TIDMMNC
RNS Number : 8878T
Metminco Limited
18 October 2017
AIM ANNOUNCEMENT 18 October 2017
Maiden Ore Reserve for Miraflores
Metminco Limited (ASX: MNC, AIM: MNC) ("Metminco" or the
"Company") is pleased to announce a maiden NI 43-101 and JORC
2012-compliant Ore Reserve for its 100%-owned Miraflores Gold
Project in Colombia.
The Ore Reserve has been estimated using a gold price assumption
of US$1200/oz and a cut-off grade of 1,53g/t Au. It is contained
entirely within the Miraflores Deposit constrained Mineral Resource
Estimate and is based entirely on the Measured and Indicated
Resources.
The estimate represents a conversion rate of approximately 50%
of Measured and Indicated Resources and has been based on
information derived from the Feasibility Study (FS) for Miraflores,
which will be released to the ASX today.
Miraflores Mineral Reserve Estimate as at October 2017
Reserve Classification Tonnes (t) Gold (g/t) Silver Contained Contained
(g/t) Metal (Koz Metal (Koz
Au) Ag)
------------------------ ----------- ----------- ------- ------------ ------------
Proven 835,606 4.84 2.73 130 73
------------------------ ----------- ----------- ------- ------------ ------------
Probable 2,142,741 4.16 3.21 287 221
------------------------ ----------- ----------- ------- ------------ ------------
Proven + Probable 2,978,346 4.35 3.08 417 295
------------------------ ----------- ----------- ------- ------------ ------------
Planned dilution 1,347,867 0.91 1.42 39 62
------------------------ ----------- ----------- ------- ------------ ------------
Source: Ausenco, 2017
The Company's Ore Reserve estimates for the Miraflores Gold
Project have been independently reviewed and signed off by Mr Boris
Caro who is a Member of Australasian Institute of Mining and
Metallurgy and a Registered Member of the Chilean Mining
Commission.
Mr William Howe, Managing Director, said: "The release of the
maiden Ore Reserve for the Miraflores Gold Project marks a
significant step towards our goal of near-term production in South
America and the culmination of many months of dedicated work by our
team. It also cements our confidence in the projects location on
the prolific Western Cordillera Andean Cauca trend. We look forward
to releasing the results of the Feasibility Study later today which
will demonstrate that this is an economically robust project."
The information communicated in this announcement includes
inside information for the purposes of Article 7 of Regulation
596/2014
This announcement is an abridged version of the full
announcement, including appendices which provide additional details
of the JORC Reserve estimate, which is available on the Company's
website at www.metminco.com.au.
William Howe
Managing Director
Miraflores Gold Project
Mineral Resources
The Miraflores Measured and Indicated Mineral Resources are
reported at a gold cut-off grade of 1.20 g/t Au. The resources are
based on 25,884 meters of drilling in 73 diamond drill holes and
236 meters of underground channel samples. This includes 3,624m in
10 holes carried out by AngloGold Ashanti and B2Gold in
2006-2007.
Statistical and visual checks were performed by Metal Mining
Consultants of the estimated block model to ensure there were no
discrepancies in the grade estimation routines and to ensure the
geometry of mineralization meets the configuration that the
geologists expected for estimated mineralization. The Mineral
Resources are reported inclusive of the Ore Reserves.
Measured Mineral Resources; 2.958Mt @ 2.98g/t Au and 2.48g/t
Ag
Indicated Mineral Resources; 6.311Mt @ 2.74g/t Au and 2.90g/t
Ag
Measured and Indicated Mineral Resources; 9.269Mt @ 2.82g/t Au
and 2.77g/t Ag
Inferred Mineral Resources; 0.487Mt @ 2.36g/t Au and 3.64g/t
Ag
Competent Person
Mr Boris Caro visited the site in August 2017 for 3 days as part
of the study team to review all aspects of the study including an
investigation of the mine, plant and site layouts.
Type of Study Completed
A feasibility study has been completed for the Miraflores
Project. Metminco engaged GR Engineering Services to complete the
processing, infrastructure and feasibility study management aspects
of the feasibility study. Ausenco Chile were engaged to complete
all aspects of the mine design, mine scheduling, geotechnical
analysis and ventilation system design to support the mine design,
including capital and operating costs for the mine. Surface
geotechnical design for the plant, infrastructure and tailings
facility was undertaken by Dynami Geo Consulting (a Medellin based
consulting company) and Grana y Montero Engineering, a Lima, Peru
based engineering and contracting group assisted in the design of
the Tailings Storage Facility. This study provided sufficient
technical and economic support to back up the Ore Reserve
estimate.
