Artemis Announces Revised PFS for Blackwater Project
August 26, 2020
25 minutes read
$2.2 Billion
VANCOUVER, BC, Aug. 26, 2020 /CNW/ – ARTEMIS GOLD INC. (“Artemis” or the “Company“) is pleased to announce the results of a Pre-Feasibility Study (“PFS” or the “Study“) based on a revised development approach to the recently acquired, and 100% owned Blackwater Gold Project in central British Columbia (“Blackwater” or the “Project“).
A summary of the technical and financial metrics of the PFS is provided in the tables below.
Description
Unit
Base Case
Levered Case ~
Physicals
Ore Tonnes
Mt
334.0
334.0
Grade (Au)
g/t
0.75
0.75
Grade (Ag)
g/t
5.78
5.78
Operational Strip Ratio*
2.0
2.0
Recovery (Au)
%
93%
93%
Recovered Ounces (Au)
k oz.
7,450
7,450
Recovery (Ag)
%
65%
65%
Recovered Ounces (Ag)
k oz.
40,374
40,374
Cost Metrics
Initial Capital Cost
$ million
592
592
Phase 2 Expansion Capital Cost
$ million
426
426
Phase 3 Expansion Capital Cost
$ million
398
398
Sustaining & Closure Capital Cost
$ million
712
712
Operating Costs
$/t milled
17.65
17.65
Cash Costs/oz.**
k oz.
715
715
All-In Sustaining Costs/oz.**
$/oz.
811
811
Economic Results
After-Tax NPV5
$ million
2,247
2,249
After-Tax IRR
%
34.8%
49.7%
Payback on Initial Capital
Years
2.0
2.2
Cumulative Free Cash Flow***
$ million
5,906
5,934
*Operational strip ratio is calculated as total waste mined divided by ore mined
**Please refer to Non-IFRS measures notice at the end of this news release.
***Free Cash Flow is calculated as project operating cash flow minus sustaining/closure capital and tax
~Levered Case assumptions and parameters are disclosed below under “Economic Results”.The Leveraged Case reflects the impact of debt. Financing of the Project is not a measure of the economic viability and technical feasibility of the Project, but a measure of the Company’s ability to secure debt financing for the Project.
$1,541/oz., a silver price of US $19.60/oz. and a foreign exchange rate of CAD$1 = USD$0.76. The economics include the effect of the Blackwater gold stream (the “Stream“), which was issued to finance part of the acquisition cost of Blackwater by Artemis from New Gold Inc. (“New Gold“) (refer to news release dated August 24, 2020). Under the terms of the Stream, New Gold will purchase 8.0% of the refined gold produced from the Project. Once 279,908 ounces of refined gold have been delivered to New Gold, the gold stream will reduce to 4.0%. New Gold will make payments for the gold purchased equal to 35% of the US dollar gold price quoted by the London Bullion Market Association two days prior to delivery.
The tables below show the sensitivity of after-tax NPV and IRR to changes in the US dollar gold price and the CAD/USD exchange rate.
($000) to Changes in US$ Gold Price and USD/CAD Exchange Rate (Base Case Highlighted)
US/CAD
US $ Gold Price
$ 1,050
$ 1,300
$ 1,541
$ 1,800
$ 2,050
0.60
1,672,105
2,654,199
3,600,002
4,616,021
5,596,249
0.65
1,324,653
2,232,499
3,105,715
4,043,857
4,949,033
0.70
1,026,286
1,870,434
2,681,774
3,553,299
4,394,022
0.76
721,073
1,498,745
2,246,820
3,049,606
3,824,263
0.80
540,655
1,281,108
1,992,942
2,755,653
3,491,850
0.85
329,112
1,037,579
1,708,917
2,427,104
3,120,118
0.90
141,887
825,454
1,456,039
2,135,194
2,789,605
0.95
(33,651)
631,179
1,229,101
1,873,937
2,493,860
US/CAD
US $ Gold Price
$ 1,050
$ 1,300
$ 1,541
$ 1,800
$ 2,050
0.60
29%
39%
47%
56%
63%
0.65
25%
35%
43%
51%
58%
0.70
21%
31%
39%
47%
54%
0.76
17%
27%
35%
42%
49%
0.80
14%
24%
32%
40%
46%
0.85
11%
21%
29%
37%
43%
0.90
8%
19%
26%
34%
40%
0.95
4%
16%
24%
31%
37%
The Company’s revised development approach includes:
A reduction in initial capital expenditures to $592 million by applying a disciplined three-stage approach to mine throughput ramp up, while remaining committed to achieving the full-scale project throughput of 20 million tonnes per annum (“Mtpa“);
Targeting a higher-grade zone of near surface mineralization in the southern half of the pit for processing in the first seven years supporting a shorter payback period and a higher IRR;
Improved gold and silver recoveries from metallurgical optimization work;
Applying current consensus gold and silver price decks.
