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Foran Announces Positive Preliminary Economic Assessment for the McIlvenna Bay Copper-Zinc Deposit, Saskatchewan
Foran Mining Corporation (TSX-V:FOM) is pleased to announce the positive results of an independent preliminary economic assessment completed by JDS Energy & Mining Inc. for a proposed underground mine at the Company’s 100% owned McIlvenna Bay deposit in east-central Saskatchewan, Canada.
“The positive results outlined in the McIlvenna Bay PEA clearly illustrate the robust nature of this deposit,” commented Patrick Soares, President and CEO of Foran. “What makes the McIlvenna Bay Project stand out when compared to a host of peers is a large resource base and positive metallurgy, its location, in a safe, stable jurisdiction, year-round road access and proximity to an existing grid supplied by hydro-electric power, rail and an established mining centre home base in Flin Flon, Manitoba. Today’s results demonstrate that McIlvenna Bay should advance to a feasibility study.”
Mr. Darren Morcombe, Chairman of Foran commented “This PEA is a significant step in moving the Company towards its strategy of developing and building a new base metal mining camp in the Flin Flon region. McIlvenna Bay is a standalone cornerstone project 65 kilometres from a major mining town, with fundable capital and reasonable cash cost. This project, with a significant exposure to zinc, is moving ahead as commentators highlight a tightening zinc market. Management continues to advance McIlvenna Bay, while at the same time advancing new discoveries and historic resources to delineate satellite deposits close to McIlvenna Bay, with the objective of creating a combined economic model for the camp as a whole, hence realizing its strategy. Foran`s competitive advantage in generating shareholder wealth includes management’s proven track record, along with its major shareholders’ ability to leverage the use of debt successfully, incorporate partners into assets and use their contact base to introduce potential partners to the Company. Major investors in mining projects look for unquestionable security of title, proven and pragmatic management focused on shareholder wealth creation, solid risk-adjusted economics, a proven technical approach to mining, significant exploration optionality, existing infrastructure which reduces capital costs and favourable commodity prices. Applying these criteria to McIlvenna Bay make Foran a standout company and has resulted in the robust preliminary economics announced today.” Mr. Morcombe continued “The Board is currently reviewing Management’s recommendations for Foran’s 2015 work programs and we look forward to providing an update in due course.”
PEA Economic Highlights:
The PEA envisages an average throughput rate of 5,000 tonnes per day (“tpd”) as a conventional underground operation through longhole stoping and cemented paste backfill. The mine is expected to have a 14 year life, with potential to extend the life of operations through resource expansion at depth or delineation of nearby satellite deposits. A stand-alone concentrator is proposed to be constructed adjacent to the McIlvenna Bay mine. Key parameters for the PEA are summarized in Tables 1 and 2.
The estimated pre-tax NPV7% is $381.7M, with a 21.9% IRR and 4.1 year payback; post-tax NPV7% is $262.6M, with a 18.9% IRR and 4.1 year payback.
Total payable life of mine production is expected to be 804.7 million pounds (“Mlbs.”) of zinc, 513.7 Mlbs. of copper, 15.8 Mlbs. of lead, 218,000 ounces of gold and 5.44 million ounces of silver.
McIlvenna Bay pre-production capital cost is estimated at $207.3M, with a $41.5M contingency, for a total of $248.8M (Table 2). Sustaining capital is estimated at $125.2M, with a $25.0M contingency, for a total of $150.3M. The total estimated capital cost over the LOM including closure costs net of salvage value is estimated at $332.5M, with a $66.5M contingency, for a total of $399.1M. The majority of mine construction is expected to take 18 months, with underground mine development adding an additional 6 months to the build-out period.
The average on-site operating costs total $51.03 per tonne processed, which is comprised of $33.54 per tonne for mining, $13.39 per tonne for milling and $4.10 per tonne for general and administrative. OpEx estimates for McIlvenna Bay were prepared incorporating both off-site and on-site infrastructure as related to the mine plan and process schedule.
The base case metal price deck and exchange rate are based on spot prices as at October 15, 2014 and are US$3.08/lb for copper, US$1.06/lb for zinc, US$0.93/lb for lead, US$1,238/oz. for gold, and US$17.00/oz. for silver, with a CDN$/US$ exchange rate of 0.89.
