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Marigold Life of Mine Plan Confirms Long Mine Life with Solid Margins and Production Growth

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Marigold Life of Mine Plan Confirms Long Mine Life with Solid Margins and Production Growth

 

 

 

 

 

 

 

Silver Standard Resources Inc. (NASDAQ:SSRI) (TSX:SSO)  is pleased to announce the Mineral Resources estimate, Mineral Reserves estimate and life of mine plan for its 100% owned Marigold mine  located in Nevada, U.S. All figures in U.S. dollars except where noted.

 

 

Life of Mine Plan Highlights

 

  • Significantly Increases Silver Standard’s Reserve Base: Mineral Reserves of 2.1 million ounces of gold contained in 129.7 million tonnes grading 0.51 grams per tonne mined over a 13-year operating life.
  • Potential for Mine Life Extension: Indicated Mineral Resources of 4.0 million ounces of gold contained in 243.7 million tonnes grading 0.51 grams per tonne providing strong potential to extend mine life.
  • Production Growth: Gold production averages 186,700 ounces per year over the nine years of active mining to 2023.
  • Competitive Cost Position: Average annual cash costs of $762 per payable ounce of gold sold and all-in sustaining costs of $986 per payable ounce of gold sold.
  • Limited Capital Requirements: Total sustaining capital expenditures of $123 million or $74 per payable ounce of gold sold.
  • Robust Economics: After-tax net present value (NPV) of $419 million, assuming $1,300 per ounce gold price and a 5% discount rate.

 

“Following successful integration, the life of mine plan demonstrates how Marigold is an important step in transforming Silver Standard into a premier mining company,” said John Smith, President and CEO. “The cost structure and reserve life highlights the strategic value Marigold brings to us now and through the resource cycle. The life of mine plan and team provide a strong platform to drive margins and growth opportunities at the mine and in the region. Next, the team will focus on converting resources to reserves and achieving operating efficiencies, both of which are within our demonstrated expertise.”

 

 

Mine Overview

 

 

Marigold is an open-pit gold mine located in Humboldt County, Nevada, U.S. and is situated at the northern end of the Battle MountainEureka trend. Marigold is a distal-type, structurally-controlled, sediment-hosted gold-silver deposit related to Eocene magmatism. The mineralization has a strike length in excess of eight kilometers and widths up to one kilometer, making it one of the largest mineral systems in the region. The surface zone of oxide ore extends down to approximately 200 meters.

 

 

Marigold has been in continuous production since 1988, producing in excess of 2.7 million ounces of gold prior to our ownership on April 1, 2014. Ore is mined by conventional truck and shovel equipment at an average annual rate of 15.1 million tonnes at steady state production. Ore is processed via a large run-of-mine heap leach operation with an average daily stacking rate of 42,000 tonnes. Marigold produces gold doré bars which are refined into London Bullion Market Association quality bullion and the gold sold on the spot market through bullion banks. Production at Marigold is subject to various net smelter return royalties.

 

 

The mine is connected to Interstate 80 by a six kilometer unpaved road providing excellent access. Marigold has a skilled operating team and employs approximately 360 people, who manage and maintain the mine and processing facilities to world-class safety and environmental standards. Marigold power supply is provided by NV Energy through a 120 kilovolt transmission line to site. Power draw is five megawatts and is distributed through a 25 kilovolt distribution grid. Marigold water requirements are supplied from three wells located near the mine access road. There is potential for additional water for processing and site usage from a new well to be commissioned in early 2015.  The mine is located on approximately 7,900 hectares of land controlled by Silver Standard.

 

 

Mineral Resources Estimate

 

 

The Mineral Resources estimate herein is based on all available data for Marigold.

