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Continental Gold Announces a Positive Preliminary Economic Assessment for the Buritica Project

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Continental Gold Announces a Positive Preliminary Economic Assessment for the Buritica Project

 

 

 

 

 

Continental Gold Limited (TSX:CNL) (OTCQX:CGOOF) is pleased to announce the completion of an independent Preliminary Economic Assessment for its 100%-owned Buritica Project in Antioquia, Colombia. The PEA was completed utilizing the resource estimate for the Yaragua and Veta Sur deposits, prepared in accordance with National Instrument 43-101 as announced on May 13, 2014. The PEA study, the details of which will be set out in a technical report prepared in accordance with NI 43-101 and filed on SEDAR within 45 days of this press release, was led by M3 Engineering and Technology Corporation of Tucson, Arizona, with contributions from other independent consultants including Chilean-based NCL Ltda. who was responsible for the development of the underground mine plan for the project. All dollar amounts are quoted in U.S. Dollars. All cash cost information is net of silver by-product credits.
 

Highlights

 

 
 
--  An 18-year mine life based on 20,055,000 tonnes grading 7.80 g/t gold
    and 19.35 g/t silver resulting in 4,777,000 ounces of recovered gold and
    7,088,000 ounces of recovered silver (see Table 1). Throughput will
    begin at a rate of 2,000 tonnes per day ("tpd") and will ramp up to
    3,500 tpd in the third year (see table below, under "PEA Parameters"). 
    
--  The first five years of production will average approximately 314,000
    ounces of gold and 507,000 ounces of silver annually, at a total cash
    cost of $389 per ounce of gold. Life of mine production will average
    265,000 ounces of gold and 394,000 ounces of silver annually, at a total
    cash cost of $431 per ounce of gold, placing Buritica in the lowest cash
    cost quartile globally. 
    
--  The after-tax net present value at a 5% discount ("NPV5") amounts to
    $1.08 billion. 
    
--  The after-tax internal rate of return ("IRR") is 31.5% on an initial
    capital cost of $390.3 million with a payback of 2.8 years. 
    
--  Five master vein families contain 76% of the total gold mine production
    in the first three years. The focus on mining the San Antonio,
    Murcielagos and Centena vein families in the Yaragua mineral resource
    and the 62 and 90 vein families in the Veta Sur mineral resource will
    result in a straight-forward development in the early years of the mine.
    
--  Longitudinal Bench and Fill (long-hole) has been selected as the mining
    method, as both vein systems are steeply dipping and the host rock is
    competent. Drifts will measure 4 x 4 metres and the benches will be 8
    metres in height. 
    
--  Mining dilution of 58% was calculated under the assumption that all
    material located outside the hard boundaries of modeled veins is
    assigned a value of 0 g/t gold and silver. However, based on recent
    results announced on October 28, 2014 for the Veta Sur deposit,
    including 30 metres (true horizontal width) @ 9.6 g/t gold and 47 g/t
    silver, significant potential exists to improve the dilution grade
    assumption in future economic studies.
 

 

 

The PEA is preliminary in nature, includes inferred mineral resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves, and there is no certainty that the PEA will be realized. Mineral resources that are not mineral reserves do not have demonstrated economic viability.
 

“The results of this PEA outline a future mine at Buritica that will employ more than 500 people, with the size, cost structure, diluted grade and overall economics qualifying it to become one of the world’s leading gold mines,” commented Ari Sussman, CEO of Continental. “The project design for Buritica minimizes, as much as possible, the impact on local communities, while adhering to the highest standards for environmental protection, operating efficiencies and workforce safety. Our commitments for 2015 are to complete the outstanding permitting for the project and update both our NI 43-101 resource estimate and PEA, incorporating data received from underground development sampling and drilling completed by January 31, 2015.”

PEA Parameters

 

 
 
