Artemis Gold Inc. (TSX-V: ARTG) is pleased to announce the results of its 2021 Feasibility Study for the staged development of the 100% owned Blackwater Gold Project in central British Columbia.
The results of the Study supersede the 2020 Prefeasibility Study dated August 26, 2020 entitled “Blackwater Gold Project British Columbia NI 43-101 Technical Report on Pre-Feasibility Study” filed on SEDAR by Artemis on September 18, 2020. The results of the FS reflect several positive changes in the approach to the planned development of the Blackwater Project compared with the 2020 PFS. The scope changes incorporated in the Study include:
Key Economic Outputs of the Study
Annual Gold production and AISC over the LOM is presented in Table 1.
A summary of the technical and financial metrics of the Study in comparison with the 2020 PFS is provided in the Table 2.
Table 1: Average Annual Gold Production, AISC and FCF For the Blackwater Gold Project
|1||Levered case assumptions and parameters are disclosed under “Economic Results”. The levered 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.|
|2||Please refer to Non-IFRS measures notice at the end of this news release for definition of AISC.|
|3||Free cash flow is calculated as project operating cash flow minus sustaining/closure capital and taxes|
Table 2 – Key Results of the FS (including the New Gold Inc. Stream, defined below)
|*||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 for definition of AISC.|
|***||Free cash flow is calculated as project operating cash flow minus sustaining/closure capital and taxes|
|~||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.|
The estimate of life of mine sustaining capital in the FS has increased by C$194 million to C$831 million compared with the C$637 million estimate of sustaining capital in the 2020 PFS. The increase in sustaining capital is a reflection of more accurate cost estimates related predominantly to the continuous expansion of the tailings storage facility and water management systems as well as the cost of the replacement mining fleet over the LOM. The increase in sustaining capital over the life of mine is the larger factor that contributed to an increase in the AISC to C$850/oz in the FS, up from C$811/oz in the 2020 PFS.
The base case economics are calculated on an unlevered basis, based on a market consensus long term gold price of US$1,600/oz, a silver price of US$21.33/oz and a foreign exchange rate of CAD$1 = USD$0.79. The economics include the effect of the Blackwater gold stream, which was issued to finance part of the acquisition cost of Blackwater by Artemis from New Gold Inc. (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 figures and 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.
Steven Dean, Chairman and CEO of Artemis commented: “Since the release of the 2020 PFS, Artemis has been focused on optimizing and de-risking the Blackwater project, which has culminated in the compelling economics outlined in the FS. Expanded Phase 1 throughput and an acceleration of the Phase 2 expansion supports a 29% increase in gold production over the first five years of operations and a 5% increase in gold production over the first 10 years. By installing a larger capacity crushing circuit with a primary gyratory crusher up front, the Phase 2 expansion has been streamlined with the addition of major items such as an upgradable conveyor, an additional ball mill and additional tanks, which supports the ultimate expansion to 20Mtpa in two mineral processing trains, down from three in the 2020 PFS, improving economies of scale. The FS has a more constrained cost estimate accuracy, better mitigates Project risk, reflects current costs, and reflects an investment in electrification of the process plant in phase 1 to reduce the Project’s carbon footprint.”
“After applying this approach to the development of the Blackwater Project, the initial development capital has increased to C$645 million, a 9% increase in line with the 9% increase in the initial throughput rate. The FS base case economics demonstrate a payback period of two years, an after-tax IRR of 32% and an NPV5% of C$2.15 billion based on a US$1,600/oz gold price, increasing to C$2.8 billion at a US$1,800/oz gold price. We look forward to continuing to work with our partners, including the 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 further advance the Blackwater Project. With the FS now completed, Blackwater continues to target a start of construction in Q2 2022, which puts the Project on track to develop into a new tier 1 gold operation in Q1 2024.”
The Study was led by Ausenco Engineering Canada Inc. together with the support of Knight Piésold Ltd. Moose Mountain Technical Services, Allnorth Consultants Ltd. Lorax Environmental Services Ltd. ERM Consultants Canada Ltd. and JAT MetConsult Ltd., all of which are independent of the Company.
The Company presented two cases as part of the FS: a base case which is unlevered, and an alternate levered case which assumes C$360 million (plus up to C$25 million of capitalized interest) is funded through project debt.
The Company set out to meet or exceed the economics of the Blackwater Project and improve the accuracy and financeability of the Project against the 2020 PFS. Artemis’ methodology and approach to development of the Project includes the following:
Mineral Resource Estimate
The Mineral Resource Estimate for the Blackwater Project is effectively unchanged from the estimate incorporated into the 2020 PFS. The Mineral Resource is estimated from a drill hole database containing 1,002 drill holes and 288,738 assay intervals. Three domains were generated based on the major north-south fault and changes in orientation of the mineralization. The block model has a 10 x 10 x 10 m selective mining unit, with interpolation of gold done by multiple indicator kriging and interpolation of silver using ordinary kriging. The interpolations were limited by domain boundaries and were clipped to the overburden surface. Blocks were assigned a preliminary classification based on variography and drill hole spacing by domain, with Measured and Indicated confidence classifications then adjusted for block continuity.