 

 

Table 1: Marigold Mineral Resources Estimate (as at September 30, 2014)

 

Category

Tonnes

Gold Grade

Contained Gold

(Mt)

(g/t)

(Moz)

Measured

Indicated

243.7

0.51

4.0

Inferred

13.4

0.46

0.2

 

 

Notes:

1. James Carver, Registered SME Member (# 509390),is the Qualified Person for the Mineral Resources estimate.
2. The Mineral Resources estimate has been classified in accordance with Canadian Institute of Mining, Metallurgy and Petroleum (CIM, 2010) definition standards.
3. Reported Mineral Resources are estimated below the as-mined surface of September 30, 2014 and are inclusive of Mineral Reserves.
4. Gold values have been estimated using ordinary kriging.
5. Domain based outlier restriction on gold values ranging between 1.37 g/t and 8.58 g/t has been used for the Mineral Resources estimate.
6. Densities for different lithological units have been calculated based on detailed test work carried out by Silver Standard and corresponds to the historical mine production.
7. The Marigold drillhole database including collar survey, assay, lithology, oxidation and densities used for this resource estimate has been verified by James Carver by conducting detailed verification checks, including QA/QC of location, geological, density and assay data.
8. Mineral Resources include all mineralized material that has the potential for economic recovery of gold from an open pit supply to a run-of-mine heap leach operation.
9. The Mineral Resources estimate has been calculated based on an optimized pit at a cut-off grade of a payable gold grade of 0.065 g/t (gold assay factored for recovery, royalty and net proceeds per mineral resource block) with a gold price assumption of US$1,500 an ounce.
10. The cost, recovery and design parameters considered by optimization calculations for this Mineral Resources estimate are considered appropriate based on the current mine production.
11. The reported Indicated Mineral Resources are regarded as appropriate for medium to long term production open pit planning and mine scheduling on a quarterly basis.
12. Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability. While the classification categories of Mineral Resources used in this news release are recognized and required under Canadian regulations, the U.S. Securities and Exchange Commission (“SEC”) does not recognize them and U.S. companies are generally not permitted to disclose resources in documents they file with the SEC.
13. Tonnage and grade measurements are in metric units. Contained gold ounces are reported as millions of troy ounces (Moz).
14. Figures may not total exactly due to rounding.

 

 

Mineral Reserves Estimate

 

 

The Mineral Reserves estimate herein is based on all available data for Marigold.

 

 

Table 2: Marigold Mineral Reserves Estimate (as at September 30, 2014)

 

Category

Tonnes

Gold Grade

Contained Gold

(Mt)

(g/t)

(Moz)

Proven

Probable

129.7

0.51

2.12

Total

129.7

0.51

2.12

 

 

Notes:

1. Thomas Rice, SME Registered Member (#269380), is the Qualified Person for the Mineral Reserves estimate.
2. Trevor Yeomans, B.Sc. (Hons), ACSM, P. Eng. is the Qualified Person who provided metallurgical parameters that were incorporated in the Mineral Reserves estimate.
3. CIM (2010) definition standards were used in the generation of Mineral Reserves estimate classification.
4. Mineral Reserves are contained within pit designs generated using Indicated Mineral Resources only and a gold price of $1,300 per ounce.
5. Reported Mineral Reserves are estimated below the as-mined surface of September 30, 2014.
6. Mineral Reserves are estimated at a cut-off grade of 0.065 g/t payable gold grade.
7. Mining costs are based on historical values and budgeted costs with a haulage component based on estimated haul cycle times.
8. Processing and general and administrative costs were estimated on the basis of historical values and budgeted costs.
9. The Mineral Reserves estimate is quoted within a pit design that utilizes geotechnical parameters proven from actual performance.  The design was created using a geometry guideline from a Floating Cone algorithm that maximizes the Mineral Reserves cash flow.
10. No mining dilution is applied to the grade of the Mineral Resources. Dilution intrinsic to the Mineral Resources estimate is considered sufficient to represent the mining selectivity considered.
11. Average life of mine strip ratio is 3.7 waste to ore.
12. Metallurgical recovery formula was applied for gold using “nearest neighbor” model based on cyanide-soluble gold grades, calibrated to historically achieved recoveries.
13. Tonnage and grade measurements are in metric units. Contained gold ounces are reported as millions of troy ounces (Moz).
14. Figures may not total exactly due to rounding.
15. This Mineral Reserves estimate assumes that all required permits, as discussed under the heading “Environmental, Reclamation and Social Responsibility” will be obtained.