Description
Unit
Phase 1
Phase 2
Phase 3
Periods
Years
1 – 5
6 – 10
11 – 23
Annual Throughput
mtpa
5.5
12.0
20.0
Initial/Expansion Capital Cost
$ million
592
426
398
Average Grade (Au)
g/t
1.57
1.17
0.55
Average Strip Ratio
1.68
1.92
2.14
Operating Costs
$/t milled
28.42
23.30
15.13
Average Ann. Au Production
k oz.
248
420
316
All-In Sustaining Costs
$/oz.
668
696
911
Average Annual Free Cash Flow
$ million
262
351
219
*Operational strip ratio is calculated as total waste mined divided by ore mined
**Please refer to Non-IFRS measures notice at the end of this news release.
***Free Cash Flow is calculated as project operating cash flow minus sustaining/closure capital and tax
~Levered Case assumptions and parameters are disclosed below under “Economic Results”
Steven Dean, Chairman and CEO of Artemis commented: “We are pleased to announce the results of the PFS, which illustrate the robust economics that management believed were achievable when the Company made the decision to acquire Blackwater earlier this year. The strategy of staging the ultimate development of the mine, among other de-risking initiatives, allows for much improved economics, while allowing the Company to phase the development before ramping up to full throughput of 20 million tonnes per annum.”
$600 million. On the basis of an expected achievable 60% debt leverage of initial capital costs, the Project after-tax IRR increases to 50%. The phased approach provides the opportunity to build the Blackwater project into a new 250,000 ounce per year gold operation growing to more than 400,000 ounces of gold per year with growth financed from free cash flow. We believe that this disciplined approach is the most prudent way to advance one of the largest undeveloped gold projects in Canada. We are looking forward to working with our partners, including Lhoosk’uz Dené Nation, Ulkatcho First Nation, the Carrier Sekani First Nations and Nazko First Nation and with the support of the BC and Federal Governments, to advance the Blackwater Project. With Environmental Assessment approvals in 2019, the permitting process for the Project is already well advanced.”
John A. Thomas, all of whom are independent of the Company. The Company presents two cases as part of the Study: a base case which is unlevered, and an alternate levered case which assumes 60% of the initial funding requirement is funded through project debt.
British Columbia, NI 43-101 Technical Report on Feasibility Study” with an effective date of January 14, 2014, filed on SEDAR by New Gold on January 22, 2014 (the “2014 Feasibility Study“)). Artemis’ methodology and approach to development of the Project includes the following:
Starting at 5.5 Mtpa throughput and focusing on the near-surface, higher-grade zone of mineralization in the southern half of the deposit to minimize initial capital cost intensity, improve payback and IRR;
Two subsequent expansion stages ramping up to the original planned capacity of approximately 20 Mtpa outlined in the 2014 Feasibility Study, with expansions funded from future operating cashflows;
Phase
Years
Annual Throughput
1
1 to 5
5.5 million tonnes
2
6 to 10
12 million tonnes
3
11 to 23
20 million tonnes
The smaller-scale start-up defers a substantial portion of waste pre-stripping from initial capital, as designed in the 2014 Feasibility Study, into operating costs in the PFS. While this partly contributes to the slightly higher operating costs as compared to the 2014 Feasibility Study, it substantially reduces up front funding requirements and results in a much higher IRR for the PFS;
Cost benefits from a smaller, off-the-shelf, modular approach for buildings and crushing equipment;
Staged installation of three similar-sized processing trains to 20 Mtpa;
Re-designed three-stage crushing with a ball mill provides improved capacity to accommodate variability of ore hardness and maintain name-plate throughput;
Reduced overall process footprint and laydown area requirements;
Staged tailings capital costs, including relocation of the start-up dam site downstream to optimize initial capacity and haulage distances, improve constructability by following existing access trails in an area of gentler terrain, and simplify water management during early operations;
Enhanced water management flexibility with planned installation of a water treatment plant at the start of operations;
Total project indirect capital costs and owner’s costs significantly reduced as planned expansions will take advantage of an operating site with installed infrastructure and an established site management team;
10m x 10m x 10m selective mining unit, with interpolation of gold done by Multiple Indicator Kriging (“MIK“) and interpolation of silver using Ordinary Kriging (“OK“). The interpolations were limited by the domain boundaries and were clipped to the overburden surface. Blocks were assigned a preliminary classification based on the variography and drill hole spacing by domain, with Measured and Indicated confidence classifications then adjusted for continuity of blocks.
