Fireweed Zinc Announces Positive Preliminary
Economic Assessment with Pre-Tax IRR of 32% and NPV (8%) of C$779M
on Macmillan Pass Project
Vancouver, British Columbia -- May 24, 2018 --
InvestorsHub NewsWire -- FIREWEED ZINC LTD. (“Fireweed” or the
“Company”) (TSXV: FWZ) is pleased to announce
the positive results of an independent Preliminary Economic
Assessment (“PEA”) for its Macmillan Pass Project (the “Project”)
in Yukon, Canada. The PEA was prepared in accordance with National
Instrument 43-101 Standards of Disclosure for Mineral
Projects (“NI 43-101”) by JDS Energy and Mining, Inc. (JDS)
with work on tailings and water by Knight Piesold Consulting, both
of Vancouver, Canada.
Production and Economic
Highlights:
- Long mine life and large-scale
production:
- 18-year mine life with 32.7Mt of
mineralization mined at 4,900 tonne-per-day average processing
rate.
- 1.54Mt of Zinc, 0.88Mt of Lead,
and 37Moz of Silver in concentrate shipped.
- Average yearly contained-metal
production of 85kt Zinc, 48kt Lead and 2Moz Silver.
- Robust economics using metals
prices of $1.21/lb Zn, $0.98/lb Pb, and $16.80/oz Ag:
- Pre-Tax NPV at 8% of $779M CAD and
IRR of 32%.
- After-Tax NPV at 8% of $448M CAD
and IRR of 24%.
- Manageable CAPEX and rapid
payback:
- Pre-production CAPEX of $404M
CAD.
- Payback period of 3.9 4
years.
- Starter-pits on Tom West and Jason
Main zones reduce up-front capital.
- Significant Upside
- Numerous opportunities for
significant economic improvement.
- Known zones remain open for
expansion, including into high-grade areas.
- Highly prospective and large land
package untested with modern exploration methods.
“This first NI43-101-compliant PEA on the
Macmillan Pass Project represents a significant step for the
Company as we progress the Project towards production. Project
economics in the PEA demonstrate that Macmillan Pass is not just
viable at the zinc, lead and silver prices levels contemplated in
the study, but highly robust,” commented Brandon Macdonald, Chief
Executive Officer. “With consideration of the exploration upside
not just at the known zones, but also within the broader land
package, the Project is steadily shaping up to be a premiere
district-scale zinc mining camp in the mining-friendly Yukon
Territory.”
Overview of PEA Results and
Assumptions
Summary Table of Economic Inputs and
Results
|
Unit |
Base Case |
Spot
Prices2 |
Inputs |
Zinc
Price |
US$/lb |
$1.211 |
$1.42 |
Lead
Price |
US$/lb |
$0.981 |
$1.05 |
Silver
Price |
US$/oz |
$16.801 |
$16.38 |
Exchange Rate |
CAD/USD |
0.77 |
0.78 |
Economics
Pre-Tax |
Cash
Flows (Undiscounted) |
C$M |
$1,735 |
$2,581 |
NPV at
8% |
C$M |
$779 |
$1,214 |
IRR |
% |
32% |
42% |
Payback
Period |
years |
3 |
2.4 |
Economics
Post-Tax |
Cash
Flows (Undiscounted) |
C$M |
$1,119 |
$1,669 |
NPV at
8% |
C$M |
$448 |
$729 |
IRR |
% |
24% |
31% |
Payback
Period |
years |
4 |
3 |
Unit
Parameters
Per Tonne Mined |
Net
Smelter Return3 |
C$/tonne |
$167.38 |
$193.28 |
Pit Mining Costs |
C$/tonne |
$4.45 |
$4.45 |
Underground Mining Costs |
C$/tonne |
$52.02 |
$52.02 |
Processing Costs |
C$/tonne |
$22.92 |
$22.92 |
Site G&A |
C$/tonne |
$10.37 |
$10.37 |
Total
OPEX |
C$/tonne |
$82.00 |
$82.00 |
Operating Margin |
C$/tonne |
$85.38 |
$111.28 |
Sustaining Capital & Closure |
C$/tonne |
$19.88 |
$19.88 |
Adjusted Operating Margin |
C$/tonne |
$65.50 |
$91.4 |
1. Base case prices for zinc, lead and silver are
the average of three years past and projected two years forward by
analysis of London Metal Exchange futures as of April 30, 2018.
