Re: News Release - Thursday, December 03, 2009
Title: Skeena Announces Robust Preliminary Assessment Results for Malpica Copper-Gold Project, Mexico
News Release: 09-11
Skeena Resources Limited (TSX.V: SKE) ("Skeena" or the "Company") is pleased to announce a Canadian National Instrument ("NI") 43-101 compliant Preliminary Assessment or Scoping Study (the "Study") for the Company's Malpica copper-gold-molybdenum project in Sinaloa State, 30 km east of Mazatlan, Mexico (the "Malpica Project" or Project"). The Study was completed by Mr. Stephen Godden, F.I.M.M.M., C. Eng., Consulting Engineer and Director of S. Godden & Associates Limited ("SGA") of Welwyn Garden City, UK. Mr. Godden is an independent Qualified Person, as defined under NI 43-101. He is the principal author of the Technical Report that will be filed on www.sedar.com and posted to the Company's website within 45 days of this news release.
The Study is predicated on an in-pit diluted Mineral Resource of 37.34 million tonnes grading 0.519% Cu and 0.416 g/t gold, above a grade cut-off of 0.25% Cu. The preliminary open-pit optimization and design studies were completed by Mr. Godden, in conjunction with Maptek/KRJA Systems Limited of Edinburgh, UK, utilizing VulcanTM software.
Assuming 100 percent equity funding (excluding the potential benefits and costs of debt financing) and a contractor operated, leased mine vehicle fleet, the Study indicates an EBITDA (pre-tax and excluding interest, depreciation and amortization, but including estimated royalties) Internal Rate of Return ("IRR") of 37 percent. The estimated payback period is approximately 1.5 years for pre-production capital and approximately 4.9 years if the deferred capital cost for the flotation plant is included (see below). Using a base case copper price of US$2.50 per pound and a base case gold price of US$825 per Troy ounce, the Study demonstrates that the Project yields an estimated, cumulative operating profit of US$323.27 million and an undiscounted, EBITDA Net Present Value ("NPV") of US$200.86 million. At a copper price of US$3.00 per pound and a gold price of US$990 per Troy ounce the undiscounted, EBITDA NPV of the Project increases to $410.02 million and the EBITDA IRR increases to 66%.
The Company is further pleased to announce an NI 43-101 compliant Mineral Resource estimate for the Project The estimate has been prepared by Mr. Gary Giroux, M.A.Sc., P. Eng (B.C.), a consulting geological engineer employed by Giroux Consultants Ltd. and an independent Qualified Person as defined under NI 43-101. The geological models were prepared by Mr. John Zbeetnoff, P.Geo., a geological consultant to the Company.
The following Tables 1 and 2 summarize the tonnages and grades above a range of copper grade cut-offs. The estimate contains an Indicated Mineral Resource of 9.66 million tonnes with average, undiluted grades of 0.589% Cu (125.46 million lbs Cu) and 0.491 g/t gold (150,000 oz Au), at a grade cut-off of 0.25% Cu. An additional 39.6 million tonnes with average, undiluted grades of 0.48% Cu (416.51 million lbs Cu) and 0.41 g/t Au (520,000 oz Au), at a grade cut-off of 0.25% Cu, have been classified as Inferred Mineral Resources.