----------------------------------------------------------------------------
Gold Price                                  $1,200 per ounce                
----------------------------------------------------------------------------
Total Resource Tonnes to be Mined           20,055,000                      
----------------------------------------------------------------------------
Processing Rate (tonnes per day)            2,000 increasing to 3,500 by the
                                            third year                      
----------------------------------------------------------------------------
Mine Life                                   18 years                        
----------------------------------------------------------------------------
Assumed Dilution                            58%                             
----------------------------------------------------------------------------
Minimum Mining Width                        1.6 metres                      
----------------------------------------------------------------------------
Average Mining Width                        2.5 metres (Yaragua)            
                                            3.1 metres (Veta Sur)           
----------------------------------------------------------------------------
Gold Grade                                  7.80 g/t                        
----------------------------------------------------------------------------
Silver Grade                                19.35 g/t                       
----------------------------------------------------------------------------
Gold Recovery Rate                          94.98%                          
----------------------------------------------------------------------------
Silver Recovery Rate                        56.80%                          
----------------------------------------------------------------------------
Total Gold Ounces Recovered                 4,777,000                       
----------------------------------------------------------------------------
Total Silver Ounces Recovered               7,088,000                       
----------------------------------------------------------------------------
Initial Project CAPEX                       $390.3 million                  
----------------------------------------------------------------------------
Contingency (included within Initial        $61.4 million                   
 Project CAPEX)                                                             
----------------------------------------------------------------------------
Sustaining Capital Costs Life of Mine       $346.7 million                  
----------------------------------------------------------------------------
Mining Costs                                $44.55/tonne                    
----------------------------------------------------------------------------
Processing Costs including dry stack        $37.38/tonne                    
 tailings                                                                   
----------------------------------------------------------------------------
G&A                                         $17.42/tonne                    
----------------------------------------------------------------------------
Cut-Off Grade                               3.10 g/t gold equivalent        
----------------------------------------------------------------------------
Royalty                                     3.20%                           
----------------------------------------------------------------------------
Corporate Tax Rate                          33.3%                           
----------------------------------------------------------------------------
 

 

 

Details

 
Mineral Resource Estimate
 

This PEA is based on the mineral resource estimate (summarized below), prepared in accordance with NI 43-101, as announced on May 13, 2014 and set out in the technical report entitled “Independent Technical Report and Resource Estimate on the Buritica Gold Project 2013” dated June 25, 2014, with an effective date of December 31, 2013, prepared by Andrew J Vigar, BappSc Geo, FAusIMM, MSEG, and Martin Recklies, BappSC Geo, MAIG, each of Mining Associates Pty Limited.
 

The mineral resource estimate is based on 206,717 metres of drilling and underground sampling.
 

Combined Yaragua and Veta Sur Mineral Resources above a 3 g/t gold cut-off, as at December 31, 2013

 

 
 
----------------------------------------------------------------------------
       Resource                 Grades                      Metal           
----------------------------------------------------------------------------
                                      AuEq                       AuEq       
Category     M tonnes Au g/t Ag g/t    g/t   Zn% Au Moz Ag Moz    Moz Zn Mlb
----------------------------------------------------------------------------
Measured         0.99   20.4     48   21.4   0.7   0.65   1.54   0.68   15.0
----------------------------------------------------------------------------
Indicated        7.41    9.0     29    9.6   0.5   2.15   6.89   2.29   75.1
----------------------------------------------------------------------------
M&I              8.39   10.4     31   11.0   0.5   2.80   8.43   2.97   90.1
----------------------------------------------------------------------------
Inferred         16.7    7.8     24    8.2   0.3    4.2   13.1    4.4    111
----------------------------------------------------------------------------
 

 

 

Notes: Reported tonnage and grade figures have been rounded from raw estimates to reflect the order of accuracy of the estimate. Minor variations may occur during the addition of rounded numbers. There have been no assumptions made as to metal prices or recoveries in this mineral resource estimate other than in gold equivalents that are calculated for AuEq = Au + Ag/50. M in Figures and Tables represents millions.
 

Preliminary Economic Assessment
 

The PEA outlines an after-tax Base Case NPV5 of $1.08 billion, with an after tax IRR of 31.5%. Initial capital cost for the project is estimated to be $390.3 million, with sustaining capital costs for the balance of the life of mine at $346.7 million. The Base Case payback period has been estimated at 2.8 years, once commercial production has been achieved. Economic sensitivities at various discount rates and assumed metal prices have been calculated as follows:

 

 
 
----------------------------------------------------------------------------
                                        Lower Case    Base Case  Upside Case
----------------------------------------------------------------------------
Gold Grade (grams per tonne)                  7.80         7.80         7.80
----------------------------------------------------------------------------
Silver Grade (grams per tonne)               19.35        19.35        19.35
----------------------------------------------------------------------------
Gold Price ($/oz)                           $1,000       $1,200       $1,400
----------------------------------------------------------------------------
Silver Price ($/oz)                            $15          $17          $19
----------------------------------------------------------------------------
After-Tax NPV0 ($billion)                    $1.35        $1.96        $2.58
----------------------------------------------------------------------------
After-Tax NPV5 ($billion)                    $0.70        $1.08        $1.45
----------------------------------------------------------------------------
After-Tax NPV10 ($billion)                   $0.37        $0.61        $0.85
----------------------------------------------------------------------------
After-Tax IRR                                24.1%        31.5%        38.1%
----------------------------------------------------------------------------
Payback Period (years)                         3.4          2.8          2.5
----------------------------------------------------------------------------
                                                                            