2.
Spot prices at close of London Metal Exchange on April 30,
2018.
3.Net smelter returns are net of off-site costs
including TC/RCs, freight and penalties
Capital & Operating Cost
Estimates
Table of Initial and Sustaining Capital
Costs
Area |
Initial
(C$000) |
Sustaining
(C$000) |
Total
(C$000) |
Mining |
30,300 |
378,400 |
408,700 |
Site Development |
12,000 |
1,100 |
13,100 |
Mineral Processing |
70,600 |
5,500 |
76,100 |
Tailings Management |
32,700 |
113,900 |
146,600 |
On-site Infrastructure |
51,400 |
14,800 |
66,200 |
Off-site Infrastructure (Canol
Road) |
78,300 |
6,700 |
85,000 |
Project Indirects |
43,000 |
- |
43,000 |
Engineering & Project
Management |
20,500 |
- |
20,500 |
Owner Costs |
7,000 |
- |
7,000 |
Closure |
- |
56,700 |
56,700 |
Contingencies1 |
58,600 |
72,300 |
130,900 |
TOTAL
PROJECT |
404,400 |
649,400 |
1,053,800 |
1. Note
on contingencies: Contingencies were assigned according to the
level of engineering in the various project areas as follows:
mining infrastructure 20%, process plant/site
infrastructure/indirects 20%, tailings 35%, off-site infrastructure
10%. JDS terms this method “fit for purpose.” An example is the
process equipment cost. JDS used vendor quotes on nearly all the
equipment. Vendor quotes can generally be assessed a contingency of
5-10%. On the other hand, Knight Piesold had little data on the
soils to be excavated for the tailings management facility
embankment. They applied a contingency of 35% in that
case.
Off-site
Charges
Off-site charges
include concentrate transport to Skagway for loading onto
ocean-going cargo ships bound for smelter destinations yet to be
determined but assumed to be in Asia. The charges also include
treatment charges and penalties as shown in the table
below.
Table of Off-site Charges
Off-site
Charges |
Units |
Zinc
Concentrate |
Lead
Concentrate |
Transport to Smelter |
CAD/wmt conc. |
$211.85 |
$211.85 |
Smelter Treatment Charge |
US$/dmt conc. |
$190.00 |
$170.00 |
Silver Refining |
US$/oz |
$1.50 |
$1.50 |
Mercury (Hg) Penalty |
US$/dmt conc. |
$0.96 |
NA |
Silica (SiO2)
Penalty |
US$/dmt conc. |
$2.00 |
NA |
Operating
Costs
The
estimated operating costs, over the life of the Project, are
presented below:
Table of Operating Costs
(OPEX)
Open Pit
Mining |
C$/tonne
mined |
$4.45 |
Underground
Mining |
C$/tonne mined |
$52.02 |
Processing |
C$/tonne |
$22.92 |
G&A |
C$/tonne |
$10.37 |
All-In
OPEX |
C$/tonne |
82.00 |
Mineral Resources
This
PEA is based on a mine plan for delivery of 32.66 Mt at a diluted
head grade of 9.07% zinc equivalent (5.31% zinc, 3.56% lead and
43.41g.t silver) delivered to the processing plant. The table below
outlines the total base case Indicated and Inferred Mineral
Resources, including those that were not included in this mine
plan.
Table of Base Case Mineral Resource Estimates
(at NSR cutoff grade of $65 CAD)
Category |
Tonnes
(Mt) |
ZnEq
% |
Zn
% |
Pb
% |
Ag
g/t |
B lbs
Zn |
B lbs
Pb |
MOz
Ag |
Indicated |
11.21 |
9.61 |
6.59 |
2.48 |
21.33 |
1.63 |
0.61 |
7.69 |
Inferred |
39.47 |
10.00 |
5.84 |
3.14 |
38.15 |
5.08 |
2.73 |
48.41 |
Details, supporting information and Qualified
Person statements for these Mineral Resources are described in the
Company’s news release and the Technical Report both dated January
10, 2018 and both filed on www.sedar.com.