Table 1: Estimated Indicated Mineral Resources (undiluted), Malpica Project
|
Cu (%)
Cut-off |
Tonnes |
Average Grades |
Million
lbs Cu |
Million
oz Au |
|
Cu (%) |
Au (g/t) |
|
0.10 |
10,630,000 |
0.553 |
0.477 |
129.62 |
0.16 |
|
0.15 |
10,510,000 |
0.558 |
0.479 |
129.31 |
0.16 |
|
0.20 |
10,180,000 |
0.571 |
0.485 |
128.17 |
0.16 |
|
0.25 |
9,660,000 |
0.589 |
0.491 |
125.46 |
0.15 |
|
0.30 |
8,890,000 |
0.616 |
0.499 |
120.75 |
0.14 |
|
0.35 |
7,940,000 |
0.651 |
0.509 |
113.98 |
0.13 |
|
0.40 |
6,810,000 |
0.697 |
0.515 |
104.66 |
0.11 |
|
0.45 |
5,820,000 |
0.743 |
0.523 |
95.35 |
0.10 |
|
0.50 |
4,940,000 |
0.791 |
0.534 |
86.16 |
0.08 |
|
0.55 |
4,190,000 |
0.838 |
0.547 |
77.42 |
0.07 |
|
0.60 |
3,490,000 |
0.892 |
0.548 |
68.64 |
0.06 |
Table 2: Estimated Inferred Mineral Resources (undiluted), Malpica Project
|
Cu (%)
Cut-off |
Tonnes |
Average Grades |
Million
lbs Cu |
Million
ozs Au |
|
Cu (%) |
Au (g/t) |
|
0.10 |
45,890,000 |
0.439 |
0.393 |
444.21 |
0.58 |
|
0.15 |
45,390,000 |
0.443 |
0.394 |
443.38 |
0.57 |
|
0.20 |
43,140,000 |
0.457 |
0.400 |
434.72 |
0.55 |
|
0.25 |
39,600,000 |
0.477 |
0.409 |
416.51 |
0.52 |
|
0.30 |
33,910,000 |
0.511 |
0.422 |
382.08 |
0.46 |
|
0.35 |
27,800,000 |
0.552 |
0.434 |
338.37 |
0.39 |
|
0.40 |
22,330,000 |
0.595 |
0.438 |
292.96 |
0.31 |
|
0.45 |
17,820,000 |
0.639 |
0.441 |
251.08 |
0.25 |
|
0.50 |
14,340,000 |
0.678 |
0.444 |
214.38 |
0.20 |
|
0.55 |
11,280,000 |
0.720 |
0.446 |
179.08 |
0.16 |
|
0.60 |
8,530,000 |
0.768 |
0.447 |
144.45 |
0.12 |
The estimated Mineral Resources have also been classified by oxidation state. Table 3 summarizes the estimated amounts of Mineral Resource present within the oxide, transitional and sulphide zones, at a grade cut-off of 0.25% Cu.
Table 3: Summary of Estimated, Undiluted Mineral Resources by Oxidation State,
0.25% Cu Grade Cut-Off, Malpica Project
|
Alteration |
Classification |
Tonnes |
Average Grades |
Million
lbs Cu |
Million
ozs Au |
|
Cu (%) |
Au (g/t) |
|
Oxide
Transitional
Sulphide
Total |
Indicated
Indicated
Indicated
Indicated |
1,080,000
1,070,000
7,510,000
9,660,000 |
0.519
0.536
0.607
0.589 |
0.286
0.334
0.543
0.491 |
12.36
12.65
100.52
125.46 |
0.01
0.01
0.13
0.15 |
|
Oxide
Transitional
Sulphide
Total |
Inferred
Inferred
Inferred
Inferred |
4,560,000
2,960,000
32,080,000
39,600,000 |
0.496
0.491
0.473
0.477 |
0.299
0.331
0.432
0.409 |
49.87
32.05
334.58
416.51 |
0.04
0.03
0.45
0.52 |
The Mineral Resource estimates are based on 137 Diamond drill holes totalling 22,954 metres and 9,662 assays intervals, of which 35 Diamond drill holes totalling 5,600 metres and 2,828 assay intervals were completed by Skeena. The balance of the data was generated from historical drill holes. Check assays on historical drill core were completed by Skeena to ascertain the reliability of the historical database. The Mineral Resource estimates will be detailed in a NI 43-101 Technical Report (further described below), with an effective date of October 31, 2009, which will be filed on www.sedar.com and posted to the Company's website within 45 days of this news release.
The Project would be an open pit, heap leach operation only for the first 3.5 years of its life, when mainly oxide material would be mined (for purposes of preliminary analysis, oxide and transitional mineralized materials were modelled as a single, undifferentiated material suitable for heap leaching). The small amount of sulphide material that would be mined during this period would be stockpiled. Preliminary process design is based on copper recovery from run-of-mine oxide (plus transitional) material by conventional acid heap leach, followed by SX-EW, rinsing, crushing, caustic and lime addition, stacking and then cyanide leaching for gold. Over seven years of oxide production, the heap leach process would yield 79.07 million pounds of copper in cathode and 58,400 ounces of gold in dor�, with approximately 61 percent of this being recovered during the first three production years. During the second half of Production Year 4, sulphide material would start to be processed by conventional flotation methods. The flotation plant would produce a primary copper concentrate for sale, with significant gold credits.
