Brazilian Gold Corporation (TSX VENTURE:BGC) ("Brazilian Gold" or the "Company")
is pleased to announce the positive results of a Preliminary Economic Assessment
("PEA") on the Sao Jorge gold deposit located in the Tapajos Mineral Province of
northern Brazil. Brazilian Gold has the option to purchase 100% of the project
from Talon Metals Corp. The PEA was prepared as an independent National
Instrument 43-101 ("NI43-101") technical report by the Canadian office of Coffey
Mining Pty Ltd. ("Coffey Mining") with assistance from Coffey Mining's Brazilian
office.
Highlights
-- Independent PEA completed by Coffey Mining indicates a project internal
rate of return (IRR) of 22.9% and a net present value (NPV) at a 5%
discount rate of $99.1 M at a gold price of $1,300 per ounce.
-- Project economics using a gold price of $1,560 per ounce indicates a
project IRR of 36.4% and a NPV at a 5% discount rate of $181.4 M.
-- Study based on the updated mineral resources as outlined in the PEA
using a 0.3 g/t gold cut-off and drill hole assays up to July 30, 2008.
-- Not included in the PEA are assay results from the 2011 drill program on
Sao Jorge that is testing down dip and along strike of historic
drilling.
-- Given the robust economics of the PEA, the Company will embark on a pre-
feasibility study on the Sao Jorge deposit once the planned drill
program and an updated resource estimate is completed.
-- Subject to further favorable results from Brazilian Gold's additional
properties that are located adjacent to Sao Jorge, the pre-feasibility
study will look at the relevant synergies of their gold mineral
resources and a central processing facility. These additional properties
include the new Rio Novo discovery and Surubim, where an extension to
the historic drill program is underway.
The PEA is based on the outcomes of an engineering study completed by Coffey
Mining according to preliminary economic assessment study standards. The PEA
includes the project concept, infrastructure, geotechnical assessment, mining,
mineral processing, environmental, permitting, social aspects and project
economics. The study is based on the updated mineral resources as outlined in
the PEA using a 0.3 g/t gold cut-off and drill hole assays up to July 30, 2008.
The study envisaged a 2 Mtpa open pit mine with an on-site gold processing plant
that would deliver an average of 52,900 ounces gold per year, at full
production, for the 8-year life of mine ("LOM"). The project has an IRR, using a
base case gold price of $ 1,300 per ounce, of 22.9% and a NPV at a 5% discount
rate of $99.1 M. Using a gold price of $1,560 per ounce, the project has an IRR
of 36.4% and an NPV at a 5% discount rate of 181.4 M.
Preliminary Economic Assessment Summary
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Base Case ($1,300/oz +20% Base Case
gold)(i) ($1,560/oz gold)
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Average mined gold grade 0.93 g/t -
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Average mine production per year 2 Mt -
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Metallurgical recoveries 91% -
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Average Gold production per year 52,900 ounces -
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Capital costs $126 million -
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Operating costs $16.36/tonne -
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IRR 22.9% 36.4%
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NPV (5% discount rate) $99.1 million $181.4 million
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Payback 3 years 2 years
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Cash cost per ounce $617 -
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This PEA is preliminary in nature as it includes inferred mineral resources that
are considered too speculative geologically to have 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 do not have demonstrated economic viability.
The PEA is based on an mineral resource estimate containing an indicated mineral
resource of 11.365 Mt grading 1.0 g/t gold (379,000 ounces of gold) and an
inferred mineral resource of 20.673 Mt grading 0.8 g/t gold (558,000 ounces of
gold); both the resource estimate and PEA have been prepared by Coffey Mining.
All references to $ in this News Release are references to United States dollars.
Mr. Ian Stalker, CEO of Brazilian Gold, commented, "Given that the PEA on Sao
Jorge is based solely on the resource estimate that incorporates historic assay
results up to July 30, 2008 and still demonstrates a robust economic data set,
the potential clearly exists to enhance the project's economics by factoring in
the latest drill results from Sao Jorge, Rio Novo and Surubim. As we continue to
increase our understanding of the gold potential contained in our extensive land
package in the immediate vicinity of Sao Jorge, the objective will be to examine
the various development and production scenarios of these nearby projects. With
further additions to our exploration land package in and around Sao Jorge in the
Tapajos region of Brazil announced recently, and the commencement of regular
commercial flights from Brasilia to Novo Progresso in the near future adding to
the already fast improving infrastructure, the potential for a combined 'Sao
Jorge - Tapajos regional project' with central treatment plant and ease of
management control and human resources mobilization all adds to this already
positive PEA.
I would like to take this opportunity to thank Coffey Mining and the staff of
Brazilian Gold for their efforts in completing the PEA."