The base case cut-off grade, within the “reasonable prospects of eventual economic extraction” pit shell is 0.20 g/t gold equivalent, where the AuEq is calculated as AuEq = Au g/t + (Ag g/t x 0.006). At the base case prices, exchange rate and smelter terms a 0.20g/t AuEq cut-off covers the processing costs of C$9.00/t processed. At a 0.20 g/t AuEq cut-off, the total Measured and Indicated Mineral Resource is estimated at 597 Mt at 0.65 g/t AuEq, 0.61 g/t Au, and 6.4 g/t Ag for a total of 12.4 million AuEq ounces. Of the total Measured and Indicated Mineral Resources, 75% are in the Measured category. Table 6 summarizes the Mineral Resource estimate and includes sensitivity cases to show the estimate sensitivity to changes in cut-off grade.
Table 6 – Mineral Resource Table Showing Sensitivity to Cut-off Grades (base case highlighted)
|1.||The Mineral Resource estimate was prepared by Sue Bird, P.Eng., the Qualified Person for the estimate and an employee of MMTS. The estimate has an effective date of May 5, 2020.|
|2.||Mineral Resources are reported using the 2014 CIM Definition Standards and are estimated in accordance with the 2019 CIM 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 conceptual pit shell to meet “reasonable prospects of eventual economic extraction” using the following assumptions: the 143% price case with a base case of US$1,400/oz. Au and US$15/oz Ag at a currency exchange rate of 0.75 US$ per C$; 99.9% payable Au; 95.0% payable Ag; US$8.50/oz Au and US$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. Additional risk factors are listed in the “Cautionary Note Regarding Forward-Looking Information” section at the end of this news release.
Mineral Reserve Estimate
The Mineral Reserve Estimate for the Blackwater Project is effectively unchanged from the estimate incorporated into the 2020 PFS. 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 Table 7. Inferred Mineral Resources are set to waste.
Table 7 – Mineral Reserve Estimate
|1.||The Mineral Reserve estimates were prepared by Marc Schulte, P.Eng., an MMTS employee, and have an effective date of September 10, 2021.|
|2.||Mineral Reserves are reported using the 2014 CIM Definition Standards and are estimated in accordance with the 2019 CIM Best Practices Guidelines|
|3.||Mineral Reserves are based on the FS LOM plan.|
|4.||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 such as loss and dilution.|
|5.||Mineral Reserves are reported at an NSR cut-off of C$13.00/t. The cut-off grade covers processing costs of C$9.00/t, general and administrative (“G&A“) costs of C$2.50/t and stockpile rehandle costs of C$1.50/t.|
|6.||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; US$8.50/oz Au and US$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.|
|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.|
Mineral Reserves are based on the Feasibility Study engineering and economic analysis for the Blackwater Project. Specific risk to the Mineral Reserves include changes to the following factors: Metal Prices, Foreign Exchange Rates, Interpretations of mineralization geometry and continuity of mineralization zones, geotechnical and hydrogeological assumptions, ability of the mining operation to meet the annual production rate, operating cost assumptions, mining and process plant recoveries, the ability to meet and maintain permitting and environmental license conditions and the ability to maintain the social licence to operate.
There are no other known factors or issues that materially affect the Mineral Reserve estimate other than which is disclosed above and 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 Project is located in central 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 329 mineral claims covering an area of 148,902 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. A project location map is provided in Figure 4:
Project Development Plan
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 ~16,500 t/d (6.0Mtpa). The ore processing facilities will be expanded to ~24,700 tonnes per day (9.0Mtpa) in year 5 with full Phase 2 expansion to ~33,000 tpd (12Mtpa) in year 6 with an expansion to 41,100 tpd (15Mtpa) in year 10 and a final expansion to achieve 55,000 t/d (20 Mtpa) starting in year 11 of operation. A combined gravity circuit and whole ore leach will be used for recovering gold and silver.
The proposed mine plan involves mining 334 Mt of ore, 586 Mt of waste rock and 87 Mt of overburden. Conventional open pit mining methods will be used, initially targeting high-grade, near-surface ore for processing, with lower-grade material being stockpiled for processing at the end of the mine life.
Most of the waste material sourced from the pit will be used for construction of TSF or placed in the TSF itself. Overburden and non potentially acid generating waste rock not required for construction will be placed in stockpiles between the open pit and the TSF. Potentially acid generating waste rock, together with tailings, will be deposited into the TSF that will be located to the north-northwest of the open pit.