 

 

Mining and Processing

 

 

Marigold uses conventional drill/blast and truck/shovel open pit mining methods. Waste and some ore is mined on 15 meter benches by a 55-cubic meter electric rope shovel. The majority of the ore is extracted on 7.5 meter benches using two 520 tonne hydraulic excavators. Wall angles vary from 47 to 51 degrees, with pre-split for final walls. Over the mine life, a fleet of eighteen 290 tonne haul trucks and three loading units are expected to move approximately 614.8 million tonnes of material including 129.7 million tonnes of ore for a strip ratio of 3.7:1.

 

 

Mine material movement averages 71.8 million tonnes per year for the nine year period of mine operations. Ore tonnage averages 15.1 million tonnes per year.  The majority of the mining is from the Mackay area. The remaining ore is mined from two satellite deposits: the Hercules pit which is north of the Mackay pit; and the 5 North pit, which is one mile north of the Mackay pit. Both the Hercules and 5 North pits contain higher grade ore; however, due to haul distances and relatively smaller ore tonnages, these pits are scheduled to be mined later in the mine life.

 

 

Ore is hauled to the leach pads and truck dumped in 6- to 9-meter lifts. The pads are permitted to a maximum height of 120 meters. Pad expansion occurs periodically through the mine life as required. The ore is treated with cyanide solution which passes through a conventional ADR (adsorption-desorption-recovery) circuit. Solution management is a critical part of the process with ore being leached over a 120-day cycle for a total recovery averaging approximately 74%. All gold treatment occurs on site, producing gold doré bars.

 

 

Operational statistics are presented in Table 3 and Table 4.  Production and cost statistics are presented in Table 5.
 

Table 3: Operating and Production Statistics

 

 

Units

Annual
Average

Total

Total Material Mined

Mt

71.8

614.8

Waste Removed

Mt

56.6

485.1

Ore to Leach Pad

Mt

15.1

129.7

Strip Ratio

waste:ore

3.7

Gold Grade to Leach Pad

g/t

0.51

Gold Recovery

%

74%

Gold Produced

koz

186.7

1,658.8

 

 

Notes:

1.

Annual averages are calculated over the active mining period commencing on October 1, 2014 and ending in 2023.

 

 

Table 4: Operating Statistics Per Annum

 

Year

Ore Mined

Waste Removed

Strip Ratio

Gold Grade

Gold Recovery

(Mt)

(Mt)

(waste:ore)

(g/t)

(%)

Q4 2014

4.0

14.4

3.6

0.80

73%

2015

12.8

64.3

5.0

0.53

73%

2016

15.4

59.0

3.8

0.42

72%

2017

15.4

59.0

3.8

0.54

72%

2018

15.4

61.7

4.0

0.45

74%

2019

15.4

59.9

3.9

0.43

74%

2020

15.4

52.9

3.4

0.49

74%

2021

15.4

52.9

3.4

0.62

77%

2022

15.4

46.6

3.0

0.54

75%

2023

4.9

14.5

2.9

0.45

73%

2024

2025

2026

2027

Total

129.7

485.1

3.7

0.51

74%

 

 

Notes:

1. 2014 operational figures based on estimates from October 1, 2014 to December 31, 2014.
2. Figures may not total exactly due to rounding.

 

 

Table 5: Production and Cost Statistics Per Annum

 

Year

Gold Stacked
on Pads

Gold
Produced

Cash
Costs

All-In Sustaining
Costs

(oz)

(oz)

($/payable ounce of
gold sold)

($/payable ounce of
gold sold)

Q4 2014

75,702

65,644

$722

$976

2015

160,389

172,396

$765

$1,090

2016

150,875

166,203

$869

$1,157

2017

192,100

183,324

$690

$1,099

2018

166,600

172,635

$755

$1,028

2019

156,400

158,813

$761

$1,139

2020

181,900

175,865

$802

$890

2021

237,999

224,723

$675

$808

2022

200,600

209,451

$692

$787

2023

51,628

69,704

$766

$793

2024

18,011

$930

$972

2025

16,304

$1,067

$1,108

2026

16,304

$1,258

$1,292

2027

9,422

$1,726

$1,773

Total

1,574,191

1,658,799

$762

$986

 

 

