Anaconda Mining Reports Q3 Production Results and Announces Updated Mineral Reserve and Resource for Argyle
"With the focus of Q3 2021 on mine waste development to access ore at Argyle, which was impacted by drill availability, mill throughput during the quarter was mainly limited to lower grade Pine Cove ore stockpiles, resulting in gold production of 2,218 ounces. As a result of the delays in mine development, the Company is revising its guidance downward to approximately 12,000 ounces sold and produced for 2021. While the challenges in developing mine waste at Argyle are disappointing, ore delivery ramped up at the end of September and we are confident in the mine plan going forward. This mine plan is based on the independently updated Mineral Reserves prepared by Nordmin, where 2022 is shaping up to be a record year of production for the Company. Over the next 14 months, we expect to mine approximately 529,100 tonnes of ore at an average diluted grade of 1.99 grams per tonne, which at a recovery rate of 87% will result in production of approximately 29,500 ounces. The Company also anticipates announcing an expanded Mineral Resource for Stog'er Tight in the coming weeks, which we believe will demonstrate the continued ability to expand the life of mine of the Point Rousse operations."
~Kevin Bullock, President and CEO, Anaconda Mining Inc.
Q3 2021 Highlights
- Updated Probable Mineral Reserve for Argyle of 529,100 tonnes at an average diluted grade of 1.99 grams per tonne ("g/t") gold containing 33,850 ounces, using a base case gold price of $2,000 (US$1,550);
- Gold production over the next 14 months is expected to be approximately 29,500 ounces based on an 87% overall mill recovery, setting up Anaconda for a record year of production in 2022, at an average operating cash cost per ounce sold of $1,112 (US$878) 1;
- Argyle demonstrates robust economics with undiscounted after-tax cash flows of $18.4M and an after-tax NPV (5%) of $17.4M with an IRR of 1,631%;
- Anaconda produced 2,218 ounces of gold in Q3 2021, a 61% decrease compared to Q3 2020 as throughput was predominantly from low-grade ore stockpiles while mine waste development was the focus at Argyle, with ore delivery ramping back up at the end of September;
- Due to slower mine waste development at Argyle during Q3 2021 which delayed access to higher-grade ore, the Company has revised its 2021 guidance downward to approximately 12,000 ounces of gold sold and produced;
- The Company sold 2,574 ounces of gold in Q3 2021, generating metal revenue of $5.8 million at an average realized gold price1 of $2,242 (US$1,779) per ounce;
- The Pine Cove Mill processed 118,988 tonnes during Q3 2021 and achieved mill availability of 95.1%, achieving similar mill throughput as in Q3 2020. The mill achieved a strong average recovery rate of 86.2% during Q3 2021 despite throughput being comprised mainly of low-grade Pine Cove stockpiles;
- Mining operations achieved 802,087 tonnes of waste development during the third quarter, lower than plan due to drill availability which delayed access to ore, resulting in 18,047 tonnes of ore mined. Ore mining has been ramping up significantly since the end of September and mill throughput in Q4 is expected to be predominantly from Argyle;
- As of September 30, 2021, the Company had a cash balance of $10.6 million, preliminary working capital1 of $6.5 million, and additional available liquidity of $3.0 million from an undrawn revolving line of credit facility.
1 Refer to Non-IFRS Measures Section below.
Third Quarter Operating Statistics
| | | Three months ended September 30, 2021 | | | Three months ended September 30, 2020 | | | Nine months ended September 30, 2021 | | | Nine months ended September 30, 2020 | |
| Mine Statistics | | | | | | | | | | | | |
| Ore production (tonnes) | | | 18,047 | | | | 187,185 | | | | 106,762 | | | | 401,573 | |
| Waste production (tonnes) | | | 802,087 | | | | 387,116 | | | | 1,934,794 | | | | 1,510,830 | |
| Total material moved (tonnes) | | | 820,134 | | | | 574,301 | | | | 2,041,556 | | | | 1,912,403 | |
| Waste: Ore ratio | | | 44.4 | | | | 2.1 | | | | 18.1 | | | | 3.8 | |
| | | | | | | | | | | | | | | | | |
| Mill Statistics | | | | | | | | | | | | | | | | |
| Availability (%) | | | 95.1 | | | | 97.6 | | | | 91.7 | | | | 98.0 | |
| Dry tonnes processed | | | 118,988 | | | | 120,359 | | | | 328,551 | | | | 351,828 | |
| Tonnes per day ("tpd") | | | 1,361 | | | | 1,340 | | | | 1,313 | | | | 1,311 | |
| Grade (grams per tonne) | | | 0.67 | | | | 1.59 | | | | 0.88 | | | | 1.42 | |
| Recovery (%) | | | 86.2 | | | | 88.5 | | | | 85.9 | | | | 87.5 | |
| Gold Ounces Produced | | | 2,218 | | | | 5,444 | | | | 7,959 | | | | 14,098 | |
| Gold Ounces Sold | | | 2,574 | | | | 5,105 | | | | 8,849 | | | | 13,948 | |
| | | | | | | | | | | | | | | | | |
Operations Overview for the Three Months Ended September 30, 2021
Anaconda sold 2,574 ounces of gold during the third quarter of 2021, generating metal revenue of $5.8 million at an average realized gold price1 of $2,242 (US$1,779) per ounce, and year-to-date has sold 8,849 ounces to generate metal revenue of $20.1 million. For the nine months ended September 30, 2021, the Company produced 7,959 ounces due to the heavy focus on mine waste development coupled with the processing of low-grade ore stockpiles. Accordingly, the Company has revised its 2021 guidance downward to approximately 12,000 ounces of gold sold and produced. The Company will update its operating cash costs per ounce sold1 guidance when it releases its financial results for Q3 2021. The average operating costs per ounce sold over the 14 month mineral reserves for Argyle is expected to be $1,112 per ounce (US$878).