In addition to the site infrastructure, it is assumed that a 135 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.
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. The estimated closure costs of C$175 million (discounted to year 22) represents management’s investment in environmental stewardship and increased ownership of its various ESG initiatives.
Mining will be based on conventional open pit methods (drill-blast-load-haul), which are suited to the Project location and local site requirements. Open pit operations are anticipated to run for 17 years, excluding 15–18 months of pre-production mining. Following mining operations, stockpiled low-grade material will be processed for an additional five years, resulting in a total LOM of 22 years. The open pit will be developed with a series of pushbacks. The first stage will target suitable overburden and waste rock for construction whilst exposing near-surface, high-grade material. The second phase will target higher-grade, lower-strip-ratio ore providing mill feed over the initial years of the Project. The remaining stages expand the pit to the north targeting progressively deeper ore. LOM activities are summarized in Appendix A.
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 600 t class hydraulic shovels and 230 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 various lease arrangements.
Metallurgy & Process
The process flowsheet was designed based on historical test work and more recent test work carried out in 2019 for New Gold. Some additional test work was completed to support carbon loading, rheological parameters and cyanide destruction assumptions.
The 2019 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 mineralogy indicated that the sulphur content is mainly associated with pyrite, pyrrhotite and sphalerite. The comminution test work included semi-autogenous grind mill comminution on the new drill core, Bond rod mill work index, Bond ball mill work index and abrasion index tests. The results indicate the material is hard with results ranging from 11.8 -24.6 kWh/t and the 75th percentile of the samples tested was 21.1 kWh/t for the variability samples. A correlation between gold extraction and head grade was not observed. The variability composite results averaged 93.7% total gold extraction with gravity gold recovery of 34.2%.
Based on the test results, a gold doré can be produced with a primary grind size of 80% passing 150 μm followed by gravity concentration, two-hour pre-oxidation, a 24 hour cyanide leach at an initial cyanide concentration of 500 ppm and a pH of 10.5, and a carbon-in-leach adsorption, desorption and refining process. The recovery of gold and silver is expected to be 93% and 65% respectively.
The initial design daily throughput is ~16,500 tonnes per day, with an availability of 70% used in designing the crushing circuit and 92% for the design of the rest of the plant.
Phase 1 Development:
The process for Phase 1 will consist of:
A schematic showing the proposed flowsheet for Phase 1 is provided in Figure 5.
Phase 2 Expansion:
The Phase 2 expansion to 12Mtpa has been simplified to be achieved with only minor modifications needed to the existing phase 1 crushing, stockpile and ball mill feed system. The second ball mill will operate in series with the Phase 1 mill. The rest of the plant circuits will be duplicated (gravity concentration, leaching, adsorption, elution and cyanide destruction) or expanded. Minor upgrades will be carried out on some infrastructure to accommodate the increased throughput.
Phase 3 Expansion:
Phase 3 expansion to 20Mtpa will require a new process line, from primary crushing through to cyanide destruction, although a carbon elution circuit will not be needed as the Phase 1 and 2 units will have sufficient capacity with the lower ore grades in Phase 3.
Capital Cost Estimate
The Study outlines an initial capital cost estimate of C$645 million for Phase 1 (6Mtpa), expansion capital of C$347 million for the Phase 2 expansion to 12Mtpa, and expansion capital of C$374 million for the Phase 3 expansion to 20Mtpa. Sustaining capital over the LOM is estimated at C$831 million while closure costs are estimated at C$175 million (discounted to year 22)
Table 8 summarizes the initial capital cost estimate for the Project.
Mining capital costs cover site development for the pits, haul roads and stockpiles, open pit mining to provide construction material to the project and expose ore for milling, mobile mining fleet costs and mine operations support infrastructure. The mobile mining fleet is planned to be purchased via various lease arrangements, with quoted commercial terms from the equipment suppliers. The leased mining fleet is paid off over several years, so costs are mostly captured as sustaining capital.
The biggest drivers associated with the estimated expansion capital costs are onsite infrastructure (C$43 million), modular expansion of the process plant (C$456 million), mining costs (C$63 million) and tailings management (C$137 million). Sustaining capital is estimated to average C$57 million per year for years 1-5, C$50 million per year in phase 2 and C$37 million per year in phase 3. Mobile fleet lease payments and mining support activities (C$430 million) and tailings management (C$271 million) are the primary drivers of sustaining capital costs.
Operating costs by phase for the LOM are provided in Table 9.