The PEA was led by JDS; sensitivity analyses to metal prices and exchange rate are presented in Tables 5 and 6 and Figure 1.
All input estimates are based on budget quotations, peer comparisons and JDS’ recent experience in projects of similar scope. All figures are quoted in CDN$ unless otherwise noted.
The PEA is considered preliminary in nature and includes mineral resources, including 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. Mineral resources that are not mineral reserves have not yet demonstrated economic viability. Due to the uncertainty that may be attached to mineral resources, it cannot be assumed that all or any part of a mineral resource will be upgraded to mineral reserves. Therefore, there is no certainty that the results concluded in the PEA will be realized.
Table 1. Summary of Key Parameters
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Parameter
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Mine Life 13.7 years
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Plant Throughput (LOM average) 4,761 tpd
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Revenue $2,504.9M LOM
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OpEx $1,211.3M LOM
$51.03/tonne milled
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Net Pre-tax Cash Flow $894.6M LOM
$65.5M/year
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Net After-tax Cash Flow $646.2M LOM
$47.3M/year
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Cash Cost (Net of By-Product)(1)
Cu US$0.84/lb.
Zn (US$0.37/lb.)
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Pre-Tax NPV7% $381.7M
Pre-Tax IRR 21.9%
Pre-Tax Payback 4.1 years
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After-Tax NPV7% $262.6M
After-Tax IRR 18.9%
After-Tax Payback 4.1 years
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(1) Includes all Treatment & Refining charges, transportation charges,
deductions, operating costs and royalties.
Table 2. Summary of Capital Expenditures
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Base Contingency (20%) Total
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Pre-Production CapEx $207.3M $41.5M $248.8M
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Sustaining Capital $125.2M $25.0M $150.3M
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LOM $332.5M $66.5M $399.1M
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Table 3. Breakdown of Operating Costs
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Average Operating Costs Per tonne milled LOM
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Mining $33.54 $796.2M
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Processing $13.39 $317.7M
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G&A $4.10 $97.4M
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Total $51.03 $1,211.3M
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Table 4. Summary of Payable Metal Production
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Metal Per annum LOM
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lbs. tonnes lbs. tonnes
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Zinc 58.9M 26,717 804.7M 365,101
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Copper 37.6M 17,055 513.7M 233,013
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Lead 1.2M 544 15.8M 7,167
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oz. oz.
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Gold 16,000 218,000
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Silver 398,000 5,437,000
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Table 5. Metal Price Sensitivity Analysis
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-10% Base Case +10%
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Zinc (US$/lb.) 0.95 1.06 1.17
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Copper (US$/lb.) 2.77 3.08 3.39
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Lead (US$/lb.) 0.84 0.93 1.02
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Gold (US$/oz.) 1,114 1,238 1,362
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Silver (US$/oz.) 15.30 17.00 18.70
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Pre-tax
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NPV7% $ 200.6M $ 381.7M $ 562.9M
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IRR 15.4% 21.9% 27.6%
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Payback 5.4 years 4.1 years 3.4 years
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Post-tax
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NPV7% $ 129.4M $ 262.6M $ 394.5M
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IRR 13.3% 18.9% 24.0%
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Payback 5.4 years 4.1 years 3.5 years
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Table 6. Exchange Rate Sensitivity Analysis
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-10% Base Case +10%
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US$:CDN$ 0.98 0.89 0.80
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Pre-tax
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NPV7% $ 251.3M $ 381.7M $ 541.1M
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IRR 17.2% 21.9% 26.9%
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Payback 4.9 years 4.1 years 3.5 years
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Post-tax
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NPV7% $ 166.9M $ 262.6M $ 378.7M
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IRR 14.9% 18.9% 23.4%
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Payback 4.9 years 4.1 years 3.5 years
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Infrastructure
McIlvenna Bay is linked to Flin Flon, Manitoba by 85 km of highway followed by 18 km of unsealed secondary road. It is expected that the secondary road will require ongoing maintenance for heavy machinery delivery and concentrate trucking.
A power line currently crosses the property in the vicinity of the Deposit. It is anticipated that this line would require upgrading to support a 25 megawatt load required to operate mine operations and a concentrator.
It is envisaged that concentrate would be trucked weekly from the minesite and that no long-term storage facility would be required on-site.