The proposed operation would recover an estimated, cumulative 358.14 million pounds of copper and an estimated, cumulative 385,900 ounces of gold at an average stripping ratio of 1.78, over an estimated 11.4 year mine life. The estimated average annual recovered metal production would be 31.49 million pounds of copper and 33,900 Troy ounces of gold. Cumulative gross revenue during the mine life would be US$962.75 million, generating a cumulative operating profit of US$323.27 million for the base case metal prices (copper at US$2.50 per pound and gold at US$825 per Troy ounce). Life-of-mine capital costs are estimated at US$122.42 million (inclusive of an overall 10 percent contingency), US$33.09 million of which (inclusive of an overall 10 percent contingency) is required for pre-production Project development and to start the heap leach operation. The largest single capital cost item, the flotation plant at an estimated US$70 million, can be deferred to Production Years 3 and 4. Overall cash margins per recovered pound of copper, net of gold by-product credits, is projected to be US$0.56.
The robustness of the preliminary financial results was explored using sensitivity analyses to examine the impact of varying the estimated capital costs, operating costs, metal prices and process recovery rates. The results show that, in common with most mining projects, the EBITDA NPV of the Project is most affected by metal prices and by the copper price in particular. For example:
- a 20 percent increase in the base case metal price (US$2.50/lb Cu) to US$3.00/lb Cu realizes an increase in the undiscounted EBITDA NPV of approximately US$155.2 million; and
- if a discount rate of eight percent is applied, the EBITDA NPV increases by approximately US$80.4 million when the base case copper price is increased by 20 percent.
The Project is less sensitive to the gold price, insofar as an increase of 20 percent to the base case gold price (US$825/oz Au) yields an increase in the undiscounted EBITDA NPV of approximately US$54.0 million and approximately US$27.0 million at a discount rate of eight percent.
Table 4: EBITDA Financial Highlights, Malpica Project
|
Total tonnes milled & processed (diluted)
Total waste tonnes mined
Overall average stripping ratio
Overall average diluted grades (oxide + sulphide) |
37.37 Mt
66.56 Mt
1.78
0.519% Cu
0.416 g/t Au |
|
Tonnes processed -- oxide material (heap leach process)
Average diluted grades -- oxide material |
9.25 Mt
0.485% Cu
0.302 g/t Au |
|
Tonnes milled -- sulphide material (conventional flotation)
Average diluted grades -- sulphide material |
28.09 Mt
0.530% Cu
0.453 g/t Au |
|
Total recovered metal (from processes, excluding smelter terms) |
358.14 M lbs Cu
385,900 oz Au |
|
Average annual metal recovery
(Life-of-Mine = 11.4 years) |
31.49 M lbs Cu
33,932 oz Au |
|
Overall average on-site operating cost
Overall average operating cost per pound of recovered copper
Overall average margin per pound of recovered copper |
US$ 17.13/t milled
US$ 1.79/lb Cu
US$ 0.56/lb Cu |
|
Pre-production capital cost (incl. 10% contingency)
Additional capital cost (incl. 10% contingency, sustaining capital and
deferred capital for flotation plant, tailings facility lifts and closure)
Overall capital cost (incl. sustaining capital and 10% contingency) |
US$ 33.10 million
US$ 89.32 million
US$122.42 million |
|
Net cashflow (EBITDA, inclusive of royalties)
EBITDA NPV (8%)
EBITDA NPV (12%)
EBITDA IRR |
US$200.86 million
US$ 85.19 million
US$ 55.95 million
37% |
|
EBITDA payback period (for initial capital cost, incl. 10% contingency)
EBITDA payback period (incl. deferred capital for flotation plant) |
Approx. 1.5 years
Approx. 4.9 years |
Rupert Allan, President and CEO of Skeena, commented that "these robust economic results for a comparatively modest size deposit are directly attributable to its fortuitous location in an area of low cost infrastructure, the low average stripping ratio, an oxidized cap over the mineralized zones, early cash flow generated by the application of heap leach technology and the opportunity to delay construction of a conventional flotation plant to Production Years 3 and 4. We are encouraged by the Study and will be advancing the Project to full feasibility and environmental permitting as quickly as possible".