I. MINERAL RESOURCES
The Sao Jorge gold project is host to structurally controlled stockwork and
disseminated gold mineralization hosted in Proterozoic-age granitic rocks.
Coffey Mining estimated indicated and inferred mineral resources for the Sao
Jorge project on the basis of analytical results available up to the 30th of
July 2008.
The summarised mineral resource statement in Table 1 has been prepared and
reported in accordance with NI43-101 standards, and the classifications adopted
by CIM Council in December 2005. The resource estimate has been classified as an
indicated and inferred mineral resource based on the confidence of the input
data, geological interpretation and grade estimation.
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Table 1: Sao Jorge Grade Tonnage Report - Combined Oxide and Fresh Domains
Multiple Indicator Kriging Estimate
10E x 10mN x 2.5mRL Selective Mining Unit Applying 0.3g/t of
cut-off grade
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Lower
Cutoff Average Contained
Grade Million Grade Gold
(g/t Au) Tonnes (g/t Au) (Kozs)
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0.3 11.365 1.0 379
0.5 8.334 1.3 343
0.7 6.232 1.5 303
Indicated Mineral 0.8 5.453 1.6 285
Resource 0.9 4.792 1.7 267
1.0 4.207 1.8 249
1.1 3.683 2.0 231
1.2 3.199 2.1 213
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0.3 20.673 0.8 558
0.5 12.576 1.1 458
0.7 7.861 1.5 369
Inferred Mineral 0.8 6.541 1.6 338
Resource 0.9 5.465 1.8 309
1.0 4.471 1.9 278
1.1 3.670 2.1 251
1.2 3.117 2.3 230
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Mineral resources are not mineral reserves and do not have demonstrated economic
viability. Mining methods, metallurgical recoveries, environmental permitting,
legal, marketing, or other relevant issues may materially affect the conversion
of mineral resources to mineral reserves.
As is allowed under CIM rules, inferred mineral resources may be used in a PEA.
The Sao Jorge mine plan has been designed to include as much of the indicated
and inferred mineral resources as economically possible.
II. MINING, PROCESSING AND PRODUCTION PLAN
The Sao Jorge deposit is amenable to open pit mining of its gold bearing
mineralization. The processing plant of 2 Mtpa will necessitate a nominal mining
rate of 11 Mtpa according to the pit design and its 4.5:1 stripping ratio.
Pre-production stripping of 5.6 Mt will be required prior to the initiation of
commercial operations. Thereafter, the mining rate will average 9.9 Mtpa for the
8-year LOM.
Standard drill and blast bench mining will be employed with excavator loading of
dump trucks. Waste rock will be delivered to a waste rock stockpile near the pit
mouth and ore will be delivered to the run-of-mine (ROM) stockpile where it will
be fed to the crusher and the processing mill.
Mining costs for the operation are estimated to be $1.39/tonne mined and the
mine is projected to have a 4.5:1 strip ratio of waste tonnes to ore tonnes.
Coffey Mining has undertaken a process flow design and scoping-level cost
estimate for the processing mill based on limited metallurgical test work
conducted in 2006 and reported in previous technical reports by SGS Lakefield
Limited. An overall recovery of 91% from this material indicates the ore
responds well to conventional gold extraction processes.
The test work that has been completed, in conjunction with costing estimates,
has resulted in the proposal of a standard gold plant process flow sheet for
precious metal recovery. The proposed flow sheet incorporates crushing,
grinding, gravity concentration, thickening and the Carbon in Leach (CIL)
process to produce gold dore.
III. OPERATING COSTS
The operating costs for the mine and plant have been derived from known mining
costs and factored mill processing costs based on the preliminary plant design.
The operating costs amount to $16.36/t of which mining accounts for $7.63/t and
processing accounts for $8.73/t; G&A is included in the processing costs.
Details of the cost estimates are provided in Table 2.
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Table 2: Operating Cost Estimate
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US$/t mined US$/t ROM
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Mine (average) 1.39 7.63
Ore 1.91
Waste 1.27
Drilling and Blasting (excl Labour) 0.27
Mine equipment 0.88
Direct Mine Labour 0.23
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Process Plant - 8.73
Plant - 1.72
Labour - 1.96
Power - 2.64
Security - 0.15
Logistics - 0.39
Support services - 0.33
Corporate G&A - 1.54
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TOTAL 16.36
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IV. CAPITAL COSTS
The PEA has assumed owner mining necessitating the purchase of all mining and
ancillary equipment. The capital requirements for the Sao Jorge gold mine,
operating at a steady state of 2 Mtpa throughput rate, have been tallied by cost
centre: mine, processing plant and infrastructure. In addition, indirect costs,
owner costs and working capital items have been included to determine the total
funding requirements for the construction and preparation of the mine for
commercial operations.