Mining & Processing
The PEA is based on a conventional underground mine similar to existing mining operations in the region, with a ramp and shaft to optimize resource extraction. Zinc and copper concentrates are not assumed to be transported to the nearest smelters, but to a North American smelter for zinc and an Asian smelter for copper.
Due to the broad horizontal thickness and steep dip of the mineralized zones, the mine will utilize longhole stoping. Structural backfill in the form of cemented paste fill will be pumped underground from a surface paste facility to fill 73% of the open stope voids, while the remaining 27% will be filled with run of mine waste as it is produced. A concentrator with conventional milling and flotation is envisaged to be built on-site.
The PEA contemplates a 5,000 tpd process plant flow sheet design which follows conventional crushing, a semi-autogenous mill with a pebble crushing circuit, a ball mill grinding circuit using cyclones for classification followed by a talc pre-flotation step to remove detrimental talc prior to copper/zinc/bulk flotation. The metallurgical processing selected for the different mineralization types were designed to produce copper concentrates, zinc concentrates and/or a bulk concentrate as final products depending on the mineralization type batch fed to the plant. Details on the various mineralization types are provided below.
The PEA utilized the results of metallurgical testwork conducted in 2012 on the three main styles of mineralization at McIlvenna Bay, namely the Main Lens Upper West Zone massive to semi-massive sulphides, the Main Lens Zone 2 massive sulphides, and the Copper Stockwork Zone, to determine metallurgical recoveries for the Deposit. This work indicated the Deposit would produce marketable copper, zinc and lead-copper concentrates, with the copper and zinc concentrates being characterized by low to very low levels of deleterious elements and good copper and zinc grades, respectively. The types and grades of resulting concentrates produced from the main mineralized zones in the Deposit are detailed in Table 7.
Table 7. McIlvenna Bay Metallurgical Testwork(1)
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Zone Cu Zn Pb-Cu Bulk
Concentrate Concentrate Concentrate
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Copper Stockwork Grade: NA NA
Zone 29% Cu, 6.4g/t Au,
Composite Head 126g/t Ag
Grade: 1.45% Cu, Recoveries:
0.34 g/t Au, 8 g/t 94% Cu, 85% Au,
Ag 77% Ag
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Main Lens: Grade: Grade: NA
Upper West Zone 24% Cu, 6.5g/t Au, 54% Zn
Composite Head 216g/t Ag Recovery:
Grade: 3.97% Zn, Recoveries: 76% Zn
1.61% Cu,, 0.55 84% Cu, 60% Au,
g/t Au, 25 g/t Ag 50% Ag
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Main Lens: NA Grade: Grade:
Zone 2 55% Zn 12% Cu, 14% Pb,
Composite Head Recovery: 5.3g/t Au, 332g/t
Grade: 7.25% Zn, 85% Zn Ag
0.30% Cu, 0.19 g/t Recoveries:
Au, 16 g/t Ag 56% Cu, 59% Pb,
42% Au, 33% Ag
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(1) Testwork conducted by G&T Metallurgical Services (Stewart Group) on three composite samples prepared from core drilled by the Company; for additional information see the Foran news release dated June 20, 2013.
Mineral Resource Estimate
In March 2013, Foran updated the mineral resource estimate for McIlvenna Bay (the “2013 Resource”; Table 8). The PEA incorporates the results from the 2013 Resource, of which 55% was classified as indicated and 45% was classified as inferred.
Table 8. Mineral Resource Estimate (US$60/t NSR cut-off) (1-4)
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Tonnage Copper Zinc Gold Silver CuEq ZnEq
Zone (kt) (%) (%) (g/t) (g/t) (%) (%)
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Indicated
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Main Lens - Upper
West Zone 2,148 1.66 4.10 0.88 31 2.79 18.75
----------------------------------------------------------------------------
Main Lens - Zone 2 3,386 0.31 7.15 0.24 24 1.51 10.19
----------------------------------------------------------------------------
Lens 3 756 1.23 2.55 0.30 15 1.79 12.03
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Copper Stockwork
Zone 7,610 1.60 0.30 0.50 11 1.90 13.10
----------------------------------------------------------------------------
Total Indicated 13,900 1.28 2.67 0.49 17 1.96 13.19
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Inferred
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Main Lens - Upper
West Zone 2,913 1.63 3.68 0.51 19 2.47 16.62
----------------------------------------------------------------------------
Main Lens - Zone 2 2,796 0.51 7.13 0.38 26 1.79 12.04
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Lens 3 124 1.61 2.67 0.51 18 2.31 15.52
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Copper Stockwork
Zone 5,478 1.56 0.47 0.42 12 1.87 12.59
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Total Inferred 11,311 1.32 2.97 0.43 17 2.01 13.52
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(1) Effective date January 1, 2013; CIM definitions were followed for
Mineral Resources; CuEq = copper equivalent; ZnEq = zinc equivalent;
NSR = Net Smelter Return.