Notes

1. 2014 operational figures based on estimates from October 1, 2014 to December 31, 2014.
2. Gold produced from 2024 onwards is derived from the residual recoverable gold remaining in the leach pads when mining is completed and is recovered through continued leaching from 2024 to 2027.
3. Gold Stacked on Pads refers to gold content of ore stacked on the pads in that period that is recoverable by the leaching process. Gold Produced refers to the amount of gold recovered from the heap in that period and processed to product for sale. The difference between the values in these columns is due to the lag effect of the 120-day leach cycle on gold dissolution in the heap and ounces already in the pads as of October 1, 2014.
4. Cash costs include mine operations, processing, general administration, inventory adjustment, royalties and refining charges (net of silver credits).  All-in sustaining costs include cash costs plus capitalized stripping, sustaining capital, and reclamation.
5. Figures may not total exactly due to rounding.
6. Cash costs and all-in sustaining costs are a non-GAAP financial measure. Please see “Cautionary Note Regarding Non-GAAP Measures” in this news release.

 

 

Capital Expenditure Summary

 

 

Sustaining capital expenditures, exclusive of deferred stripping, are expected to total $123 million over the life of the mine.  Detailed capital expenditures by area are presented in Table 6.

 

 

Table 6: Summary of Sustaining Capital Expenditures ($M)

 

Capital Expenditures

Total

Mining Equipment

$17

Capitalized Equipment Maintenance

74

Processing

24

Administration & Permitting

8

Total Capital Expenditures

$123

 

 

Notes

1. Excludes capitalized stripping.

 

 

Operating Cost Summary

 

 

Operating costs per tonne of ore processed averages $9.16 over the life of mine to 2027. Optimization efforts continue at Marigold in order to reduce the operating costs going forward. These initiatives are discussed in more detail in the Opportunities section of this news release.

 

 

Table 7: Operating Costs per Tonne

 

Operating Costs

Units

Value

Mine Operations

$/tonne mined

$1.50

Mine Operations

$/tonne processed

7.13

Processing

$/tonne processed

1.33

General Administration

$/tonne processed

0.69

Total Operating Costs

$/ tonne processed

$9.16

 

 

Operating costs include mine operations, processing, and general and administrative costs. Cash costs, which include refining charges and royalties, average $762 per payable ounce of gold sold over the life of mine to 2027. Costs per payable ounce of gold sold basis are presented in Table 8.
 

Table 8: Costs per Payable Ounce of Gold Sold ($/oz)

 

 

Value

Mine Operations

$434

Processing

104

General Administration

54

Inventory Adjustment

42

Royalties & Refining (net of silver credits)          

127

Total Cash Costs

$762

Capitalized Stripping

123

Sustaining Capital

74

Reclamation

27

All-In Sustaining Costs

$986

 

 

Notes:

1. Mine operations are presented net of capitalized stripping.
2. Inventory adjustment represents carrying values of starting leach pad and bullion inventory at October 1, 2014 which are released into cash costs over the life of mine through to 2027 as the associated ounces are sold.
3. Capitalized stripping is in accordance with IFRIC 20 “Stripping Costs in the Production Phase of a Surface Mine“.
4. Payable gold ounces sold over the life of mine total 1,659,637 oz.
5. Figures may not total exactly due to rounding.

 

 

Economic Analysis

 

 

The Marigold economic analysis is based on a $1,300 per ounce gold price.  The mine is expected to generate $419 million in after-tax NPV using a 5% discount rate over the life of mine. Key economic and financial assumptions are presented in Table 9 and the economic analysis summary is presented in Table 10.

 

 

Table 9: Key Economic and Financial Assumptions

 

Assumption                                      

Units

Value

Gold Price

$/oz

$1,300

Oil Price

$/bbl

$100

Royalty Rate

%

9.8%

 

 

Notes:

1. Weighted average royalty rate of 9.8% over the life of mine to 2027.  Annual average royalty rate varies from 9.1% to 10.0%.

 

The Marigold mine is subject to Nevada State Net Proceeds tax at a rate of 5% and U.S. Federal income tax at a statutory rate of 35% with an Alternative Minimum income tax rate of 20%.