----------------------------------------------------------------------------
Years 1-5 Average Annual Gold                                               
 Production (oz)                           313,600      313,600      313,600
----------------------------------------------------------------------------
Years 1-5 Average Total Cash Cost                                           
 ($/oz)                                       $385         $389         $393
----------------------------------------------------------------------------
Life of Mine Average Total Cash Cost                                        
 ($/oz)                                       $427         $431         $436
----------------------------------------------------------------------------
                                                                            
----------------------------------------------------------------------------
Years 1-5 Average Annual Cash Flow                                          
 ($million)                                   $128         $168         $207
----------------------------------------------------------------------------
 

 

 

Mining and Processing
 

The PEA is based on an underground mining operation using waste backfill, a conventional cyanidation processing facility, dry-stacked filtered tailings and related infrastructure capable of producing at 2,000 tpd at the commencement of production, ramping up to 3,500 tpd by year three.
 

Mineral resource extraction will utilize the Longitudinal Bench and Fill method of long-hole stoping, with waste being used as backfill. The Higabra Valley tunnel at the base of the mountain slope was chosen as the main haulage level. The majority of the existing resources in the Yaragua and Veta Sur deposits are located above the elevation of this tunnel, providing an advantageous gravity scenario for the extraction and de-watering of the resources. The mine will be developed via three primary ramps – two at Yaragua and one at Veta Sur – and will be used to transport equipment, personnel, materials and mined mineral resources to the Higabra Valley tunnel. Additional primary development will include six main ventilation raises and several crosscuts connecting the primary ramps. A total of 196,000 metres of primary and secondary development are contemplated over the 18-year mine life, with approximately 21,000 metres required to be completed ahead of commercial production.
 

Life of mine production is anticipated to total 20.1 million tonnes at an average diluted grade of 7.8 g/t gold and 19.35 g/t silver. Average total cash costs over the 18-year mine life are anticipated to be $431 per ounce of gold.
 

Minerals will be processed through a conventional crushing-grinding-gravity-cyanidation circuit with dore sold to a third party smelter. Metallurgical test-work completed to date demonstrates average recovery rates of 94.98% for gold and 56.80% for silver on a blended basis from the Yaragua and Veta Sur deposits.
 

Capital Costs
 

Capital costs for the Buritica Project were estimated under the assumption that any acquisition costs or expenditures by the Company prior to this PEA are deemed “sunk” costs, and are therefore not included in the analysis. Initial capital costs are summarized as follows:

 

 
 
----------------------------------------------------------------------------
Capital Costs                                                      $ million
----------------------------------------------------------------------------
Underground Development, Infrastructure and Mine Equipment              88.4
Process Plant and Tailings Facility                                    188.3
General Site Facilities                                                 36.0
Water                                                                    1.3
Power                                                                   10.0
Access Road                                                             13.5
----------------------------------------------------------------------------
Subtotal                                                               337.5
Owners Cost and EPCM                                                    52.8
----------------------------------------------------------------------------
Total (including Contingency of $61.4 million)                         390.3
----------------------------------------------------------------------------
 

 

 

Sustaining capital costs over the balance of the mine-life totals $346.7 million, predominantly attributable to continued underground development, costs associated with replacing equipment, and the ramp-up from 2,000 tpd to 3,500 tpd in the third year of commercial production.
 

Operating Costs
 

Operating cost estimates were prepared by M3 and NCL in conjunction with the Continental senior management team. Operating costs, before by-product credits, are outlined below:

 

 
 
----------------------------------------------------------------------------
Operating Costs                                                      $/tonne
----------------------------------------------------------------------------
Mining                                                                 44.55
----------------------------------------------------------------------------
Processing                                                             37.38
----------------------------------------------------------------------------
G&A (including refining and transportation)                            17.42
----------------------------------------------------------------------------
Royalty                                                                 9.34
----------------------------------------------------------------------------
Total Operating Costs                                                 108.69
----------------------------------------------------------------------------
 

 

 

Preliminary Economic Assessment Contributors
 

M3 of Tucson, Arizona, under the supervision of Alberto Bennett, P.E. and Laurie Tahija, P.E., designed the PEA for the Buritica Project. NCL of Santiago, Chile, under the supervision of Carlos Guzman, FAusIMM and RM of the Chilean Mining Commission, developed the underground mine plan. Other independent consultants were utilized for various parts of the PEA.
 

Technical Information
 

This press release has been reviewed and approved by Mark Moseley-Williams, BSc, Mining Engineering, President and Chief Operating Officer of the Company and a qualified person within the meaning of NI 43-101.

About Continental Gold
 

Continental Gold Limited is an advanced-stage exploration and development company with an extensive portfolio of 100%-owned gold projects in Colombia. Spearheaded by a team with over 40 years of exploration and mining experience in Colombia, the Company is focused on advancing its high-grade Buritica gold project to production.

Posted November 18, 2014

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