"Upside economic potential exists in a number of areas. As with any historic project, some of the early work, particularly by Asarco in the 1960s and 1970s, was not sufficiently documented to allow for its inclusion within the scope of a (NI 43-101 compliant) Preliminary Assessment. Thus:
- neither silver nor molybdenum credits are included in the Preliminary Assessment (the former would report to a bulk copper concentrate and the latter into a selective/cleaned molybdenum concentrate);
- the Company is confident that the gold values are under-reported as a consequence of early operators not assaying for gold and of the Mineral Resource estimate not including significant surface trench results when survey control was judged not to be sufficiently stringent (twinning some of the historic drillholes and additional survey control could, therefore, add to the gold resource);
- a portion of the main mineralized zones remain open down-dip and along strike - more in-fill and step-out drilling is required, which could lead to an expanded Mineral Resource;
- the Study relied exclusively on historic metallurgical investigations by Asarco and Cambior, where a range of metal recoveries have been indicated the lower or average rate was assumed for purposes of preliminary cashflow modelling --
- copper recoveries from both oxide and sulphide material could be five percent higher - the available metallurgical test data suggests they could average 85 percent and 90 percent, respectively, whereas the base case average rates assumed for purposes of preliminary cashflow modelling were 80 percent and 85 percent, respectively,
- gold recovery into a bulk copper concentrate could be five percent higher - the available metallurgical test data suggests it could average 85 percent, whereas the base case average rate assumed for purposes of preliminary cashflow modelling was 80 percent, and
- further column leach investigations are planned, and the oxide-mixed-sulphide boundaries require further definition;
- depending on metal prices, the copper cut-off grade (currently 0.25% Cu) could be reduced, thereby increasing the available tonnage of mineralized material available for extraction; and
- other well-defined exploration targets exist on the Malpica property".
This release makes mention of Inferred Mineral Resources. Readers are cautioned that Inferred Mineral Resources are considered geologically speculative and have a great deal of uncertainty as to their existence and economic viability. Mineral resources that are not mineral reserves do not have demonstrated economic viability. Readers are further cautioned that there is no certainty that either the Mineral Resources will be proven to be economically viable or that the Project can achieve the economic results estimated herein. The Project is also subject to other risk factors such as environmental reviews and permitting.
Study Highlights:
Location
The Malpica Project is exceptionally well located with respect to available infrastructure -- it is traversed by a paved highway and a major power supply line, the Project area is approximately 13 kilometres east of a main rail line, 10 kilometres east of Rio Presidio and the agricultural service town of Villa Union, 27 kilometres east of the Mazatlan international airport and approximately 35 kilometres east of the deep water port at Mazatlan.
Geology
The Malpica Deposit is hosted by a younger, granodioritic intrusive phase of the calc-alkalic Sinaloa Batholith. Copper, gold, silver and molybdenum mineralization is associated with hydrothermally altered, sub-parallel and tabular breccia zones (quartz-tourmaline veinlets, stockwork and fracture fillings) containing sulphide-deficient occurrences of disseminated chalcopyrite, pyrite, bornite, chrysocolla and molybdenite.
Capital Investment
The initial capital investment amounts to an estimated US$32.81 million (inclusive of a 10 percent overall contingency) over a two year, pre-production period when site preparation, construction of heap leach pads, installation of crushing and stacking facilities, construction a tailings storage facility and construction the heap leach Adsorption/Desorption Recovery (ADR) and refining/dor� plants would be completed. The estimated life-of-mine capital costs are summarized on Table 5.