Further analysis and test work is recommended for the stope
filling sequence and stability analysis prior to any decision to
commence with the project construction.
Cut-off grade determination
An underground cut-off grade (CoG) of 1.53 g/t- for gold was
applied to underground diluted resources constrained by the final
underground design. This grade delineated the Ore Reserve estimate.
The cut-off grade was utilized for the stope optimization and the
mining schedule.
-- Reserves are based on a gold price of US$1,200/oz;
-- Reserves are defined within an underground mine plan generated from diluted Measured and Indicated Mineral
Resources;
-- An underground CoG of 1.53 g/t-Au was applied to underground resources constrained by a final underground design;
-- Underground reserves assume a total dilution of 31%;
-- In-situ Au ounces disregard metallurgical recovery of 92%;
-- 28% of the mined out stopes and drifts will use backfill including waste and filtered tailings material.
Backfilling operations will commence in the 2nd year of operation;
-- Detailed ventilation designs were applied; and
-- Reserves are based on topography received from Metminco on January 26, 2017.
Ore Reserve Estimation Factors
For stope optimization, Stope Optimizer from Vulcan(TM) mine
planning software was used. A post analysis of the optimisation
confirms that for a life of mine of around 10 years, ore to plant
of 1,300 tpd producing 4,000 oz Au per month, the cut-off grade
would be 1.75 g/t Au. Therefore this cut-off grade was used in the
optimization algorithm.
The mining method selected for the MIraflores deposit is the
retreat longhole open stope method with partial backfill. The
decision of which stopes require to be backfilled was made taking
into consideration the geotechnical analysis and the mining
sequence.
Only the underground resources contained within the mining
stopes or underground development drives were included in the Ore
Reserve estimate.
Underground reserves assume a total dilution of 31%.
Ore loss has been accounted for by removing areas that will not
be mined as they are either too remote from other potential ore to
pay for additional development, or the potential value has been
diluted to a point where the material is eliminated from
consideration. No other ore loss has been considered.
Mine development and stope production were scheduled using
Vulcan Gantt Scheduler(TM). The scheduler package developed the
schedule following a logic sequence of development drives with a
maximum monthly rate of 270 meters per horizontal development drill
jumbo.
Ramps; 4.5 x 4.5 meters
Drifts and cross-cuts; 4 x 4 meters
Stoping minimum width; 2.5 meters
Stoping average width; 7 meters
Production will start in year 1, focusing on high-grade areas
and the early level development from the secondary ramps. The
production will ramp up relatively quickly, allowing the processing
of 1,300 tonnes per day during the first year of the mine
schedule.
The mine operating and capital cost estimate was also
constructed using first principles and an Excel(TM) cost model.
The geotechnical study included the data collection through
drilling and mapping, rock mass classification, structural
analysis, stability analysis and ground support
recommendations.
The mine operation includes in-fill drilling activities for
stope delineation and ore control purposes.
The planned dilution material will contain a small amount of
Inferred Resources, However, this material contributes less than 1%
of the total material above the cut-off grade.
The mining production schedule developed by Ausenco requires
approximately 20% of the process tailings and all waste material
mined for stope backfill purposes. Further backfill material (up to
50% of the total tailings), will be placed underground for cost and
environmental benefit. Conceptually, Ausenco considers this
strategy as adequate to improve either the stability of the stopes
and for reducing the size of the tailing storage facility. However,
it will be necessary to revisit the mining production schedule to
achieve the proposed stope backfill targets prior to mining
commencing.
Metallurgical Factors
The feasibility study metallurgical testwork program was
conducted by Inspectorate Exploration and Mining Services
(Inspectorate) of Vancouver, Canada, and ALS Laboratories (ALS) and
was designed to evaluate a process flowsheet that included:
-- Three-stage crushing;
-- Grinding;
-- Gravity concentration of the coarse gold;
-- Gold flotation of the gravity tailing;
-- Cyanide leaching of the gold flotation concentrate;
-- Cyanide detoxification of the cyanidation residue; and
-- Tailing thickening and filtration.
This flow sheet as tested has resulted in a gold recovery of 92%
and silver recovery of 60% being utilised in the process plant
design.
The process facility is designed to treat 474,500 tonnes of ore
per annum (1,300 tonnes per day). The wet plant is scheduled to
operate seven days per week at a nominal treatment rate of 59 dry
t/h.
Environmental Studies
Baseline environmental studies were initiated by the previous
owner in order to advance the development and preparation of an
Environmental Impact Assessment study needed for regulatory
permitting in Colombia. Given the current revision to the mine
plan, some additional studies may be required for the areas to
which the mine facilities have been relocated. This will be
determined once the final mine plan is developed and the
aforementioned gap analysis has been completed but some of this
information has already been gathered to date.