Mining
Initial
material will be recovered at a rate of about 5,000 tonnes per day
by conventional truck and shovel surface mining from both the Tom
and Jason deposits. During the third year, production will
transition to underground mining using Avoca-style sub-level
retreat longhole (LH) stoping, vertical crater retreat (VCR) and
alimak stoping. Stopes will be filled with a combination of waste
rock and paste and cemented rock fill.
Open
pit mining accounts for 13% or 4.2M tonnes of the total 32.7M
tonnes of material mined and processed. VCR and LH methods account
for 75% of the material mined and processed by underground
methods.
Mining
recovery and dilution factors were applied by mining method.
Average open pit mining recovery and dilution were 95% and 10%
respectively. Average underground mining recovery and dilution were
92% and 21% respectively.
Existing surface roads and underground
development will be rehabilitated and utilized as part of the mine
plan. Mine access portals at multiple elevations are planned to
maximize natural ventilation and dewatering of underground
operations. Open pits have been designed to maintain safe working
distance from all major water ways.
Diesel
powered mobile equipment would be used to conduct all open pit and
underground mining activities. Underground crushing and conveying
would provide low cost mineral transport from the Tom deposit,
while the Jason mine being further from the mill site would utilize
truck transport.
Table of Mine Production
Statistics
Total Production Life
of Mine |
M
tonnes |
32.66 |
Mine
Life |
years |
18 |
Average Production
Rate |
tpd |
4,900 |
Average Head
Grades |
|
|
Ag |
g/t |
43 |
Pb |
% |
3.6% |
Zn |
% |
5.3% |
Processing
The
Company reported details of metallurgical testing with excellent
results in a news release dated May 15, 2018.
The
Project incorporates a standard comminution, flotation separation
flow sheet including a primary crusher feeding a single
semi-autogenous (SAG) mill, thence a ball mill, followed by
selective two and three-stage flotation to produce two concentrate
products for shipment to offsite smelters. Table 3 provides
pertinent feed, recovery, and grade levels.
Summary Table of Macmillan Pass Global (65% Tom
+ 35% Jason) Composite Metallurgical Results
Product |
Grade |
Metal Recoveries
(%) |
|
Zinc
(%) |
Lead
(%) |
Silver
(g/t) |
Lead |
Zinc |
Silver |
Feed |
7.3 |
3.2 |
44 |
100 |
100 |
100 |
Lead Concentrate |
8.9 |
61.5 |
688 |
75 |
5 |
59 |
Zinc Concentrate |
58.4 |
2.2 |
88 |
7 |
89 |
22 |
The
iron levels are low, at about 1.5%, a feature desired by zinc
smelters. Deleterious element levels were generally low,
except for mercury at 155 ppm and SiO2 at 4% in the
global zinc concentrate. Either or both may incur modest smelter
penalties.
Table of Processing
Statistics
Zn Recovered |
Life of Mine - M
lbs |
3,397 |
avg M
lbs/yr |
188 |
Pb Recovered |
Life of Mine - M
lbs |
1,929 |
avg M
lbs/yr |
107 |
Ag Recovered |
Life of Mine - k
oz |
37,191 |
avg k
oz/yr |
2,053 |
|
|
|
Payable Zn |
Life of Mine - M
lbs |
2,887 |
avg M
lbs/yr |
159 |
Payable Pb |
Life of Mine - M
lbs |
1,833 |
avg M
lbs/yr |
101 |
|
|
|
Zn
Concentrate |
Life of Mine – 000
dmt |
2,638 |
avg 000
dmt/yr |
147 |
Pb Concentrate |
Life of Mine – 000
dmt |
1,422 |
avg 000
dmt/yr |
79 |
Infrastructure
Access
Site
access for most raw materials, fuel and supplies will be via the
existing Canol Road (Yukon Highway 6). The Project site also has a
740m long gravel airstrip. The unpaved road runs 229-km from paved
Highway 4, the Robert Campbell Highway at Ross River, to the
Project site. It will require upgrade and repairs to accommodate
dual-trailer concentrate trucks with a 40-tonne payload. Maximum
travel speed will be 50 km/hr as the design basis for difficult
sections, and 80 km/hr where the upgrades are not cost prohibitive.