May 5, 2020)
In situ Grades
In situ Metal
Classification
Cutoff
Tonnage
AuEq
Au
Ag
AuEq
Au
Ag
(g/t)
(ktonnes)
(g/t)
(g/t)
(g/t)
(koz)
(koz)
(koz)
Measured
0.20
427,123
0.68
0.65
5.5
9,360
8,905
75,802
0.30
313,739
0.84
0.80
5.9
8,463
8,109
59,009
0.40
238,649
0.99
0.96
6.1
7,627
7,347
46,727
0.50
186,687
1.15
1.11
6.2
6,881
6,656
37,333
0.60
149,261
1.30
1.26
6.4
6,223
6,039
30,521
0.70
120,916
1.45
1.41
6.6
5,633
5,479
25,619
Indicated
0.20
169,642
0.56
0.51
8.5
3,046
2,766
46,578
0.30
123,309
0.68
0.61
10.4
2,677
2,431
41,112
0.40
86,473
0.81
0.74
12.4
2,264
2,057
34,419
0.50
64,305
0.94
0.85
14.8
1,947
1,763
30,681
0.60
50,527
1.05
0.95
17.2
1,705
1,537
27,957
0.70
40,317
1.15
1.03
19.6
1,493
1,340
25,458
Measured + Indicated
0.20
596,765
0.65
0.61
6.4
12,406
11,672
122,381
0.30
437,048
0.79
0.75
7.1
11,140
10,540
100,120
0.40
325,122
0.95
0.90
7.8
9,890
9,404
81,146
0.50
250,992
1.09
1.04
8.4
8,828
8,419
68,014
0.60
199,788
1.23
1.18
9.1
7,928
7,577
58,478
0.70
161,233
1.37
1.32
9.9
7,125
6,819
51,077
Inferred
0.20
16,935
0.53
0.45
12.8
288
246
6,953
0.30
11,485
0.66
0.57
16.2
245
210
5,971
0.40
8,690
0.77
0.65
19.2
214
182
5,373
0.50
5,552
0.95
0.79
26.0
169
142
4,648
0.60
4,065
1.10
0.90
32.7
143
118
4,279
0.70
3,328
1.20
0.97
36.9
128
104
3,951
Notes:
1.
The Mineral Resource estimate has been prepared by Sue Bird, P.Eng., an independent Qualified Person.
2.
Resources are reported using the 2014 CIM Definition Standards and were estimated in accordance with the CIM 2019 Best Practices Guidelines.
3.
Mineral Resources are reported inclusive of Mineral Reserves.
4.
Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability.
5.
The Mineral Resource has been confined by a “reasonable prospects of eventual economic extraction” pit using the following assumptions: US $2,000/oz. Au and US $21.43/oz Ag at a currency exchange rate of 0.75 US$ per CAD$; 99.9% payable Au; 95.0% payable Ag; $8.50/oz Au and $0.25/oz Ag offsite costs (refining, transport and insurance); a 1.5% NSR royalty; and uses a 93% metallurgical recovery for gold and 55% recovery for silver.
6.
The AuEq values were calculated using US $1,400/oz Au, US $15/oz Ag, a gold metallurgical recovery of 93%, silver metallurgical recovery of 55%, and mining smelter terms for the following equation: AuEq = Au g/t + (Ag g/t x 0.006).