As of July 2017, Baseline Study and Environmental Impact
Assessment programs have recommenced. The bulk of the Baseline
activities previously completed will be used as background
information, however, local regulations requires all environmental
and social baseline data to be no older than 12 months since its
collection, thus new monitoring programs are underway starting Q3
of 2017.
The monitoring and environmental inventories consist of:
-- Fauna and flora characterization;
-- Underground and surface water characterization;
-- Noise, vibration and air pollution; and
-- Potential contaminants from extracted minerals and stored tailings.
This data along with the mineralogical, geological, social and
economic aspects of the new project will be used to complete the
Environmental Impact Assessment, as per the Terms of Reference
received by Miraflores from the local environmental agency
Corporacion Autonoma Del Risaralda (CARDER) in July 2017.
The Environmental Management Plan (EMP) will be drafted once the
environmental impacts are completed and finalized in late 2017.
Acid rock drainage characterization data obtained to date
includes ABA, multi-element analyses, and mineralogical analyses.
Column testing was conducted for waste rock and low-grade stockpile
materials. Geochemical evaluation of flotation tailings and cyanide
leach tailings was also conducted. Preliminary results indicate
that the flotation tailings and the majority of waste rock are
non-PAG (non-potentially acid generating); whereas the low-grade
stockpiles and cyanide leach tailings are PAG (potentially acid
generating). Potential for metal leaching is indicated in the
static test data, but further evaluation is in progress to acquire
kinetic data for use in geochemical modelling.
The current mine plan does not include low grade stockpiling on
surface. The cyanide leach tailings will be placed underground as
part of the mine backfilling requirements.
The current mine plan includes the use of a large fraction of
the expected tailings flow as underground backfill material. The
remaining filtered tailings will be sent to the tailings management
facility where they will be spread and mechanically compacted to
achieve an unsaturated, dense and stable tailings deposit. No pond
or water impoundment will exist so there is no potential for
infiltration to native soils from the tailings materials.
Miraflores has received a mine development permit from the
CARDER for the development of 2,000 meters of underground
exploration development which includes 2 permanent waste dumps and
water discharge licence (Resolution 1505 of 7 September 2017).
Infrastructure
The area is well serviced with respect to roads. The site is
located approximately 7km from the Panamerican highway that runs
along the Cauca River. The road connecting the Panamerican Highway
with the town of Quinchia passes within a few kilometers of the
site and is currently being upgraded with 4 of the 7km of road now
newly sealed and with the remaining portion of the road expected to
be completed prior to construction commencing. From the newly
sealed road access to the site is via an unsealed road which will
require upgrading to allow access for large bulk loads. The
feasibility capital estimate allows for the upgrade to this access
road, the mine haul roads and other proposed internal roads for the
operation.
Sufficient labour is readily available throughout the region but
specifically in Quinchia and in communities immediately surrounding
the site. Professional and experience labour will be sourced from
both within and outside of Colombia. The town of Quinchia and
surrounding towns have an adequate supply of suitable accommodation
for any labour brought into the area. It is Miraflores's intention
to employ labour locally and where labour is brought into the area
from outside, the Company will require that labour to relocate to
Quinchia.
Power Supply to the site will be via a new overhead power line
from Quinchia. The incoming supply voltage will be 33 kV, with
step-down transformers to the site distribution voltage of 13.8 kV.
A medium voltage distribution board installed at the incoming HV
switchyard will distribute power to the outgoing feeders. The new
power line will be approximately 8km in length and will be a
dedicated line.
Water supply needs for the Project (processing plant and camp)
have been assessed and the water balance summary has been carried
out. The processing plant will require a total of 500 m3/day of
water to operate.
The accommodation camp will require 30 m3/day of freshwater
which will be trucked to site from the local community water
supply. The surplus water from mine dewatering operations will be
used for construction works, dust suppression and drilling and/or
will be sent to the water treatment plant.
Capital and Operating Costs
The capital and operating cost estimates produced for the
establishment of the mine is considered to be an AACE class 3
estimate with a level of accuracy within -10% and +15%. Costs are
presented in United States dollars (US$) and are based on prices in
effect during the second quarter of 2017; no escalation factors
have been applied.
The exchange rate applied for the operating and capital cost
estimates are:
-- US$1.00 = A$0.80 (Australian Dollar);
-- US$1.00 = EUR0.86 (Euro); and
-- US$1.00 = 3,000 COP (Colombian Pesos).
