ltd and
Orway Mineral Consultants as part of the Lycopodium Feasibility Study
for Resolute.
Resolute's operating data indicates overall recovery of 93.5% for oxide
ore and 93.1% for primary ore.
Mineral Processing
The Obotan carbon-in leach ("CIL") plant is designed to nominally crush
and mill 3.0Mtpa of primary ore with a maximum wet plant capacity of
approximately 3.8Mtpa to allow for higher throughput when treating soft
oxides.
The process includes single stage jaw crushing, a SAG and ball mill in
closed circuit with hydro-cyclones, pebble crusher, a gravity circuit
and a single stage pre-leach and seven stage CIL circuit. The process
plant will be located proximal to the Nkran deposit where 80% of the
Reserves are located. Maximum haulage distance for ore from the
satellite deposits will be 15km.
The process plant design allows for a gravity recovery of gold of 40%.
This recovery is similar to that achieved by Resolute. The proposed
process flow sheet is similar to that employed by Resolute.
Infrastructure
The PFS has assumed the cost for the construction of new administration
buildings, temporary and permanent mine village facilities, a new 30km
116Kv power line, and the rehabilitation and expansion of the existing
borefield.
The recent agreement with the Anglican Church (as announced 20 December
2011) to purchase the original Resolute's administration and mine
village buildings was not incorporated into the PFS. The refurbishment
of these facilities is expected to cost marginally more than the new
facilities but will provide immediate access during development and for
current exploration activities.
Sensitivities
The key sensitivities are set out below:
____________________________________ |Factor |Change|Effect on NPV| |_______________|______|_____________| |Gold Price | +10% | +28% | |_______________|______|_____________| |Operating Costs| +10% | -15% | |_______________|______|_____________| |Capital Costs | +10% | -4% | |_______________|______|_____________| |Ore Grade | -10% | -28% | |_______________|______|_____________|
When the Company examined a sensitivity model from the base case,
whereby the operating costs were increased by 10%, capital costs
increased by 10% and grade reduced by 10%, the resulting after tax NPV
was still a strong $221.8 million.
Project Development Plan
PMI had already commenced various FS work in Q3/Q4, 2011. This FS work
entailed geotechnical and metallurgical drilling and laboratory
analysis, environmental baseline monitoring and socio-economic
evaluation. A new resource estimate of the Obotan deposits is
scheduled for completion before the end of February and will form the
basis for the FS mineral reserves and mine production schedule. The
Company is now focused on completion of the Obotan Gold Project FS by
the middle of 2012.
NI 43-101
Information that relates to Mineral Resources at the Obotan Gold Project
is based on a resource estimate that has been carried out by Mr Peter
Gleeson, and information that relates to Mineral Reserves at the Obotan
Gold Project is based on a reserve estimate that has been carried out
by Mr Duncan Pratt, both full time employees of SRK Consulting,
Australia. MrGleeson is a Member of the Australian Institute of
Geoscientists (MAIG) and Mr Pratt (CP Mining), is a Member of the
Australasian Institute of Mining and Metallurgy (MAusIMM). Both have
sufficient experience which is relevant to the style of mineralisation
and type of deposit under consideration and to the activities
undertaken to qualify as a Competent Person as defined in the 2004
Edition of the Australasian Code for Reporting of Exploration Results,
Mineral Resources and Ore Reserves (JORC), and as a Qualified Person in
terms of NI43-101. The Mineral Resource and Mineral Reserve estimates
have been prepared in accordance with the 2010 Canadian Institute of
Mining, Metallurgy and Petroleum (CIM) Definition Standards for Mineral
Resources and Mineral Reserve as incorporated by reference in National
Instrument 43-101 of the Canadian Securities Administrators, and is
consistent with the Australasian Guidelines and Code for the Reporting
of Exploration Results, Mineral Resources and Ore Reserves (Revised
December 2007) as prepared by the Joint Ore Reserves Committee of the
AusIMM, AIG and MCA (JORC). Both Mr Gleeson and Mr Pratt consent to
and approve the inclusion of matters based on information in the form
and context in which it appears.
