Yellowhead Mining Reports Completion of Feasibility Study; Confirms Robust Economics Over a 28 Year Project Life
VANCOUVER, March 2, 2012 /PRNewswire/ --
Yellowhead Mining Inc. (TSXV: YMI), "YMI" or "the Company") reports the results of the independent Harper Creek Feasibility Study ("FS").
Highlights
- The project estimated pre-tax NPV8 is $749.7 million with an IRR of 20.2% for a 28 year project life at a milling rate of 70,000 tpd (25.55Mt/y), based on long-term metal price projections of US$2.50/lb Cu, US$1,250/oz Au and US$20/oz Ag, and a US$:Cdn$ exchange rate of 0.86:1.Capital costs are estimated at $838.95 million[1]+/- 15% in Q4 2011 dollars, including contingency of 10% or $76.4 million.
- Life of Mine ("LOM") onsite cash operating costs, including precious metal credits, are estimated at US$0.95/lb Cu (US$0.80/lb for the first 5 years) and total onsite and offsite cash cost (including precious metal credits) is estimated at US$1.56/lb Cu.
- LOM[2] cash operating costs per tonne milled are estimated as follows: Mining $2.82; Milling $3.12; Site Services $0.28; General & Administrative $0.38 for a total of $6.60/t milled.
- The project as designed is expected to produce a total of 3.63 billion pounds of copper, 372,000 ounces of gold and 14 million ounces of silver contained in concentrate.
- LOM stripping ratio is estimated at 0.81:1. The mill is also scheduled to process ore recovered from low grade stockpile for the last 5 years of operation. During pre-production in year -1 a total of 30 million tonnes is expected to be mined predominately for roads, tailings starter dam and other civil construction activities.
- The FS is based on an updated resource (refer to press release dated February 16, 2012). At a 0.20% Cu cutoff Measured Resources are estimated at 348.5Mt at 0.31 % Cu, 0.034g/t Au, 1.3g/t Ag; Indicated Resources at 466.5Mt at 0.28% Cu, 0.03g/t Au, 1.3g/t Ag for a total Measured and Indicated Resource of 815Mt at 0.29% Cu, 0.032g/t Au and 1.3g/t Ag. A further 80.17Mt at 0.30% Cu, 0.033g/t Au, and 1.4g/t Ag are estimated in the Inferred Resource category and is reported as waste in the mine production schedule until it can be upgraded by additional infill drilling.
- Total mineable reserves were determined by pit optimization runs using a Lerchs-Grossmann algorithm to determine the "optimum" pit limit. At a 0.14% Cu cutoff, Proven Reserves are estimated at 401.18Mt @ 0.272% Cu, 0.031g/t Au and 1.15g/t Ag; Probable Reserves 303.22Mt @ 0.248% Cu, 0.027g/t Au and 1.13g/t for a total Proven and Probable Reserve of 704.4Mt @ 0.262% Cu, 0.029g/t Au and 1.14g/t Ag.
- Sustaining capital over the project life is estimated at $293.2 million.
Production Statistics
The following table details production estimates by period.
Ore Avg Cu
Milled Head Grade Recovered to Concentrate Recovery
Copper Gold Silver Cu Au Ag
Mt % g/t g/t lb X 1000 oz oz %
Years
1 - 5 125,195 0.31 0.04 1.15 762,944 85,145 2,635,177 91%
Years
1 -
10 252,945 0.29 0.03 1.19 1,483,114 164,580 5,624,259 90%
Life
of
Mine 704,392 0.26 0.03 1.14 3,630,564 372,137 14,736,280 89%
Economic Analysis
The base case economic analysis is based on the following long term metal price projections: US$2.50/lb Cu (based on a US$:Cdn$ exchange rate of 0.86:1 taken from an established historic relationship with copper prices), US$1,250/oz Au and US$20/oz Ag. Based on the above capital and operating cost estimates, the Harper Creek project is estimated to have a pre-tax net present value of US$749.7 million (@ 8% discount rate) and an internal rate of return of 20.2 % based on 100% equity financing.
Sensitivity Analyses
The following table demonstrates the sensitivity of project economics to changes in copper prices. Corresponding foreign exchange ("FX") rates are taken from the established historical relationship which demonstrates a very strong copper price to US$:Cdn$ FX rate correlation. Gold and silver prices are unchanged from the base case prices of $1,250 and $20 per ounce respectively.