7.
The specific gravity of the deposit has been determined by lithology as being between 2.6 and 2.74.
8.
Numbers may not add due to rounding.
There are no other known factors or issues that materially affect the Mineral Resource estimate other than normal risks faced by mining projects in the province in terms of environmental, permitting, taxation, socio-economic, marketing, and political factors and additional risk factors as listed in the “Cautionary Note Regarding Forward-Looking Information” section below.
The Mineral Reserves for Blackwater are a subset of the Measured and Indicated Mineral Resources, described above. Proven and Probable Mineral Reserves are modified from Measured and Indicated Mineral Resources and are summarized in the table below. Inferred Mineral Resources are set to waste. Mineral Reserves are estimated in accordance with the CIM 2019 Best Practices Guidelines and are classified using the 2014 CIM Definition Standards.
Classification
Run of Mine
(Mt)
AuEq Grade
(g/t)
Gold Grade
(Au, g/t)
Contained Metal
(Au, Moz.)
Silver Grade
(Ag, g/t)
Contained Metal
(Ag, Moz.)
Proven
325.0
0.78
0.74
7.8
5.8
60.5
Probable
9.1
0.84
0.80
0.2
5.5
1.6
Total Reserve
334.0
0.78
0.75
8.0
5.8
62.1
Notes:
1.
The Mineral Reserve estimates were prepared by Marc Schulte, P.Eng. (who is also the independent Qualified Person for these Mineral Reserve estimates), reported using the 2014 CIM Definition Standards, and have an effective date of August 18, 2020.
2.
Mineral Reserves are based on the PFS Life of Mine Plan.
3.
Mineral Reserves are mined tonnes and grade, the reference point is the mill feed at the primary crusher and includes consideration for operational modifying factors.
4.
Mineral Reserves are reported at an NSR cut-off grade of $13.00/t.
5.
Cut-off grade assumes US$1,400/oz. Au and US$15/oz Ag at a currency exchange rate of 0.75 US$ per C$; 99.9% payable gold; 95.0% payable silver; $8.50/oz Au and $0.25/oz Ag offsite costs (refining, transport and insurance); a 1.5% NSR royalty; and uses a 93% metallurgical recovery for gold and 55% recovery for silver.
6.
The cut-off grade covers processing costs of $10.00/t and administrative (G&A) costs of $3.00/t.
7.
The AuEq values were calculated using commodity prices of US$1,400/oz Au, US$15/oz Ag, a gold metallurgical recovery of 93% silver metallurgical recovery of 55%, and mining smelter terms for the following equation: AuEq = Au g/t + (Ag g/t x 0.006).
8.
Numbers have been rounded as required by reporting guidelines.
There are no other known factors or issues that materially affect the Mineral Reserve estimate other than normal risks faced by mining projects in the province in terms of environmental, permitting, taxation, socio-economic, marketing, and political factors and additional risk factors as listed in the “Cautionary Note Regarding Forward-Looking Information” section below.
British Columbia, approximately 160 km southwest of Prince George and 446 km northeast of Vancouver. The Project is accessible by major highway and access/service roads.
Artemis has a 100% recorded interest in 328 mineral claims covering an area of 148,688 ha distributed among the Property and the Capoose, Auro, Key, Parlane and RJK claim blocks. Surface rights over the Project area are controlled by the Crown.
The Blackwater Project will comprise the construction, operation, and closure of an open pit gold and silver mine and ore processing facilities commencing with a nominal milling rate of 15,000 t/d (5.5 Mtpa). The ore processing facilities will be expanded to achieve 33,000 tpd (12 Mt/y) starting in year 6 with a final expansion to achieve 55,000 t/d (20 Mt/y) starting in year 11 of operation. A combined gravity circuit and whole ore leaching (WOL) will be used for recovering gold and silver.
334 Mt of ore, 584 Mt of waste rock and 83 Mt of overburden. The material will be sourced via conventional open pit mining methods, initially targeting high-grade, near-surface ore for processing, with lower-grade material being stockpiled for processing at the end of the mine life.
At closure, all buildings will be removed, disturbed lands rehabilitated, and the property returned to otherwise functional use according to future approved reclamation plans and accepted practices at the time of closure.