The route includes a barge crossing over the Pelly River at Ross
River.
Power
The
estimated connected load for the project is 10.6 MW, and the
operating demand is 68,432 MWhr/year. Power is to be supplied by
on-site liquified natural gas (LNG) fired generators. LNG will be
trucked from Dawson Creek, BC, and stored
on-site.
Water
Management
No specific designs
or plans were undertaken for water supply but a water management
system for plant make-up water is budgeted. Water is plentiful in
the area. Local surface water supplies should be more than adequate
for process and potable needs. Tailings return water will somewhat
reduce the need for process water. Package sanitary plants are
readily available and work well for sanitary needs of the camp,
dries, and process area restrooms.
Tailings Disposal
The
study base case for the nearby tailings management facility is
conventional tailings slurry disposal in a valley fill arrangement
with the tailings embankment designed to be a rock-filled structure
with granular filter zones on the upstream face. The embankment
construction material will be borrowed from the tailings management
facility impoundment where possible and the entire facility will be
lined with a HDPE geomembrane liner.
Airstrip & Camp
The
existing airstrip to be upgraded to 1,100 m useable length,
complete with lights and navigation equipment for all weather
flying. It will be able to accommodate a Dash 8-100 40-person
charter aircraft. An all-weather modular construction,
270-person camp for construction and operation will include
dormitories, kitchen, dining, laundry, boot room, recreation area,
and storage, all connected with arctic corridors. Camp is
complete with potable water treatment system, sewage and waste
disposal facilities.
Sensitivity Analysis
The
Project is highly leveraged to metal prices; a 15% increase in
metal prices results in an 74% increase in NPV.
Pre-Tax NPV8
(C$M) |
Input
Factor |
Input |
85% |
90% |
95% |
100% |
105% |
110% |
115% |
Metal
Prices |
204 |
396 |
588 |
779 |
971 |
1,163 |
1,354 |
OPEX |
973 |
908 |
844 |
779 |
715 |
650 |
586 |
CAPEX |
891 |
854 |
817 |
779 |
742 |
705 |
667 |
Project Opportunities
The PEA
identifies several project challenges and opportunities that were
addressed to a level satisfactory for this PEA and represent
optimization opportunities for the next study level to further enhance project economics. These
include:
- The
$404 million pre-production capex includes $105 million of capital
cost required to upgrade the government-owned North Canol Road
(Yukon Highway 6) including direct costs, owner’s costs, EPCM and
contingency. The Company will continue to work with the Yukon
government to consider options for upgrading the road which
engineering is beyond the normal scope of a PEA.
- Optimization of the extent and configuration of
the surface extraction in the starter pits, and the disposition of
the related mine waste rock, require a depth of engineering
analysis beyond PEA level.
- Further
evaluation may reveal the existence of non acid-generating mine
waste, resulting in a lower cost borrow alternative for
construction of the tailings management facility embankment, a
major cost item.
- Exploration potential remains open at depth at all
deposits and significant upside remains as some high grade
intersections are known at depth. Further drill testing is required
to define and include this mineralization as mineral
resources.
- Footprint of the current known deposits is very
small compared to the overall land position. Exploration
potential exists over the 470 square kilometre land package. Most
of the area has never been explored using modern exploration
methods.
- Further
metallurgical test work will advance optimization of the recovery
process to further improve metal recoveries and reduce the quantity
of undesirable materials.
Upcoming Activities
- During
Summer of 2018 the Company plans to commence a large drilling
campaign with three drills and the goals to upgrade priority zones
to measured and indicated resources, expand known zones through
step-out holes, and drill new targets with aim to discover and
define new deposits.