The feasibility study delivered a total estimated Initial
Capital cost of bringing the project into production of US$71.8
million excluding all contingency. This cost is based upon an EPCM
approach whereby Miraflores assumes general risk. Contingencies of
US$6.2 million was estimated for the project development.
Contingencies have been estimated at 7.67% of initial capital.
Sustaining capital requirements associated with the mine and
owner cost of US$18.5 million were included into the financial
model.
The Operating cost was based on a high productivity operation,
this will demand a high efficient environment for productivity and
cost controls. No contingency was embedded into the operating
cost.
The feasibility study delivered the following results for the
operating costs:
-- Mining cost of US$27.94 /processed t;
-- Processing cost of 20.54/processed t;
-- Tailing cost of US$0.62 /processed t; and
-- G&A cost of US$4.36 / processed t;
The total site operating cost is US$53.46 /processed t.
Government Royalty of US$52.18 / payable ounce.
Refining charges, transport and insurance of US$4.50 / payable
ounce.
Total Cash Costs of US$599 / payable ounce.
The operating cost estimate did not include Corporate overheads
and exploration activities.
Revenue Factors
The revenue estimate was conducted as per industry standards
taking into consideration the annual metal production, commercial
terms and predicted metal prices.
The revenue estimate utilized the following assumptions:
-- A gold and silver prices of US$1,300/oz and US$18 /oz respectively (Within the range of industry expectations and
Broker and Bank predictions. The gold price used is close to the moving 5 year average gold price);
-- The average processed head grade of 3.29 g/t and 2.56 g/t for gold and silver respectively (from the mine and
processing schedules);
-- Metallurgical recoveries of 92 % and 60 % for gold and silver production respectively (determined from
metallurgical testwork);
-- Metal payability factors of 96.6 % and 99.0 % for gold and silver respectively (from historical figures and
discussions with refiners);
-- Refinery and transport and insurance charges of US$4.50/ payable ounce (based on previous study estimates); and
-- Royalty of 4% of the net smelter return (based on the Miraflores licence and Existing Aporte contract expiry
(2019) prior to commencement of production in late 2019 when the licence will revert to the normal system of
concession contracts which are subject to a 4% royalty only).
Economic Analysis
Metminco developed a comprehensive financial model for the
economic evaluation of the Miraflores Gold Project. The financial
model incorporates the modifying factors delivered by the
Miraflores Feasibility Study.
The key assumptions utilised in the financial model are listed
as follows:
-- Gold and silver prices of US$1,300 /oz and US$18 /oz respectively;
-- Net smelter return as per the Revenue estimate;
-- Operating and capital costs as per industry standards;
-- Working capital and inventory management as per industry standards;
-- Debt and financing activities are excluded from the net present cost estimate;
-- All cash flows were treated in real terms, therefore, no inflation or escalation factors were applied;
-- Discount Rate of 8%;
-- Site operating cost of US$ 53,46 /processed t; and
-- Income tax of 33%.
The Miraflores Feasibility Study delivered a Net Present Value
of US$72.3 million after tax and an Internal Rate of Return of
25%.
Social Licence
According to the social base line information for the project
carried out in 2013, there were 289 families in the direct
influence area, with a total population of 1,152 inhabitants. The
village that has the largest number of inhabitants was Miraflores
with 410 inhabitants.
Community base line studies, social impact assessments and
community development plans will be complete by the end of
2017.
The Company has an existing agreement with the artisanal miners
at Miraflores that will provide education, training and jobs for
some of the certified miners while others will receive compensation
when the project enters construction and artisanal mining
ceases.
The Company maintains excellent relations with the local
community, municipality and government agencies.
Project Risks and Operating Licences
The main risks for the development of the Miraflores Gold
Project identified by the feasibility study are described as
follows:
-- Social disruptions or community unacceptance of the project;
-- Gold price;
-- Increase of the predicted capital or operating cost;
-- Not achieving the target production because of mining or processing issues. E.g. reduced ore grade, not achieving
the design processing throughput or gold recovery, etc.
-- Existing Miraflores licence contract is not renewed or the licence does not revert to the normal system of
concession contracts which are subject to a 4% royalty only);
-- Geotechnical instability; and
-- Unpredicted water levels in the underground mine.
Other than the Aporte contract for the Miraflores licence no
other material agreement is in effect at this time.
The Miraflores Project Environmental Impact Assessment Study
(2013) did not previously have an official Terms of Reference
(ToR), instead, the baseline data collection and impact assessment
development was progressed under a generic ToR for open pit mining.