Table 5: Summary of Preliminary Capital Cost Estimates, Malpica Project
|
Capital Cost |
Elements |
Estimated Cost
(million US$) |
Comments |
|
Pre-Production |
Permits, EIS & community
General site works
Surface infrastructure
Moving adjacent road
Heap leach plant
Tailings storage facility
Project design & ECPM
Sub-total |
0.65
3.25
0.83
1.96
10.85
12.00
0.55
30.09 |
-
incl. power line move, power supply, water supply, access roads and infrastructure pads
incl. contractor site establishment
-
incl. heap leach pads, crushing & stacking, SX-EW circuit, ADR/elution circuit, refining/ dor� plant, laboratory & first fill inventory
first build, NAFTA standards
-
- |
|
Other |
Pre-strip
Flotation plant
Tailings storage lifts
Closure
Sub-total |
0.30
70.00
4.00
3.00
77.30 |
-
all-in cost
-
deferred to end of mine life
- |
|
Sustaining |
Heap Leach Plant
Flotation Plant
Sub-total |
0.05 per year
0.50 per year
3.90 |
Over active period of plant, US$0.40 million
ditto, US$3.50 million |
|
Contingency |
10% |
11.13 |
Contingency rate applied to all estimates |
|
Total |
- |
122.42 |
- |
Mining
The preliminary mining plan was developed from the Inferred and Indicated Mineral Resources estimated by Giroux Consultants Ltd. Pit optimization was performed using VulcanTM software, based on the Lerchs-Grossmann pit shell algorithm - it resulted in an estimated mining resource conversion rate of approximately 76 percent of the estimated Inferred and Indicated Mineral Resources, at a grade cut-off of 0.25% Cu. Owing to the size and distribution of economic grades in the deposit, pit optimization resulted in three distinct pit shells of varying sizes and depths. The largest pit contains some 25.57 million tonnes (undiluted), representing approximately 67 percent of the total (undiluted) mineable Mineral Resource.
The preliminary pit designs were based on a maximum inter-ramp pit slope angle/batter of 55 degrees, a maximum highwall of approximately 250 metres and 18 metre wide haul roads with average gradients of 1:10. The deposit would be mined by conventional open pit methods, using trucks and shovels. The life-of-mine stripping ratio has been estimated at 1.78.
Table 6 summarizes the preliminary production schedule. The production and processing rate for oxide and transitional material (that occurs in approximately the upper 40 metres of each of the three pits), excluding waste, has been scheduled at 5,000 tonnes per day for the first four years of the heap leach operation. Sulphide processing would start in the second half of Production Year 4, when sulphide mineralized material would be drawn from a stockpile and selectively mined in conjunction with oxide material. Full production throughput in the flotation plant would be achieved in Production Year 5, when the daily production rate of mineralized material would increase to 10,000 tonnes per day of sulphide material, plus rapidly decreasing amounts of oxide and transitional material. The heap leach operation would end early in Production Year 7.
Table 6: Summary of Preliminary Mine Production Schedule, Malpica Project
|
Production
Year |
Oxide
Tonnes
(million) |
Sulphide
Tonnes
(million) |
Average
Diluted Grades |
Recovered Metal |
Opex/lb Recovered Cu (US$) |
|
Cu (%) |
Au (g/t) |
Cu (lbs) |
Au (oz) |
|
1 |
1.825 |
- |
0.467 |
0.184 |
15,030,779 |
4,692 |
1.32 |
|
2 |
1.825 |
- |
0.542 |
0.306 |
17,446,136 |
10,258 |
1.29 |
|
3 |
1.825 |
- |
0.501 |
0.413 |
16,136,582 |
15,912 |
1.80 |
|
4 |
1.825 |
1.179 |
0.454 |
0.210 |
24,751,958 |
15,225 |
2.01 |
|
5 |
1.400 |
3.650 |
0.483 |
0.411 |
44,962,244 |
50,526 |
2.06 |
|
6 |
0.332 |
3.650 |
0.512 |
0.641 |
37,986,096 |
67,282 |
1.82 |
|
7 |
0.218 |
3.650 |
0.507 |
0.420 |
36,605,350 |
41,691 |
1.97 |
|
8 |
- |
3.650 |
0.571 |
0.354 |
39,065,679 |
33,568 |
1.78 |
|
9 |
- |
3.650 |
0.458 |
0.528 |
31,314,637 |
49,533 |
1.98 |
|
10 |
- |
3.650 |
0.604 |
0.407 |
41,281,928 |
38,187 |
1.59 |
|
11 |
- |
3.650 |
0.610 |
0.431 |
41,698,950 |
40,435 |
1.55 |
|
12 |
- |
1.357 |
0.466 |
0.533 |
11,856,953 |
18,589 |
1.90 |
|
Totals & Averages |
9.250 |
28.086 |
0.519 |
0.416 |
358,137,292 |
385,898 |
1.79 |
Heap Leaching
Preliminary design is based on truck-stacking run-of-mine oxide and transitional material on a specially prepared heap leach pad. The heap would then be sprayed with acid; the resultant liquor would be collected and pumped through an SW-EX plant to recover copper as copper cathodes. The spent material would then be rinsed and neutralized, crushed, pH adjusted and stacked by conveyor for application with a dilute cyanide solution. The pregnant solution would be recovered and processed through an ADR plant to recover gold by carbon adsorbtion, elution and then electro-winning.