In addition to the site infrastructure, it is assumed that a 134 km, 230 kV transmission line will be constructed from the BC Hydro Glenannan substation near Endako, B.C. to the site to supply power to the Project.
Owner-managed mining and fleet maintenance operations are planned for 365 days/year, with two 12-hour shifts planned per day. Initially, mining will be undertaken using 400 t class hydraulic shovels and 190 t payload class haul trucks. As production requirements increase, the load and haul fleet will be expanded with 550 t class hydraulic shovels and 220 t payload class haul trucks. The initial drill and loading fleet is planned to be diesel drive, with expansion fleet requirements being electric drive. The mine equipment fleet is planned to be purchased via lease arrangements.
The process flowsheet has been designed based on historical test work and more recent test work carried out in 2019 for New Gold.
Kamloops, BC for test work that included core splitting, sample preparation, interval assaying, mineralogy, gravity concentration, cyanide leach and cyanide destruction.
The test program included three larger composites for optimization test work and 48 samples covering the deposit to establish the variability of the ore to the chosen flow sheet.
The initial design daily throughput is 15,000 tonnes per day, with an availability of 75% used in designing the crushing circuit and 93% for the design of the rest of the plant.
The process will consist of:
Three stage crushing, consisting of a primary jaw crusher with grizzly feeder, a secondary cone crusher and two tertiary cone crushers. The primary jaw crusher, the three cone crushers and the three vibrating screens will each be housed in steel-framed buildings, with covered conveyors transporting material between each stage. The crushed ore stockpile will be covered to prevent freezing;
Crushed ore will be conveyed from the stockpile to a single, 7.3 m x 12.5 m, 14 MW ball mill for grinding, with the circuit being closed by cyclones. Gravity concentration will be incorporated into the grinding circuit using centrifugal concentrators and an intensive cyanide leach unit for recovering gold from the gravity concentrate;
The leach circuit will consist of eight tanks fitted with mechanical agitators, an initial pre-oxidation tank with cyanide being added to the second and subsequent tanks. The leach residence time will be 48 hours;
Carbon in pulp adsorption of gold and silver will be carried out in a “carousel” unit, with “pump cells” moving leached slurry between the six tank units while the carbon remains in the same tank until fully loaded;
The loaded carbon will be treated in a Zadra elution and electrowinning circuit consisting of an acid wash column and two elution columns operating at 140 degrees Celsius. A propane heater will provide the necessary temperature and two additional heat exchangers will control the temperature around the circuit. A rotary kiln operating at 700 degrees Celsius will be used to maintain carbon activity. Electrowinning will be carried out to recover gold and silver from the elution solution and the resulting metallic precipitate will be dried and smelted to doré bullion;
Cyanide destruction using an SO2 air system will be carried out in the final tailings slurry, with the sulfur dioxide being produced by the combustion of elemental sulfur.
$592 million for Phase 1 (5.5 Mtpa), expansion capital of $426 million for the Phase 2 expansion to 12.0 Mtpa, expansion capital of $398 million for the Phase 3 expansion to 20.0 M tpa. Sustaining capital over the life of mine is estimated at $637 million while closure costs are estimated at $117 million, partially offset by proceeds from equipment salvage values, estimated at $42 million. The PFS factors a 15% contingency into all capital cost estimates with the exception of reclamation costs.
Description
($ 000)
Mining
68,230
Process Plant
109,412
Tailings Management
37,271
On Site Infrastructure
68,423
Off Site Infrastructure
81,042
Total Direct Costs
364,380
Indirects and EPC
119,599
Owners Costs
30,634
Total Indirect Costs
150,233
Total Directs & Indirects
514,612
Contingency
77,192
Total Capex
591,804
$121 million), modular expansion of the process plant ($272 million) and indirect costs ($108 million). Sustaining capital is estimated to average $26 million per year in phase 1, ramping up to $40 million per year in phase 2 and $23 million per year in phase 3. Mobile fleet lease payments ($289 million) and tailings management ($190 million) are the primary drivers of sustaining capital costs.