Table 3 summarizes capital costs for the Sao Jorge project.
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Table 3: Capital Cost Estimate
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Initial Sustaining
Capital Capital
Section Department Cost US$ US$ US$
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Mine Equipment 13,299,652 20,404,435
Equipment during LOM 12,381,509 12,381,509
Pre-stripping 7,104,783
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Mill Civil construction,
site prep 13,083,016 59,468,253
Mech, Elect, Instr'n 34,491,587
EPCM 5,946,825
Contingency 5,946,825
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Infrastructure Power supply (138kV x
75km) 8,750,000 17,875,000
Water supply 200,000
Access Road (5km) 625,000
Buildings, site
roads, dam 8,300,000
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Total Direct Costs 110,129,197 97,747,688 12,381,509
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Indirects 7% of Direct costs 7,014,000 7,014,000
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Owners Costs 4% of Direct &
Indirect costs 4,685,728 4,685,728
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Working Capital 2 months Opex 4,387,143 4,387,143
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Total 126,216,067 113,834,558 12,381,509
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V. FINANCIAL ANALYSIS
Cost estimates for the construction and operation of the project have been made
in the second quarter of 2011 in US dollars. The estimates do not include
allowances for escalations or currency exchange fluctuations. It has been
assumed that all equipment will be purchased new from competitive bids. Cost
estimates have been derived from:
-- Mechanical equipment lists
-- Process design criteria
-- Process flow sheet
-- Current labour and material costs
-- Preliminary general arrangement drawings
-- First principles
The economics of the Sao Jorge gold project have been evaluated utilizing the
cost inputs shown in the previous tables and the financial inputs shown in Table
4, along with the projected resultant financial performance of the operation.
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Table 4: Financial Summary
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Parameter Value Comment
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- 17% premium to 12-qtr trailing avg (US$1,111)
Gold Price US$1,300 - 16% discount to London price fix on June 21,
2011
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Discount Factor 5%
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Currency 1.70 Brazilian Real: US dollar
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NPV $99.1 M
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IRR 22.9%
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Payback 3 years
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VI. SAO JORGE NI43-101 TECHNICAL REPORT
Coffey Mining Pty Ltd (Coffey Mining) under its Canadian office, in
collaboration with its Brazilian office, completed the study of the PEA and
prepared the updated NI43-101 Technical Report for the Sao Jorge Gold Project,
in Para State, Brazil. The NI43-101 Technical Report on the Sao Jorge Project
will be filed on SEDAR and Brazilian Gold's website within 45 days of this news
release.
All principal technical personnel participating in the preparation and review of
this Technical Report have extensive relevant experience. Bernardo Viana,
Porfirio Cabaleiro and Curtis Clarke, all Qualified Persons in their respective
fields as defined by NI43-101, completed a site visit to the Sao Jorge Gold
Project on March 1, 2011. Bernardo Viana was responsible for the geology and
mineral resource estimate sections of the report, Porfirio Cabaleiro was
responsible for the mining sections of the report, and Frank Bainbridge was
responsible for the metallurgical and processing sections of the report. Curtis
Clarke was the project leader and responsible for the financial analysis section
as well as the overall compilation of the report.
Garnet Dawson, M.Sc., P.Geo. (British Columbia), Vice President, Exploration for
the Company and a Qualified Person, as defined by National Instrument 43-101,
has reviewed and approved the technical disclosure contained in this News
Release.
About Brazilian Gold Corporation
Brazilian Gold Corporation is a Canadian based public company with a focus on
acquisition, exploration and development of mineral properties in northern
Brazil. It is the largest holder of exploration concessions (3,546 km(2)) in the
underexplored Tapajos Mineral Province, which historically produced over 30
million ounces of gold largely from alluvial deposits. The Company has a
portfolio of ten grass-roots to development stage gold projects (8 projects in
the Tapajos and 2 projects in the nearby Alta Floresta Gold Province) with drill
programs (4 drill rigs) currently underway on the Sao Jorge, Rio Novo and
Surubim projects.
Forward Looking Statement:
Some statements in this news release contain forward-looking information,
including without limitation statements as to planned expenditures and
exploration programs. These statements address future events and conditions and,
as such, involve known and unknown risks, uncertainties and other factors which
may cause the actual results, performance or achievements to be materially
different from any future results, performance or achievements expressed or
implied by the statements. Such factors include without limitation the
completion of planned expenditures, the ability to complete exploration programs
on schedule and the success of exploration programs.
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