 

 

Table 10: Economic Analysis Summary ($M)

 

 

Total

Revenue

$2,159

(less) Mine Operations (excl. Capitalized Stripping)

721

(less) Processing

172

(less) General Administration

92

(less) Royalties & Refining

212

Operating Cash Flow

$962

(less) Capitalized Stripping

204

(less) Sustaining Capital

123

(less) Reclamation

46

Salvage Value

8

Pre-Tax Free Cash Flow

$596

After-Tax Free Cash Flow

$536

After-Tax NPV (5%)

$419

 

 

Notes:

1. Economic analysis presented for the period of October 1, 2014 to end of operations in 2027.
2. Figures may not total exactly due to rounding.

Marigold provides significant leverage to the price of gold. NPV sensitivities for key operational and economic metrics are presented in Table 11.

 

 

Table 11: Sensitivity Analysis for Marigold

 

 

Units

(10)%

LOM Plan

+10%

Gold Price

$/oz

$1,170

$1,300

$1,430

NPV (5%)

$M

$297

$419

$540

 

 

 

 

 

Operating Costs

$/tonne

$8.24

$9.16

$10.07

NPV (5%)

$M

$495

$419

$342

 

 

 

 

 

Capital Expenditures

$M

$111

$123

$135

NPV (5%)

$M

$430

$419

$409

 

 

Notes:

1. Operating costs per tonne of ore processed.

 

 

Environment, Reclamation and Social Responsibility

 

 

Marigold holds active, valid permits for all current facets of the mining operation as required by county, state, and federal regulations. The authorized Plan of Operations area currently encompasses 7,916 hectares, with 2,027 hectares within that area permitted for mining-related disturbance. The mine engages in concurrent reclamation practices and is bonded for all permitted features, as part of the Nevada permitting process.

 

 

Marigold will prepare a further Environmental Impact Statement (“EIS”) to permit the future mining of all pits to their planned maximum depths. In the normal course of operations planning, environmental baseline studies were initiated in 2013 to support the EIS, which is anticipated to begin in early 2015. Silver Standard has a reasonable expectation that all necessary operating permits will be granted within required timeframes to complete this life of mine plan.

 

 

Community support and engagement is well-established at Marigold and will continue, with regular updates provided by mine management to local stakeholders and regulators. In 2013, nearly $300,000 in donations, scholarships, and in-kind support was provided to local communities and charities.

 

 

Opportunities

 

 

Silver Standard has initiated exploration and resource/reserve development activities to enhance Marigold’s margins and extend the mine life. Drilling was initiated in June 2014 targeting the discovery of additional near-surface gold mineralization proximal to the current final pit and upgrading Inferred Mineral Resources to Indicated Mineral Resources. Further studies will examine the sulphide-hosted gold mineralization, which occurs directly below the leachable (oxide) ore, and may include further drill evaluation and metallurgical test work.

 

 

Several optimization studies were also initiated in 2014 to investigate opportunities to further increase Marigold’s operating efficiency. These studies include pit slope angle evaluation, haulage profile optimization, equipment productivity improvements, mine dispatch upgrade and grade control review. Initial indications from the operational excellence program show improvements and are now starting to transfer to our unit operating cost. Operational efficiency and cost control remain key areas of focus to manage the mine going forward for optimum margin, increasing the mine’s medium to long term potential and enabling the conversion of additional Mineral Resources into Mineral Reserves.

 

 

 

 

External Consultants

 

 

The Mineral Resources and Mineral Reserves estimates were prepared by Silver Standard.

 

 

AMEC Americas Limited (“AMEC”), Canada, provided technical input into the Marigold Mineral Resources model update upon which the current life of mine plan is based. This service was provided between April and August 2014.

 

 

Strategic life of mine options analyses and detailed life of mine planning was completed by Independent Mining Consultants Inc. (“IMC”) of Tucson, Arizona. IMC completed this work between June and September 2014.

 

 

Knight Piesold Ltd. (“KP”) provided rock mechanics comments to support internal review and the mine optimisation process. Current pit designs have included the slope recommendations provided by KP. Work by KP was completed between April and July 2014.

 

 

Independent peer review of the Marigold strategic optimization work and LOM planning and scheduling process was conducted by David Tutton C. Eng., consultant mining engineer. Mr. Tutton provided feedback throughout the process and his comments were incorporated in the evolving work.

Posted October 7, 2014

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