Updated Mine Plan and Increased Production
Schedule for the San Francisco Mine, Sonora, Mexico
TSX-V:TMM
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Timmins Gold Corp. ("Timmins" or the "Company")
announces the completion and filing of the technical report titled NI
43-101 F1 updated resources and reserves and mine plan for the San
Francisco Gold Mine, Sonora, Mexico, dated November 30, 2010,
prepared by Micon International Limited of
Toronto (Micon). The Technical Report was
prepared to update the previous technical report dated March 31, 2008 (as
amended on January 13, 2009), and to provide a base case scenario for
increased production at the San Francisco Mine as a result of rising gold
prices and a 28 % increase in the estimated mineral reserves at the mine.
Highlights
- Total gold production of 539,699 ounces from 2011 to 2016
- Average annual production of approximately 100,000 ounces of
gold
- Base case life of mine cash costs of USD489 per ounce
- Strip ratio of 1.73
- Increase of crushing capacity to 18,000 tonnes
per day
Commenting
on the Technical Report results, Timmins Gold President Arturo Bonillas said: "The Technical Report confirms the
robust economics of the San Francisco Mine. The increase in the mineral
reserves at the San Francisco Mine has been obtained from the successful
drilling undertaken up to June 30, 2010 and higher gold prices. The
decision to increase the capacity of the crushing system to 18,000 tonnes per day by adding one more module has been
derived from a number of factors including the successful startup of the
mine, rising gold prices and the commensurate decrease in cutoff grade, and
management's conviction that additional reserves will be established in and
around the pit as a result of the extensive drilling program planned for
2011. We are confident that the base case scenario is conservative and that
we will be able to achieve lower cash costs in actual operations."
RESOURCE AND RESERVE ESTIMATES
Mineral Resource
The updated mineral resource estimate was initially published on November
16, 2010. Figures have been rounded to reflect that they are estimations.
Mineral Resources that are not Mineral Reserves do not, however, have
demonstrated economic viability.
Mineral Resource Estimate (Inclusive of Mineral Reserves)
(Cut-off Grade 0.131 g/t Gold, USD 1,100 Gold Price)
|
Resource Classification
|
Tonnes (x 1,000)
|
Gold Grade (g/t)
|
Contained Gold (oz)
|
|
Measured
|
19,089
|
0.797
|
489,000
|
|
Indicated
|
23,442
|
0.658
|
495,000
|
|
Total Measured
and Indicated
|
42,531
|
0.720
|
984,000
|
|
Inferred
|
10,308
|
0.628
|
208,000
|
For open pit resources, Timmins utilized Lerchs
Grossman pit shell geometry at reasonable long term prices, costs and
recovery assumptions. The resource is based on a pit shell constructed at a
gold price of USD 1,100 per ounce. Pit optimization was based on Measured,
Indicated and Inferred resources which includes undiluted mineral reserve
material based on data available as at August 31, 2010.
Mineral Reserve
Proven and Probable Reserves derived from the Measured and Indicated
mineral resources including mine recovery and a dilution factor of 12% have
been estimated within the ultimate pit outline commensurate with a gold
price of USD 900 per ounce. Figures have been rounded to reflect that they
are estimations.
Mineral Reserves after Mining Recovery and Dilution
(Cut-off Grade 0.16 g/t Gold at USD 900/oz)
|
In Pit Reserves
|
In Pit Waste
|
|
Classification
|
Tonnes (x 1,000)
|
Grade (g/t)
|
Contained Ounces
|
Waste Tonnes (x 1,000)
|
Total Tonnes (x 1,000)
|
Stripping Ratio
|
|
Proven
|
17,194
|
0.756
|
418,000
|
|
|
|
|
Probable
|
17,738
|
0.635
|
362,000
|
|
|
|
|
Total
|
34,932
|
0.695
|
780,000
|
60,417
|
95,349
|
1.73
|
The strip ratio is estimated to be 1.73.