Table 9 – Operating Cost Estimate
|*||Mining costs includes stockpile re-handle, LOM mining costs exclude pre-stripping|
The operating cost estimates for the Project in Phase 1 is C$29.18/t, with economies of scale driving down costs to C$25.09/t milled in Phase 2, C$17.45/t milled in Phase 3 and C$10.36/t milled in Phase 4. Over the LOM, the Project has estimated average operating costs of C$17.96/t milled.
The Study outlines robust economics for the Blackwater Project during all four proposed stages with:
In the calculation of AISC, the cost of mining low-grade ore in Phase 1, Phase 2 and Phase 3 of operations are included in AISC in the year that they are mined with a rehandling charge applied to the AISC when low-grade stockpiles are processed in Phase 4. The AISC in Phase 4 is also impacted by the inclusion of LOM closure. Over the LOM, the Study estimates an AISC of C$850/oz (or US$672/oz) 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).
Selling Costs, Royalties and Taxes
The Study economics consider two private royalties at 1.0% and 1.5% payable over portions of the Mineral Reserve, and these have been applied to the economic cash flow model using life-of-mine average royalty rates. Estimated payments to First Nations are also included in the economic cash flow model for the Project.
Key provincial and federal tax considerations for Blackwater include:
Levered Case Assumptions
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, which are supported by the credit approved term sheet executed with Macquarie Bank Limited and National Bank of Canada in April 2021 for a C$360 million project debt facility:
Over the next 12 to 24 months, the Company will be focused on the following activities:
The Qualified Persons that will prepare the Technical Report on the Study include: Marc Schulte, P.Eng., (MMTS), George Dermer, P.Eng. (MMTS), Sue Bird, P.Eng. (MMTS), Daniel Fontaine, P.Eng. (KP), John A. Thomas, P. Eng. (JAT MetConsult Ltd.), Robin Kalanchey, P. Eng. (Ausenco), Philip Lee, RP. Bio. (ERM), James Garner, P. Eng. (Allnorth) and John Dockery, P. Geo. (Lorax). Each of the Qualified Persons has reviewed and approved the technical information contained in the Study and in this press release in their area of expertise and are independent of the Company.
Data verification programs have included review of QA/QC data, re-sampling and sample analysis programs, and database verification. Validation checks were performed on data, and comprise checks on surveys, collar co-ordinates and assay data.
In the opinion of MMTS, sufficient verification checks were undertaken on the database to provide confidence that the database is virtually error free and appropriate to support Mineral Resource and Reserve estimation.
Table 1: Average Annual Gold Production, AISC and FCF For the Blackwater Gold Project (CNW Group/Artemis Gold Inc.)
Table 2 – Key Results of the FS (including the New Gold Inc. Stream, defined below) (CNW Group/Artemis Gold Inc.)
Table 2 – Key Results of the FS (including the New Gold Inc. Stream, defined below) (CNW Group/Artemis Gold Inc.)
Figure 1 – Sensitivity of Base Case After-Tax NPV5% (C$ Billions) to Changes in US$ Gold Price Holding the USD/CAD Exchange Rate Fixed at 0.79 (base case highlighted) (CNW Group/Artemis Gold Inc.)
Table 3 – Sensitivity on Base Case After-Tax NPV5% (C$ Millions) to Changes in US$ Gold Price and USD/CAD Exchange Rate (base case highlighted) (CNW Group/Artemis Gold Inc.)
Figure 2 – Sensitivity of Base Case After-Tax IRR to Changes in US$ Gold Price Holding the USD/CAD Exchange Rate Fixed at 0.79 (base case highlighted) (CNW Group/Artemis Gold Inc.)
Table 4 – Sensitivity on Base Case After-Tax IRR to Changes in US$ Gold Price and USD/CAD Exchange Rate (base case highlighted) (CNW Group/Artemis Gold Inc.)
Figure 3 – Blackwater Gold Production and AISC Profile (CNW Group/Artemis Gold Inc.)
Table 5 – Throughput Levels by Phase (See Appendix A for Detailed Mine Schedule) (CNW Group/Artemis Gold Inc.)
Table 6 – Mineral Resource Table Showing Sensitivity to Cut-off Grades (base case highlighted) (CNW Group/Artemis Gold Inc.)
Table 7 – Mineral Reserve Estimate (CNW Group/Artemis Gold Inc.)
Figure 4 – Blackwater Project Location Map (CNW Group/Artemis Gold Inc.)
Figure 5 – Blackwater Phase 1 Process Flow Sheet (CNW Group/Artemis Gold Inc.)
Table 8 – Blackwater Initial Capital Costs (CNW Group/Artemis Gold Inc.)
Table 9 – Operating Cost Estimate (CNW Group/Artemis Gold Inc.)
Appendix A: Average Proposed Annual Mine Production for the Blackwater Project (CNW Group/Artemis Gold Inc.)
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