This generic ToR was issued by National Authority of Environmental
Licenses (ANLA) in 2012. In July 2016, a new ToR was issued by
ANLA. The Project submitted a request to Corporacion Autonoma Del
Risaralda (CARDER) for an official ToR for the new underground
Project concept. The new ToR was obtained in August 2017 and is
being used as the basis for the ongoing environmental and social
work.
The Environmental Impact Assessment Study is expected to be
submitted in late Q4 of 2017 or early Q1 of 2018.
Plan de Trabajos y Obras or (PTO); The PTO licence is issued by
the Ministry Of Mines and Energy and must comply with the Terms of
Reference set out by the ministry for non seabed minerals and
materials.
All projects must obtain an EIA and PTO prior to commencing
development of the project. Approvals are expected to take between
4 and 6 months from submission depending on the requirement to
provide further data requested by the authorities.
Ore Reserve Estimate
The Ore Reserve estimate of the Miraflores Project is reported
as at the effective day of 18 October, 2017.
The Ore Reserves estimate is inclusive of Mineral Resources.
The reserve estimate is supported by the Miraflores Feasibility
Study complying with the JORC Code standards.
The Ore Reserve estimate provided appropriately reflects the
Competent Person's view of the opportunity for Metminco to develop
the Miraflores Gold Project based on the modifying factors derived
from the Feasibility Study work and the updated Mineral Resource
model.
The key modifying factors of the Ore Reserve estimate are
described as follows:
-- Reserves are based on a gold price of US$1,200/oz and silver price of US$18/oz;
-- An underground cut-off grade (CoG) of 1.53 g/t-Au was applied to underground resources constrained by a final
underground design;
-- Reserves are defined within an underground mine plan generated from diluted Mineral Resources;
-- Underground reserves assume a total dilution of 31%;
-- Mining and processing production schedules were developed for assessing the technical viability of the project;
-- Revenue estimates were developed as per industry standards;
-- Operating and capital cost estimates were executed as per industry standards; and
-- The construction and production schedules formed the basis for a financial model delivering a positive outcome
for the economic evaluation.
Proven: 835,606 tonnes @ 4.84g/t Au and 2.73g/t Ag
Probable: 2,142,741 tonnes @ 4.16g/t Au and 3.21g/t Ag
Proven and Probable: 2.978,346 tonnes @ 4.35g/t Au and 3.08g/t Ag
Planned Dilution: 1,347,867 tonnes @ 0.91g/t Au and 1.42g/t Ag
Statement of Accuracy
The Competent Person has recommended that further work be
conducted prior to commencement of construction of the Miraflores
Project on the following topics:
-- Geotechnical stability analysis for the underground mine, especially in the areas containing non-backfilled
stopes;
-- Stope Backfilling sequence;
-- Develop a detailed mining construction schedule;
-- Understand the predicted underground water levels;
-- Update the environmental and social costs as per the granted permit -still to be granted.
This further work may result in some changes to the modifying
factors representing a high risk for the achievement of the
technical and economic outcome of the Miraflores Gold Project
delivered by the feasibility study.
For further information,
please contact:
METMINCO LIMITED
Brian Jones Office: +61 (0) 2 9460 1856
NOMINATED ADVISOR AND BROKER
RFC Ambrian
Australia
Will Souter / Nathan Forsyth Office: +61 (0) 2 9250 0000
United Kingdom
Charlie Cryer Office: +44 (0) 20 3440 6800
JOINT BROKER
SP Angel Corporate Finance
LLP (UK)
Ewan Leggat Office: +44 (0) 20 3470 0470
PUBLIC RELATIONS
Camarco
United Kingdom
Gordon Poole / Nick Hennis Office: + 44 (0) 20 3757 4997
Media + Capital Partners
Australia
Luke Forrestal Office: +61 (0) 411 479 144
Forward Looking Statement
All statements other than statements of historical fact included
in this announcement including, without limitation, statements
regarding future plans and objectives of Metminco are
forward-looking statements. When used in this announcement,
forward-looking statements can be identified by words such as
"anticipate", "believe", "could", "estimate", "expect", "future",
"intend", "may", "opportunity", "plan", "potential", "project",
"seek", "will" and other similar words that involve risks and
uncertainties.
These statements are based on an assessment of present economic
and operating conditions, and on a number of assumptions regarding
future events and actions that, as at the date of this
announcement, are expected to take place. Such forward-looking
statements are not guarantees of future performance and involve
known and unknown risks, uncertainties, assumptions and other
important factors, many of which are beyond the control of the
Company, its directors and management of Metminco that could cause
Metminco's actual results to differ materially from the results
expressed or anticipated in these statements.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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