Units
Pre-strip
Phase 1
Phase 2
Phase 3
LOM
Mining*
$/t Mined
3.31
2.15
2.14
2.62
2.37
$/t Milled
–
14.61
12.12
4.98
7.03
Process
$/t Milled
–
9.17
8.31
8.24
8.33
G&A
$/t Milled
–
4.64
2.87
1.91
2.30
Total
$/t Milled
–
28.42
23.30
15.13
17.65
*Mining costs includes stockpile re-handle, LOM mining costs exclude pre-stripping
$28.42/t, with economies of scale and driving down costs to C$23.30/t in Phase 2 and $15.13/t in Phase 3. Over the LOM, the Project has estimated average operating costs of C$17.65/t.
$668/oz in Stage 1, growing to 420,000 ounces of gold per year at AISC of $696 in stage 2 and smoothing out to 316,000 ounces of gold per year at an AISC of $911 per ounce in stage 3. The higher AISC in Phase 3 is mainly attributed to the inclusion of closure costs at the end of the life of mine. Over the LOM, the Study estimates an AISC of $811 per (or US$616/oz) ounce on production of 7.45 million ounces of gold, which places the Project in the bottom quartile of the global cost curve for gold project (source: World Gold Council).
Payable factor (Au) of 99.9%
Payable factor (Ag) of 95.0%
Refining, treatment, transport, and insurance charges of $3/oz.
The Study economics consider two private royalties at 1.0% and 1.5% over parts of the Mineral Reserve. Estimated payments to Indigenous nations are also included in the economic cash flow model for the Project.
Key provincial and federal tax considerations for Blackwater includes:
British Columbia mining tax – 2% provincial minimum tax payable on operating profits immediately upon the start of production which is creditable against the 13% effective mining tax rate which is calculated based on operating profit less applicable capital cost deductions. The mining tax is deductible in computing provincial and federal income tax;
British Columbia provincial income tax – 12.0%, payable after applicable deductions are used;
Canadian federal income tax – 15.0%, payable after applicable deductions are used.
In the economic results for the Project, the Company presents a base case economic analysis, being unlevered, plus an alternate levered case. The levered case is based on the following assumptions:
Initial capital 60% debt financed;
Annual interest rate of 5.5%;
Upfront financing fee of 3%;
7-year term post commencement of commercial production with a balloon payment of 30% of the principal at maturity;
Expansion capital is assumed to be funded through operating cashflow.
Over the next 12 to 18 months, the Company will be focused on the following activities:
Completing an NI 43-101 technical report in respect of the Study, which will be filed on SEDAR and on the Company’s website within 45 days of this news release;
Commencing a Feasibility Study based on this revised development approach with detailed engineering on the Project;
Continuing engagement and negotiations with Indigenous nations who may be impacted by the Project;
Completing supplemental geotechnical and hydrogeological site investigation work;
Progressing and achieving final permitting required to commence Project construction;
Commencing a pre-construction grade control drilling program;
Planning for an exploration core drilling program to test for potential extensions of the known mineralization
Awarding of lump-sum fixed price EPC contracts in respect of various Project construction components;
Arranging of requisite debt and equity financing to support development activities
Marc Schulte, P.Eng., (MMTS), Tracey Meintjes, P.Eng. (MMTS), Sue Bird, P.Eng., (MMTS), Daniel Fontaine, P.Eng. (KP) and John A. Thomas, P. Eng (JAT Met Consulting). Each of the Qualified Persons has reviewed and approved the technical information contained in the Study and in this press release in their area of expertise and are independent of the Company.
Data verification programs have included review of QA/QC data, re-sampling and sample analysis programs, and database verification. Validation checks haver been performed on data, and comprise checks on surveys, collar co-ordinates and assay data.
In the opinion of MMTS, sufficient verification checks have been undertaken on the databases to provide confidence that the database is virtually error free and appropriate to support Resource and Reserve estimation.
August 26 at 12:00 p.m. Eastern time (9:00 a.m. Pacific time) with the Artemis executive team. Participants may join the call by dialing:
International Toll: +1 (604) 638-5340
Canada/USA: +1 (800) 319-4610
Please provide the company name (Artemis Gold Inc.) to the operator. A recorded playback of the call will be available shortly after the call’s completion for 30 days by dialing:
International Toll: +1 (604) 638-9010
Canada/USA: +1 (800) 319-6413
Enter the replay passcode: 5142, an MP3 recording will also be available on the Artemis website.