ECONOMIC EVALUATION
Metal Price Forecast
Revenue projections are based on a constant gold price of USD 1,000/oz in
real terms, closely approximating the 3-year trailing average price but
significantly lower than current spot prices. Accordingly, the sensitivity
of the project to a gold price in a range of up to USD 1,400/oz has also
been evaluated. For minor silver content, a price of USD 17/oz has been
used.
The undiscounted base case cash flow evaluates to approximately USD 273.6
million before tax and USD 207.1 million after tax. The base case Net
Present Value (NPV) at a discount rate of 8%/y (NPV) evaluates to
approximately USD 216.8 million before tax and USD 163.1 million after tax.
As pre-2011 capital costs have been treated as sunk, no internal rate of
return has been calculated. The average cash cost of production equates to
USD 489 per ounce of gold, or USD 7.88 per tonne
treated.
Base Case
The base case evaluation has been made for a nominal through put rate of
18,000 tonnes per day, which is expected to be
achieved by July, 2011. A summary of the base case life-of-mine statistics
and annual cash flows are summarized in the table below.
Project Base Case Annual Cash Flows at USD 1,000 Per Ounce of Gold
|
|
USD 000
|
2011
|
2012
|
2013
|
2014
|
2015
|
2016
|
LOM total
|
|
Revenue
|
Gross Sales
|
94,272
|
103,502
|
103,042
|
103,913
|
86,217
|
48,744
|
539,689
|
|
|
Bullion delivery
|
274
|
305
|
278
|
280
|
236
|
124
|
1,497
|
|
|
Bullion refining
|
112
|
123
|
120
|
121
|
101
|
52
|
629
|
|
|
Net Sales Revenue
|
93,885
|
103,074
|
102,644
|
103,513
|
85,880
|
48,567
|
537,564
|
|
|
|
|
|
|
|
|
|
|
|
Cash Op. Costs
|
Mining costs
|
35,528
|
33,279
|
29,418
|
24,260
|
23,722
|
13,572
|
159,779
|
|
|
Crushing costs
|
8,525
|
9,455
|
9,454
|
9,454
|
9,439
|
2,709
|
49,036
|
|
|
Leach costs
|
5,666
|
6,340
|
6,340
|
6,340
|
6,337
|
1,380
|
32,405
|
|
|
ADR costs
|
1,442
|
1,576
|
1,576
|
1,576
|
1,570
|
428
|
8,168
|
|
|
Metallurgy & Lab costs
|
441
|
451
|
451
|
451
|
446
|
193
|
2,434
|
|
|
G&A costs
|
1,923
|
1,997
|
1,997
|
1,997
|
1,977
|
781
|
10,672
|
|
|
Total Cash Operating Costs
|
53,526
|
53,098
|
49,236
|
44,077
|
43,491
|
19,065
|
262,494
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash
Operating Margin (EBITDA)
|
40,359
|
49,975
|
53,408
|
59,435
|
42,389
|
29,502
|
275,070
|
|
|
|
|
|
|
|
|
|
|
|
Capital
|
Initial/expansion capital
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
|
Sustaining capital
|
6,143
|
690
|
2,729
|
393
|
302
|
302
|
10,559
|
|
|
Changes in working
capital
|
5,915
|
1,013
|
-375
|
-321
|
-2,247
|
-13,090
|
-9,107
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flow
before tax
|
28,302
|
48,273
|
51,055
|
59,363
|
44,335
|
42,291
|
273,618
|
|
Taxation payable
|
9,082
|
12,706
|
13,195
|
14,370
|
9,512
|
7,658
|
66,523
|
|
Net cash flow
after tax
|
19,220
|
35,567
|
37,859
|
44,993
|
34,823
|
34,633
|
207,095
|
|
|
|
|
|
|
|
|
|
|
|
Discounted Cash
Flow (8 %/y) Pre-Tax
|
27,234
|
43,010
|
42,119
|
45,345
|
31,357
|
27,696
|
216,760
|
|
Cumulative DCF (8 %/y) Pre-tax
|
27,234
|
70,243
|
112,362
|
157,707
|
189,064
|
216,760
|
|
|
|
|
|
|
|
|
|
|
|
|
Discounted Cash
Flow (8 %/y) After tax
|
18,494
|
31,689
|
31,233
|
34,369
|
24,630
|
22,681
|
163,096
|
|
Cumulative DCF (8 %/y) After tax
|
18,494
|
50,183
|
81,416
|
115,785
|
140,415
|
163,096
|
|
Sensitivity Study
Sensitivity of the NPV to changes in gold price, operating and capital
costs has been analyzed. Revenues are directly proportional to gold price,
recovery and grade. With an adverse change of 30% (i.e., a reduction in
gold price to USD 700 per ounce), NPV remains strongly positive; economic
break-even occurs with a gold price of around USD 510 per ounce. At USD
1,300 per ounce, NPV before tax is estimated at approximately USD 349
million.
