Spanish Mountain Gold Ltd. (the “Company”) (TSX-V:SPA) is pleased to announce the results of the Preliminary Economic Assessment (the “PEA”) for the pit-delineated high grade core (the “First Zone”) of the 100% owned Spanish Mountain gold project (the “Project”) located near Likely in central British Columbia, Canada. The PEA, the commencement of which was announced in a news release dated February 14, 2017, has been prepared in accordance with NI 43-101 Standards of Disclosure for Mineral Projects.
As disclosed in the previous news release, the PEA is based on a 20,000 tonnes per day (tpd) processing rate with a streamlined flowsheet to process the Measured and Indicated Resources within the First Zone. Please refer to Section 1 below for details of the proposed operation.
Highlights of the PEA are as follows:
•At the proposed 20,000 tpd throughput, the First Zone has a project life of 24 years and a total life of mine (LOM) production of approximately 2.2 million ounces of gold and 1.5 million ounces of silver.
•The initial capital expenditure is expected to be C$507M (or US$380M) including a contingency of C$51M. The sustaining capital over the life of the mine is estimated at C$194M
•At an assumed LOM gold price of US$1,250 per ounce (the base case), the First Zone generates a pre-tax NPV (@5%) of C$597M and a post-tax NPV of C$482M. Pre-tax and post-tax Internal Rates of Return are 21% and 19%, respectively. Payback of capital is expected to be less than four years.
•Selected operational and cost metrics for Years 1 - 5; Years 1 - 10 and LOM are as follows:
Units Years 1 - 5 Avg. Years 1 - 10 Avg. LOM
Gold grade g/t 0.77 0.69 0.43
Strip Ratio 0.96 1.55 1.44
Annual Gold Production koz 157 142 92
Cash Cost/ oz US$ 469 555 595
All-in-sustainable Cash Cost US$ 533 619 659
Total Cost/ oz US$ 667 752 792
Larry Yau, CEO, commented: “Once again our team’s diligence has delivered impressive results for our shareholders. I believe that this PEA has convincingly validated our two-zone project approach for advancing our multi-million ounce resource: the First Zone alone generates robust investment returns and an operation lasting 24 years whereas the Second Zone, comprised of additional multi-million ounces of gold within the current geologic resource estimate, largely as Inferred Resources, potentially adds development flexibility and leverage on the future gold price.
“While there have been numerous improvements since the 2012 PEA, a few key comparisons highlight the excellent progress our team has made in demonstrating the robust economics of our project as follows:
•Compared with the previously (2012) estimated NPV (@5%) for the entire resource, the PEA has achieved an NPV for the First Zone alone that is up to 63% higher even at a gold price that is US$210 lower than assumed for the 2012 PEA
•Post-tax IRR has increased from 12% to 19%
•Initial capital has decreased by up to C$257M (or 33%) from C$764M to C$507M
•LOM All-in-sustainable Cash Cost per ounce has decreased from US$834 to US$659
•Project life for the First Zone extends 24 years vs. 13 years for the entire resource in the 2012 PEA
The noted improvements to project economics are the result of focusing the study on a lower throughput, smaller footprint and smaller impact Project.
We believe the current PEA provides a reasonable basis for the Company to advance the Project in the present gold price environment.”
Please refer to the Company’s redesigned website for additional details on the new PEA and the project: www.spanishmountaingold.com
Section 1: Proposed Operations
The mine plan adopted for the PEA includes 178 Mt of mill feed and 257 Mt of waste over the 24 year project life. The mill feed is comprised entirely of Measured and Indicated Resources. Approximately 21 Mt of Inferred material within the pit has been treated as waste for this study.
A PEA level mine operation design, approximately 14-year LOM production schedule, and cost model have been developed for the open pit. The in-pit resource is summarized in the following table:
Pit Delineated Resources
Measured & Indicated Resource
Measured and Indicated Pit Delineated Resource kt 177,968
Gold Grade g/t 0.44
Measured and Indicated Gold koz. 2,480
Silver Grade g/t 0.67
Measured and Indicated Silver koz. 3,837
Pit Delineated Waste kt 257,102
Strip Ratio t/t 1.4
Inferred Resource Unit Amount
Inferred Pit Delineated Resource (included in Waste) above) kt 21,226
Gold Grade g/t 0.30
Silver Grade g/t 0.67
Cutoff gold grade of 0.15g/t calculated, and utilized in pit delineated resources.
Whole block diluted grades, with an additional 1% of block to block dilution at 0g/t gold, and 99% mining recovery, included in pit delineated resources
To maintain the assumed mill feed grades during the initial 11 years of production, a mill-feed cut-off grade of 0.3 to 0.4 g/t Au is utilized with material between the mining cut-off grade and mill feed cut-off grade being stockpiled for treatment during years 12 through 24.
Processing of the mill feed is by means of a conventional process flowsheet including primary grinding, flotation, regrinding of the concentrate, and cyanidation via a CIL circuit to produce doré. The process achieves an average overall LOM gold recovery of 89% with a recovery of 90% being achieved during the initial higher grade years. A silver recovery of 40% is assumed for the life of the project. Tailings from the plant are stored in a tailings management facility that has been designed to minimize water above the dam. The balance of the site water is managed through a separate water management pond that includes a water treatment plant for any water to be discharged.
Section 2: Capital Expenditures
The following table summarizes the estimated capital costs:
Initial Capital Cost (C$ Million)
Overall Site 16.6
Open Pit Mining 97.3
Processing Plant (including Ore Handling) 140.0
Tailing Management Facility & Water Management 56.8
On-Site Infrastructure 28.6
Off-Site Infrastructure 14.3
Project Indirects 84.6
Owner’s Costs 5.8
Total Initial Capital Cost 507.1
LOM sustaining capital requirements are estimated at C$ 193.5 million.
Section 3: Operating Costs
Unit Cost (C$)
Mining ($/t mined) $1.96
Mining ($/t milled) $4.79
Processing ($/t milled) $4.01
Tailings ($/t milled) $0.05
G&A ($/t milled) $1.09
Total ($/t milled) $9.94
Section 4: First Zone’s Economics
The following pre-tax financial parameters were calculated:
•3.7-year payback on C$507 million capital
•C$597 million NPV at 5% discount value.
The following post-tax financial parameters were calculated:
•3.7-year payback on C$507 million capital
•C$482 million NPV at a 5% discount rate.
The following parameters are used for the financial analysis throughout the life of mine:
•Gold price of US$1,250/oz.
•Silver price of US$18/oz.
•Exchange rate of US$0.75 to C$1.00.
•99.8% payable gold and 90% payable silver.
•US$1.00/oz. gold refining charges and US$0.60/oz. silver refining charges.
•US$1.00/oz. transport charges on produced gold and silver.
•0.15% insurance on value of produced gold and silver.
•1.5% NSR royalty.
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