Cu price NPV8 IRR Payback US$:Cdn$
$/lb US$M % Years FX Rate
2.00 199.60 11.7 7.6 0.82
2.25 474.7 16.1 6.2 0.84
Base Case 2.50 749.7 20.2 5.1 0.86
2.75 1,002.5 23.4 4.4 0.89
3.00 1,277.4 26.8 3.9 0.91
3.82
[as of 29/2/2012] 2,124.7 35.6 3.3 1.00
Harper Creek Feasibility Study
The FS team is comprised of:
- Merit Consultants International Inc. ("Merit"): FS study management as well as providing capital cost estimating, financial analysis, project scheduling and implementation strategy
- Knight Piesold Limited ("KP"): geotechnical, mine waste and water management
- Allnorth Consultants Limited: process plant and facilities design
- GeoSim Services Inc.: resource estimation
- Nilsson Mine Services Ltd.: reserve estimation, mine planning and scheduling, mine capital and operating costs
- Laurion Consulting Inc.: metallurgy, plant flowsheet design, process operating costs
The following also provided support to the FS:
- CME Consultants Inc.: drilling, geological interpretation, QA/QC
- G&T Metallurgical Services Limited ("G&T"): metallurgical test work
- KWM Consulting Inc.: comminution
- SRK Consulting Ltd.: geochemistry
- Lawrence Consulting Ltd.: geochemistry, water treatment
- Cliveden AG: marketing
The Company provided overall support and guidance to the project especially in the areas of operating and staffing philosophy, marketing and financial analysis.
The FS design is based on the development of a large-scale open pit mining and milling operation and essentially follows the concept developed in the Preliminary Economic Assessment ("PEA") completed by TetraTech and filed on http://www.sedar.com on April 1, 2011. The main changes were the location of the primary crusher which was moved closer to the pit limit with a resulting lengthening of the coarse ore conveyor and reduction in hauling costs to the crusher. Following extensive crushing and grinding testwork conducted by FLSmidth primarily at their Bethlehem, PA laboratory, together with improved recovery at a coarser grind size, the Company was able to reduce the expected power draw by the ball mills, compared to the PEA estimate, by 25% and eliminate two crushers for SAG mill coarse pebble rejects. This resulted in a reduction in capital cost for crushing and grinding and significantly reduced milling costs.
The mine will employ 311mm (12¼") electric and diesel rotary blasthole drills, 42m³ (55yd³) electric hydraulic shovels, 240st capacity haul trucks plus support equipment. Bulk heavy ammonium nitrate slurry explosives will be delivered down the blast holes by a third party vendor. The mill feed will be crushed by a 1.5m (60") x 2.3m (89") gyratory crusher to a nominal 80% passing 200mm (8"). Crushed material will feed a stockpile of nominal 70,000t live capacity, before being reclaimed to the process plant.
Plant design is based on a single line flow sheet employing SAG and ball milling, flotation including regrinding, thickening and filtering to produce a concentrate for export averaging 25.5% Cu together with gold and silver credits. The primary grinding circuit includes an 11.6m (38') x 6.7m (22') SAG mill with a 20MW (26,800HP) gearless drive feeding two 7.3m (24') x 12.8m (42') twin pinion drive ball mills, 13MW (17,400HP) total for each mill, providing a primary grind size of 80% passing 180µm. Primary grinding circuit discharge feeds two banks of six 300m³ rougher flotation cells. The rougher concentrate will be reground by two M10000 (3MW each) Isamills to 80% passing 20 µm prior to two stages of cleaner flotation by column flotation cells. At a 0.33% Cu head grade in Year 1, the recovery of copper to concentrate is estimated at 91.1%. The primary and regrind product sizes and flotation parameters were determined by G&T. Testwork indicates that the concentrate is clean with no elements at smelter penalty levels and both gold and silver at payable levels.
Concentrate will be loaded on B-Trains of nominal 40t capacity for hauling to the rail loadout facility in the town of Vavenby, a distance of approximately 25km, for rail shipment to the Port of Vancouver, a distance of 450km. From there it will be shipped to smelters/refineries most likely in the Pacific Rim. In November 2011, the Company announced the purchase of an old Weyerhaeuser sawmill site in Vavenby, with an existing rail siding, for its concentrate loadout facility.