Sensitivity of the project NPV has also been determined for a specified
range of gold prices.
Sensitivity of NPV to Gold Price
|
Gold Price
US$/oz
|
NPV before tax
(US$ 000)
|
NPV after tax
(US$ 000)
|
|
600
|
40,309
|
39,764
|
|
700
|
84,422
|
75,151
|
|
800
|
128,535
|
104,487
|
|
900
|
172,648
|
132,981
|
|
1,000
|
216,760
|
163,096
|
|
1,100
|
260,873
|
193,292
|
|
1,200
|
304,986
|
224,666
|
|
1,300
|
349,099
|
256,040
|
|
1,400
|
393,211
|
287,415
|
The project is moderately sensitive to operating costs. As the bulk of
project capital costs are already sunk, sensitivity to capital expenditures
is negligible.
CONCLUSIONS
The following is a summary of Micon's
conclusions:
"Micon has reviewed Timmins' operational
plans for the San Francisco mine and believes that the mine plan and
operational parameters have been well thought out. It is Micon's opinion that the San Francisco mine is a
well-run operation. Micon supports the further
economic studies to determine the impact of increasing the crusher
throughput to 18,000 tonnes per day.
Micon has reviewed the proposed exploration
program for San Francisco. It is Micon's opinion
that Timmins' proposed exploration plans are properly conceived and
justified for the San Francisco Mine and property.
Given the known extent of mineralization on the property, compared to the
amount of mining activity, the San Francisco Mine and property has the
potential to host further deposits or lenses of gold mineralization,
similar in character and grade to those exploited in the past, outside the
present resource base."
Qualified Person
This press release was reviewed and prepared by Lawrence A. Dick, Ph.D., P.Geo, a director of the Company, who is recognized as
a Qualified Person under the guidelines of National Instrument 43-101 and
by Miguel Soto, P. Geo., a director and the COO of the Company. Pursuant to
National Instrument 43-101, Mr. William Lewis, B.Sc., P.Geo.,
Mr. Mani Verma, M.Eng.,
P.Eng., Ing. Alan J.
San Martin, MAusIMM., from Micon
International Ltd, (Micon), of Toronto, Ontario
are the independent Qualified Persons responsible for the Mineral Reserve
and Mineral Resource Estimate. Mr. Christopher A. Jacobs, CEng, MIMMM and Mr. Richard M. Gowans,
B.Sc., P.Eng. of Micon
International Ltd, (Micon), of Toronto, Ontario
are the independent Qualified Persons responsible for the economic
assessment and metallurgy. Each of Mr. Lewis, Mr. Verma,
Mr. San Martin, Mr. Jacobs, Mr. Gowans, Mr. Dick
and Mr. Soto have read and approved the contents of this news release. For
further information please contact at 604-682-4002, or go to the website at
www.timminsgold.com
or contact our President Arturo Bonillas at arturo@timminsgold.com
or 011-52-662-252-1132.
On behalf of the Board:
Bruce Bragagnolo, LLB
Chief Executive Officer
604-638-8980
bruce@timminsgold.com
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While these forward-looking statements, and any assumptions upon which
they are based, are made in good faith and reflect our current judgment
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vary, sometimes materially, from any estimates, predictions, projections,
assumptions or other future performance suggestions herein. Except as
required by applicable law, Timmins Gold does not intend to update any
forward-looking statements to conform these statements to actual results.
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