Mine operations in the third quarter were focused on mine waste development at Argyle with 802,087 tonnes of waste moved during the quarter. While the plan was to focus on waste development, the rate of waste development was impacted by drill availability delaying the access to ore in Q3 2021, resulting in a strip ratio of 44.4 waste tonnes to ore tonnes. Ore mining has been ramping up significantly since the end of September and mill throughput in Q4 is expected to be predominantly from Argyle.
The Pine Cove Mill processed 118,988 tonnes during Q3 2021 and achieved an availability rate of 95.1%, resulting in a throughput rate of 1,361 tonnes per day, similar to the corresponding period of 2021, with overall gold production impacted by the processing of low-grade Pine Cove ore stockpiles. Notwithstanding the low-grade throughput, the mill was able to achieve an average recovery rate of 86.2%, a decrease of only 2.6% compared to Q3 2020 despite grade being down 58% from the prior period.
1 Refer to Non-IFRS Measures Section below.
Argyle Mineral Reserve
The Mineral Reserve was prepared by Independent Qualified Person, Joanne Robinson, P.Eng., of Nordmin. The updated Probable Mineral Reserve at Argyle, effective as of September 1, 2021, is 529,100 tonnes at an average diluted gold grade of 1.99 g/t and contains 33,850 ounces of gold at a strip ratio of 5.3 to 1, based on a cutoff grade of 0.56 g/t gold and gold price of CAD$2,000/oz (US$1,550/oz). This cutoff grade is the minimum ore grade required to process the ore economically.
Table 1: Argyle Mineral Reserve Estimate - Effective Date: September 1, 2021
| Category | Tonnes | Gold (g/t) | Rounded Ounces |
| Probable | 529,100 | 1.99 | 33,850 |
Footnotes:
See Gold Price, Capital, Operating and Tax Assumptions in Table 2 below.
1. The independent and qualified person for the mineral reserve estimate, as defined by NI 43-101 is Joanne Robinson, P.Eng., of Nordmin Engineering Ltd.
2. The effective date of the mineral reserve estimate is September 1, 2021.
3. The Mineral Reserve was derived from an ultimate pit shell design analysis based on parameters from the pit shell used to constrain the Indicated Mineral Resource. The ultimate pit design was created using Surpac 2021™ mining software and running a volumetric report between the pit design and the most recently surveyed topographic surface from August 30, 2021.
4. The reserve estimate includes an estimated 17% dilution and 3% metal loss as a result of regularizing the block model plus 15% external dilution and 5% mining loss.
Total gold ounces expected to be mined over the 14 month life of mine is expected to be 33,850 ounces resulting in gold produced of approximately 29,500 ounces based on an estimated average recovery rate of 87.0%. Argyle ore is being mined using conventional open pit mining methods with waste rock being stored locally at site and ore being transported by truck to the Pine Cove Mill. It is expected that Argyle ore will be batch-processed at approximately 1,200 tonnes per day with additional material from Pine Cove stockpiles continuing to supplement the mill capacity of 1,300 tonnes per day.
With mine waste development now on track and ore mining ramping up, Argyle demonstrates robust economics with undiscounted pre-tax cash flows of $21.2M, a pre-tax discounted NPV (5%) of $20.0M with an IRR of 1,667%, and an after-tax NPV (5%) of $17.4M with an IRR of 1,631%. Sustaining capital over the remaining 14 months of mine life is estimated to be $4.2M, relating mainly to ongoing mine waste development of which approximately $2.0M has already been invested as of September 30, 2021.
Table 2: Key Assumptions and Costs Used in the Mineral Reserve
| Production Profile |
| Gold Price - Base Case | CAD$2,000/ounce |
| Total Tonnes Milled | 529,100 tonnes |
| Diluted Head Grade | 1.99 g/t gold |
| Reserve Cut-Off Grade | 0.56 g/t gold |
| Total Waste Tonnes | 2,818,500 tonnes |
| Strip Ratio | 5.3:1 |
| Gold Recovery | 87% |
| Total Gold Production | 29,500 ounces |
| | |
| Capital Requirements |
| Sustaining Capital | $4.2M |
| |
| Unit Operating Costs |
| Mining Costs | $34.55/tonne milled |
| Processing Costs | $26.35/tonne milled |
| G&A | $5.10/tonne milled |
| LOM Operating Cash Costs(1) | CAD$1,112 per ounce sold (US$878) |
| LOM All-in Sustaining Cash Costs(1) | CAD$1,252 per ounce sold (US$989) |
| | |
| Project Economics |
| Royalties(2) | 3% net smelter return |
| Income Tax/Mining Tax Rates | 30%/15% |
| Pre-Tax | |
| NPV (5% Discount Rate) | $20.0M |
| Internal Rate of Return | 1,667% |
| Cumulative Cash Flows | $21.2M |
| After-Tax | |
| NPV (5% Discount Rate) | $17.4M |
| Internal Rate of Return | 1,631% |
| Cumulative Cash Flows | $18.4M |
(1) Cash cost includes mining cost, mine-level G&A, mill and refining cost. This is a non-GAAP performance measure; please see "Non-GAAP Measures and Other Financial Measures" below.