- Mapping, geochemistry and geophysics will be
conducted toward new discoveries and guiding exploration of known
zones.
- Continue baseline environmental studies toward
advancing and further permitting of the Project.
- Continue work towards an upgraded economic study
on the Project.
Qualified Person
Statements
Michael
Makarenko, P.Eng., Project Manager for JDS Energy and Mining, Inc.,
is independent of Fireweed Zinc Ltd. and a ‘Qualified Person’ as
defined under Canadian National Instrument 43101. Mr. Makarenko is
responsible for the PEA results and directly related information in
this news release. Brandon Macdonald, P.Geo, a ‘Qualified
Person’ as defined under Canadian National Instrument 43101, is
responsible for the other technical information (information not
directly related to the PEA) in this news
release.
A
technical report describing the details of the PEA study will be
filed on www.sedar.com
and posted on the Company website
(www.FireweedZinc.com)
within 45 days.
Conference Call
The Company will host
a telephone conference call on Thursday, May 24, 2018 at 11:00 a.m.
Eastern Time (8:00 a.m. Pacific) to discuss these
results.
The conference call
may be accessed by dialing 1-800-319-4610 in
Canada and the United States, or +1-604-638-5340
internationally. No access code is needed. Callers should dial in 5
– 10 min prior to the scheduled start time and simply ask to join
the Fireweed Zinc call.
The conference call
will be archived for later playback until June 7, 2018 and can be
accessed by dialing (800) 319-6413 in Canada and the United States,
or (604) 638-9010 internationally and using the passcode
2354.
About Fireweed Zinc
Ltd.: Fireweed Zinc is a
public mineral exploration company focused on zinc and managed by a
veteran team of mining industry professionals. The Company is
advancing its large 470 km2 Macmillan Pass Project in
Yukon, Canada, which is host to the 100% owned Tom and Jason
zinc-lead-silver deposits with recently announced new Mineral
Resources (see Fireweed news release dated January 10, 2018
for details) and a new PEA economic study. The project also
includes option agreements on large blocks of adjacent claims (MAC,
MC, MP, Jerry, BR and NS) which cover projected extensions of
mineralization from the Jason area and areas where previous
exploration identified zinc, lead and silver geochemical anomalies
in critical host geology.
Additional information about Fireweed Zinc and
its Macmillan Pass Project, can be found on the Company’s website
at www.FireweedZinc.com and on SEDAR at www.sedar.com
.
ON BEHALF OF FIREWEED ZINC
LTD.
“Brandon
Macdonald”
CEO
& Director
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.
PEA Cautionary Note:
Readers
are cautioned that 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 results will be realized.
Mineral resources that are not mineral reserves and do not
have demonstrated economic viability. Additional work is needed to
upgrade these mineral resources to mineral
reserves.
Forward-Looking
Statements
This
news release contains “forward-looking” statements and information
relating to the Company and the Macmillan Pass Project that are
based on the beliefs of Company management, as well as assumptions
made by and information currently available to Company management.
Such statements reflect the current risks, uncertainties and
assumptions related to certain factors including but not limited
to, without limitations, exploration and development risks,
expenditure and financing requirements, general economic
conditions, changes in financial markets, the ability to properly
and efficiently staff the Company’s operations, the sufficiency of
working capital and funding for continued operations, title
matters, First Nations relations, operating hazards, political and
economic factors, competitive factors, metal prices, relationships
with vendors and strategic partners, governmental regulations and
oversight, permitting, seasonality and weather, technological
change, industry practices, and one-time events. Additional risks
are set out in the Company’s
prospectus dated May 9, 2017 and filed under the Company’s profile
on SEDAR at www.sedar.com. Should any one or more risks or
uncertainties materialize or change, or should any underlying
assumptions prove incorrect, actual results and forward-looking
statements may vary materially from those described herein.
The Company does not undertake to
update forwardlooking
statements or forwardlooking
information, except as required by law.
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