PMI will file a NI 43-101 compliant technical report on the Obotan
Project outlining the Mineral Resources and Reserves Estimate and the
result of a Pre-Feasibility Study. The report will be available on www.sedar.com within 45 days of the date of this press release.
The NI 43-101 technical report will be authored by Peter Gleeson MAIG,
Duncan Pratt MAusIMM, CPMining for SRK and Bill Gosling FAusIMM of
GRES. These independent Qualified Persons have verified the data in
this news release. Collin Ellison, President & CEO, MIMMM, C.Eng, is a
"qualified person" within the definition of that term in NI 43-101, has
supervised the preparation of the technical information contained in
this news release.
FORWARD-LOOKING STATEMENTS
This news release includes forward-looking statements or information.
Forward-looking statements or information involve risks, uncertainties
and other factors that could cause actual results, performances,
prospects and opportunities to differ materially from those expressed
or implied by such forward-looking statement. All statements other
than statements of historical fact included in this release, including,
without limitation, statements regarding future gold production of
2.10Moz over an initial 10.2 year mine life; average annual gold
production of 205,600oz pa; forecast life of mine cash cost of
US$690/oz; initial capital cost of US$183.5M; completion of a further
JORC/NI 43-101 resource update in February 2012; forecast operating
parameters including ore mined, mill feed and recoveries; determination
of a development decision for the Obotan Project in the September 2012
Quarter; full production in 2014; and financial outcomes of the PFS,
including NPV, are forward-looking statements of information. There
can be no assurance that such statements will prove to be accurate and
actual results and future events could differ materially from those
anticipated in such statements or information. Important factors that
could cause actual results to differ materially from the Company's
plans or expectations include the actual results of current exploration
activities; changes in gold prices; changes in exchange rates;
possibility of equipment breakdowns, delays and availability; changes
in mine plans; exploration cost overruns; unexpected increases in costs
of equipment, steel, cement and consumables such as diesel and fuel
oil; unexpected environmental liabilities or social charges; the
unknown impact of the 10% windfall profit tax announced by the
Government of Ghana; title defects; the failure of contract parties to
perform the unavailability of capital and financing; adverse general
economic, market or business conditions; regulatory changes; failure to
receive necessary government or regulatory approvals; and other risks
and factors detailed herein and from time to time in the filings made
by the Company with securities regulators and stock exchanges,
including in the section entitled "Risk Factors" in the Company's
Annual Information Form dated September 20, 2011.
Any forward-looking statement or information only speaks as of the date
on which it was made and, except as may be required by applicable
securities laws, the Company disclaims any intent or obligation to
update any forward-looking statement, whether as a result of new
information, future events or otherwise. Although the Company believes
that the assumptions inherent in the forward-looking statements are
reasonable, forward-looking statements are not guarantees of future
performance and accordingly undue reliance should not be put on such.
Collin Ellison
On behalf of the Board,
Managing Director & CEO
Neither the TSX Venture Exchange nor its Regulation Services Provider
(as that term is defined in the policies of the TSX Venture Exchange)
accepts responsibility for the adequacy or accuracy of this release.
PDF with caption: "Figure 1. Location of Projects ". PDF available at: https://stream1.newswire.ca/media/2012/01/12/20120112_C3690_DOC_EN_8843.pdf
PDF with caption: "Figure 2. Obotan Gold Project - Nkran, Adubiaso, Abore and Asuadai Deposit Locations". PDF available at: https://stream1.newswire.ca/media/2012/01/12/20120112_C3690_DOC_EN_8844.pdf
To view this news release in HTML formatting, please use the following URL: https://www.newswire.ca/en/releases/archive/January2012/12/c3690.html
SOURCE: PMI Gold Corporation
InvestorRelations Canada: Rebecca Greco, Fig House Communications P. +1 (416) 822-6483 E.fighouse@yahoo.com Investor Relations Australia: Nicholas Read/Paul Armstrong, Read Corporate P. +61 8 9388 1471 M. +61 419 929 046 PMI Contact Canada: Marion McGrath, Corporate Secretary P. +1 (604) 684-6264 Toll-Free: 1 (888) 682-8089 PMI Contact Australia: Collin Ellison, Managing Director & CEO P. +61 8 6188 7900 or visit the PMI Gold Corporation website atwww.pmigoldcorp.com
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