Water from the tailings slurry will be reclaimed from the Tailings Management Facility ("TMF") for use in the milling process. The TMF has the capacity to store all tailings and submerge any potentially acid generating waste rock. Low grade material will be stockpiled to the south of the pit for easy reclaim for processing in the latter years of the mine life. The TMF is located in a natural valley to the south of the plant in an area devoid of any fish habitat.
Mine infrastructure includes upgrading of an existing logging road over a distance of approximately 12km. A 600 person camp will be established for construction workers at site; most of the mine and plant operating and maintenance labour is expected to be drawn from the local area.
Power will be supplied by an upgraded BC Hydro 138 kVA transmission line that parallels the Yellowhead Highway, approximately 10km north of the plant. The upgraded transmission line will also provide improved reliability of power to existing customers within the North Thompson River Valley and provide capacity for expansion to the existing industrial base. The Company's expected connect date is March 2015.
The project is expected to employ up to 430 hourly and staff personnel. Based on industry experience, approximately 1,000 to 1,200 jobs will be created in the surrounding communities and elsewhere within the province to provide support to the project.
Following exhaustion of reserves, the project will close and be reclaimed according to regulatory requirements. All equipment and facilities will be removed and the area graded and seeded.
Environmental
A Project Description has been delivered to the BC Environmental Assessment Office ("BCEAO") and is available on their website at:
KP is managing the environmental assessment process under a harmonized process led by the BCEAO with the Canadian Environmental Assessment Agency ("CEAA"). The Application Information Requirements was approved on October 21, 2011 and is available on the BCEAO website at:
The Application is expected to be submitted in the fall of 2012. KP is being supported by specialist consultants in the areas of fisheries, water quality, wildlife and archeology. The Company has signed General Services Agreements with the Simpcw First Nation and the Adams Lake Indian Band who provided personnel to assist with the collection of baseline information.
National Instrument 43-101 Compliance
The following Qualified Persons, as defined by National Instrument 43-101 ("NI 43-101"), with the exception of Christopher Naas and Ian Smith, are independent of Yellowhead Mining and responsible for the preparation of the Harper Creek Technical Report as shown below:
Qualified Person Scope of Responsibility
Christopher Naas, P.Geo. drilling, geological interpretation,
CME Consultants Inc. QA/QC Ron Simpson, P.Geo. Mineral resource modelling and
GeoSim Services Inc. analysis
John Nilsson, P.Eng. Proven & Probable Reserves, mine
Nilsson Mining Services planning, production scheduling, mine
capital and operating costs
John Fox, P.Eng. Metallurgical testing review, mineral
Laurion Consulting Inc. processing, process operating costs
and infrastructure with exception of
power and roads
Mark Dobbs, P.Eng. Process plant and facilities design,
Allnorth Consultants Limited power supply and control systems
Jay Collins, P.Eng. Capital cost estimate, project
Merit Consultants International Inc. development schedule, financial
analysis
Ken Brouwer, P.Eng. Tailing impoundment, water and waste
Knight Piesold Limited management plan, open pit slopes
design and environmental Stephen Day, P.Eng. Geochemistry
SRK Consulting (Canada) Inc.
Ian Smith, BE Min, FAusIMM, CP Project operating, staffing,
Yellowhead Mining Inc. marketing philosophy, financial
analysis
Future Work Program
Management's plans for 2012 are:
- Complete and submit the Environmental Assessment Application with synchronous permitting;
- Step out drilling to the east and north to increase the resource;
- Commence detailed engineering and place orders for long lead-time equipment;
- Investigate and implement opportunities for improvement in project economics;
- Proceed with financing and strategic partnership discussions with interested parties.
The Feasibility Study was prepared to Canada's NI 43-101 reporting standards for a Technical Report. Details of mineral resource estimates including QA/QC procedures, Proven and Probable Reserves, mine and process plant design, capital and operating cost estimates, project schedule and implementation strategy and financial analysis are found in the Harper Creek NI 43-101 Technical Report, a copy of which will be filed on SEDAR on or before April 1, 2012 and available at http://www.sedar.com and on the Company's website at http://www.yellowheadmining.com.