(2) A portion of the project is also subject to a 7.5% net profits interest ("NPI") with Royal Gold Inc. Depending on the price of gold in the future, operating and capital costs, the production profile of Argyle, the NPI could become payable at a future date.
Argyle Mineral Resource
The Mineral Resource was prepared by Independent Qualified Person, Glen Kuntz, P. Geo. of Nordmin. The Argyle Mineral Resource is based on validated results of 271 surface drill holes (171 diamond drill holes and 100 percussive drill holes), for a total of 16,231 metres of diamond drilling that was completed between 2016 and 2021 and the effective date of September 1, 2021. From these drill holes a total of 5,556 samples were analyzed for gold content. The Mineral Resource is defined at a 0.56 g/t gold cut-off and is based upon 1 metre assay composites using a variable gold grade cap. The Open pit constrained Mineral Resource uses the unit cost assumptions outlined in Table 2.
Table 3: Argyle Mineral Resource - Effective Date: September 1, 2021
| Type | Au (g/t) Cut -off | Category | Tonnes | Au g/t | Rounded Ounces |
| Open Pit | 0.56 | Indicated | 436,800 | 2.53 | 35,530 |
| Inferred | 500 | 2.77 | 50 |
Mineral Resource Estimate Notes
- Mineral Resources were prepared in accordance with NI 43-101 and the CIM Definition Standards for Mineral Resources and Mineral Reserves (2014) and the CIM Estimation of Mineral Resources and Mineral Reserves Best Practice Guidelines (2019). Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability. This estimate of Mineral Resources may be materially affected by environmental, permitting, legal, title, taxation, sociopolitical, marketing, or other relevant issues.
- Open pit Mineral Resources are reported at a cut-off grade of 0.56 g/t gold that is based on a gold price of CAD$2,000/oz (approximately US$1,550/oz) and a gold processing recovery factor of 87%.
- Assays were capped on the basis of the three Domain types Flat, Steep and Background.
- SG was applied on a lithological basis after calculating weighted averages based on lithological groups.
- Mineral Resource effective date September 1st, 2021.
- All figures are rounded to reflect the relative accuracy of the estimates and totals may not add correctly.
- Reported from within a mineralization envelope accounting for mineral continuity.
- Excludes unclassified mineralization located within mined out areas.
A Technical Report prepared in accordance with NI 43-101 for the Point Rousse Project will be filed on SEDAR (www.sedar.com) within 45 days of this news release. For readers to fully understand the information in this news release, they should read the Technical Report in its entirety, including all qualifications, assumptions and exclusions that relate to the Mineral Reserves. The Technical Report is intended to be read as a whole, and sections should not be read or relied upon out of context.
Qualified Persons
This news release has been reviewed and approved by Kevin Bullock, P.Eng., President and CEO and Paul McNeill, P. Geo., VP Exploration with Anaconda Mining Inc., "Qualified Persons", and Glen Kuntz, P. Geo. and Joanne Robinson, P.Eng. of Nordmin, "Independent Qualified Persons", under National Instrument 43-101 Standard for Disclosure for Mineral Projects.
Glen Kuntz, P. Geo. of Nordmin is responsible for disclosure regarding the Argyle Mineral Resource Estimate and Joanne Robinson, P.Eng., of Nordmin and Mr. Bullock, P.Eng. is responsible for disclosure regarding the Argyle Mineral Reserve Statement and related Project Economics.
ABOUT ANACONDA
Anaconda Mining is a TSX and OTCQX-listed gold mining, development, and exploration company, focused in the top-tier Canadian mining jurisdictions of Newfoundland and Nova Scotia. The Company is advancing the Goldboro Gold Project in Nova Scotia, a significant growth project with Measured and Indicated Mineral Resources of 1.9 million ounces (16.0 million tonnes at 3.78 g/t) and Inferred Mineral Resources of 0.8 million ounces (5.3 million tonnes at 4.68 g/t) (Please see The Goldboro Gold Project Technical Report dated March 30, 2021), which is subject to an ongoing Feasibility Study. Anaconda also operates mining and milling operations in the prolific Baie Verte Mining District of Newfoundland which includes the fully-permitted Pine Cove Mill, tailings facility and deep-water port, as well as ~15,000 hectares of highly prospective mineral property, including those adjacent to the past producing, high-grade Nugget Pond Mine at its Tilt Cove Gold Project.