Mineral Processing
The preliminary process designs are based exclusively on historical metallurgical testing undertaken by Asarco Smelting and Refining (in 1970), Pegasus Gold (in 1994) and Cambior (at Metcon Research in 1994 and Mineral Research Development in 1995). This testing confirmed the viability of both the heap leach and conventional flotation methods, the latter to produce bulk copper concentrates. Additional metallurgical testwork will be required for the final feasibility study to confirm the historical results, to investigate the variability of the deposits and to optimize final plant flowsheets.
In order to minimize the environmental impact of the Project, options such as the placement of tailings in depleted open pits will be investigated. All available, Project-related Acid Base Accounting (ABA) and Net Acid Generation (NAG) analyses indicate that the process tailings are likely to be non-acid generating. The sulphide sulphur content of the deposit is low and there appears to be adequate carbonate to neutralize any potential acid generation.
Operating Costs
Table 7 summarizes the preliminary operating cost estimates for the operations outlined. The total, on-site operating cost for the heap leach period is estimated at US$7.60 per tonne processed, plus US$0.50 per wet metric tonne ("WMT") for tailings disposal. The total, on-site operating cost for the flotation processing period is estimated at US$16.75 per tonne milled, plus US$0.50/WMT for tailings disposal.
Table 7: Summary of Preliminary Operating Cost Estimates, Malpica Project
|
Operating Cost |
Estimated Unit
Cost (US$) |
Comments |
|
Contract mining
Owner site management
Equipment lease
Leach plant processing
G&A during leach plant period
Flotation plant processing
G&A during flotation period
Tailings disposal |
1.75/t mined
0.25/t mined
1.00/t mined
2.85/t processed
1.75/t processed
12.50/t milled
1.25/t milled
0.50/WMT |
Mineralized material and waste
Mineralized material and waste
Mineralized material and waste
Owner operated
-
Owner operated
Cost reflects benefit of increased production rate
Heap leach and flotation plant tailings |
Qualified Persons
Mr. Stephen Godden, F.I.M.M.M., C.Eng. is the author of the Malpica Project Preliminary Assessment (the "Study"). Mr. Gary Giroux, M.Sc., P.Eng. is the author of the Mineral Resource estimate for the Malpica Project. Mr. John Zbeetnoff. P. Geo. is the geologist responsible for geological modeling, compilation of the database and QA/QC of the drillcore assays. Mr. Rupert Allan, P.Geol., Skeena's President and CEO, is the Company's designated Qualified Person for the Malpica Project. Messrs. Godden, Giroux, Zbeetnoff and Allan have reviewed and approved the contents of this news release.
ON BEHALF OF THE BOARD OF DIRECTORS OF
SKEENA RESOURCES LIMITED
"Rupert Allan"
J. R. Allan, P.Geol., President & CEO
Neither TSX Venture Exchange nor the Investment Industry Regulatory Organization of Canada accepts responsibility for the adequacy or accuracy of this release.
This news release contains forward-looking statements that are not based on historical fact, including those identified by the use of forward-looking terminology such as statements containing the words "believes", "may", "will", "estimates", "continue", "anticipates", "intends", "expects", "should" or the negatives thereof and words of similar import.
Management of the Company cautions that these forward-looking statements are subject to risks and uncertainties that could cause actual events or results to differ materially from those expressed or implied by the statements. Management believes that the estimates are reasonable, but should not unduly be relied upon. The Company makes no representation, warranty (express or implied), or assurance as to the completeness or accuracy of these projections and, accordingly, expresses no opinion or any other form of assurance regarding them. Management does not intend to publish updates or revisions of any forward-looking statements included in this document to reflect the Company's circumstances after the date hereof or to reflect subsequent market analysis. |