About Yellowhead Mining Inc. and the Harper Creek Project
The Harper Creek Project is a copper-gold-silver volcanogenic sulphide deposit with an updated Measured and Indicated Resource of 815 million tonnes grading 0.29% Cu (5.26 billion pounds of copper) plus 0.032 g/t gold and 1.3 g/t silver, plus an Inferred Resource of 80.2 million tonnes grading 0.30% Cu (0.53 billion pounds of copper). The Harper Creek Project is located in south-central British Columbia, approximately 150 kilometers by highway north of Kamloops. Yellowhead has a 100% interest in the Harper Creek Project[3]. A Preliminary Economic Assessment Report ("PEA"), which demonstrated the technical and economic viability of the Project, was completed at the end of March 2011, filed on SEDAR on April 1, 2011 and can be viewed on http://www.sedar.com. The PEA will be superseded by the new NI 43-101 Technical Report when filed.
FORWARD-LOOKING STATEMENTS AND CAUTIONARY DISCLAIMER
Except for statements of historical fact, this news release contains certain "forward-looking information" within the meaning of applicable securities laws. Forward-looking information is frequently characterized by words such as "plan", "expect", "project", "intend", "believe", "anticipate", "estimate" and other similar words, or statements that certain events or conditions "may" or "will" occur. Forward-looking statements are based on the opinions and estimates of management at the date the statements are made, and are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those anticipated in the forward-looking statements, including, among others, the accuracy of mineral grades and related assumptions, inherent operating risks, planned expenditures, proposed exploration and development at the Harper Creek Project, operating and economic aspects of the Harper Creek Project, as well as those risk factors identified in the Company's Annual Information Form filed under the Company's SEDAR profile. Yellowhead undertakes no obligation to update forward-looking information if circumstances or management's estimates or opinions should change except as required by law. The reader is cautioned not to place undue reliance on forward-looking statements. More detailed information about potential factors that could affect projected results is included in the documents filed from time to time with the Canadian securities regulatory authorities by Yellowhead.
This news release includes disclosure of scientific and technical information, as well as information in relation to the calculation of mineral resources and reserves, with respect to the Harper Creek Project. Yellowhead's disclosure of mineral resource and reserve information is governed by National Instrument 43-101 - Standards of Disclosure for Mineral Projects ("NI 43-101") under the guidelines set out in the Canadian Institute of Mining, Metallurgy and Petroleum (the "CIM") Standards on Mineral Resources and Mineral Reserves, adopted by the CIM Council, as may be amended from time to time by the CIM ("CIM Standards"). There can be no assurance that mineral resources will ultimately be converted into mineral reserves. Mineral resources are not mineral reserves and do not have demonstrated economic viability. This news release uses the terms "measured", "indicated" and "inferred" resources. U.S. persons are advised that while such terms are recognized and required by Canadian regulations, the U.S. Securities and Exchange Commission does not recognize them. "Inferred Resources" have a great amount of uncertainty as to their existence and as to their economic and legal feasibility. It cannot be assumed that all or any part of an inferred resource will ever be upgraded to a higher category. Under Canadian rules, estimates of inferred resources may not form the basis of feasibility or other economic studies. U.S. persons are cautioned not to assume that all or any part of measured or indicated resources will ever be converted into reserves. U.S. persons are also cautioned not to assume that all or any part of an inferred mineral resource exists, or is economically or legally mineable.
Neither the TSX Venture Exchange Inc. 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.
_________________________________________
[1] All Dollars Canadian unless otherwise stated.
[2] LOM refers to life of project from start up through to closure. Cash mine operating cost per tonne of ore milled to cessation of the open pit operations is estimated at $3.10/t.
[3] Subject to the payment of a 3% NSR royalty capped at $2.5 million, adjusted for inflation, and an additional 2.5% NSR royalty on an estimated 3.3 million tonnes of ore which is expected to be mined beginning in year nine within the NI 43-101 resource.
For further information:
Ronald Handford, Executive Vice President, Corporate Development
rhandford@yellowheadmining.com
Tel. +1-604-681-1709 ext. 204
Website: http://www.yellowheadmining.com
Twitter: http://twitter.com/YMI_Mining
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