(2) The base case mineral resource is estimated based on 178 diamond drill
holes and a NSR cut-off grade of US$60/t. NSR grades were calculated
and high grade caps were applied as per the discussion in the Foran
news release dated March 27, 2013 and include provisions for
metallurgical recovery and estimates of current shipping terms and
smelter rates for similar concentrates. Metal prices used are
US$3.25/lb. Cu, US$1.10/lb. Zn, US$1,400/oz. Au, and US$25/oz. Ag.
Specific gravity was interpolated for each block based on measurements
taken from core specimens.
(3) Mr. David Rennie, P.Eng., of RPA, prepared this mineral resource
estimate. Mr. Rennie is independent of Foran and is a "Qualified
Person" within the meaning of NI 43-101.
(4) CuEq and ZnEq values were estimated based on $53.94 per% Cu, $8.11 per%
Zn, $31.16 per g/t Au and $0.03 per g/t Ag.
Potentially Mineable Resources
Within the scope of the PEA, JDS re-interpreted the potentially economically viable portion of the resource through mine planning exercises and a recalculation of the NSR formulas. The diluted potentially mineable tonnes JDS has identified meets the mine planning criteria and utilizes a NSR cut-off of US$65/tonne (Table 9).
Table 9. Potentially Mineable Resource (US$65/t NSR cut-off)(1)
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Tonnage Copper Zinc Lead Gold Silver NSR
Zone (kt) (%) (%) (%) (g/t) (g/t) ($/t)
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Indicated
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Main Lens - Upper
West Zone 2,326 1.47 3.58 0.33 0.77 26.57 136.45
----------------------------------------------------------------------------
Main Lens - Zone 2 3,157 0.23 6.59 0.42 0.20 2136 89.06
----------------------------------------------------------------------------
Lens 3 76 0.37 5.41 0.09 0.17 9.58 71.69
----------------------------------------------------------------------------
Copper Stockwork
Zone 7,025 1.39 0.22 0.02 0.46 9.26 97.79
----------------------------------------------------------------------------
Copper Stockwork
Zone Footwall 968 1.50 0.39 0.03 0.49 9.34 104.55
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Total Indicated 13,552
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Main Lens - Upper
West Zone 2,729 1.45 3.33 0.11 0.44 16.91 121.22
----------------------------------------------------------------------------
Main Lens - Zone 2 1,901 0.33 6.91 0.43 0.28 21.58 93.49
----------------------------------------------------------------------------
Lens 3 0 0 0 0 0 0 0
----------------------------------------------------------------------------
Copper Stockwork
Zone 5,555 1.38 0.44 0.04 0.39 10.90 95.32
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Copper Stockwork
Zone Footwall 0 0 0 0 0 0 0
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Total Inferred 10,185
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(1) NSR calculation based on US$3.25/lb Cu, US$1.10/lb Zn, US$1.00/lb Pb,
US$25/oz Ag, US$1,400/oz Au, F/X CDN$/US$1.00.
About Foran Mining
Foran is a zinc-copper exploration and development company with projects in the Flin Flon Mining Belt. The Company’s flagship McIlvenna Bay deposit is located in east-central Saskatchewan, 65 kilometres west of Flin Flon, Manitoba, and is one of the largest undeveloped volcanogenic massive sulphide deposits in Canada.
Foran owns a 100% interest in McIlvenna Bay, subject to a 1% Net Smelter Royalty (“NSR”) with a buy-out provision in favour of Foran for the purchase of the whole NSR for $1,000,000 at any time and a net tonnage royalty of $0.75/tonne of ore extracted with a right of first refusal in favour of Foran.
As at June 30, 2014 Foran had a treasury of $3.9 million in cash and cash equivalents.
Posted November 13, 2014
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