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Newstrike Capital Reports Robust PEA on Ana Paula Project

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Newstrike Capital Reports Robust PEA on Ana Paula Project

 

 

 

 

 

Newstrike Capital Inc. (TSX-V:NES) reports the results of an independent technical report developed in accordance with CIM guidelines for a National Instrument 43-101 Preliminary Economic Assessment on its Ana Paula Project located in the prolific Guerrero Gold Belt, Mexico.
 

This study indicates that Ana Paula is a robust, high margin, rapid payback, 8.2-year open pit mining project that benefits from high gold grades with a low strip ratio. The Ana Paula project has excellent access to infrastructure and is located in an established mining jurisdiction.
 

The PEA study was prepared by JDS Energy & Mining Inc., under the direction of Thomas H. Bagan, Vice President, Project Development (Newstrike).
 

The reader is advised that the preliminary economic assessment summarized in this press release is only intended to provide an initial, high-level review of the project. The PEA mine plan and economic model include the use of inferred mineral resources which 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 preliminary economic assessment will be realized.
 

All dollar amounts in this release are stated in US currency.
 

PEA HIGHLIGHTS
 

Base Case at $1,300 Au & $20 Ag per ounce

 

 
 
--  Pre-tax NPV@5% of $405.3 million, IRR of 47.5% with a 2.0 year payback 
    
--  After-tax NPV@5% of $232.1million, IRR of 32.8% with a 2.4 year payback 
    
--  Initial capital costs of $163.9 million (Total life-of mine ("LOM") -
    $219.7 includes sustaining/closure costs of $55.8 million and
    contingency costs of $36.2 million) 
    
--  Open pit mine with 6,000 tonne per day ("tpd") gravity/flotation/CIL
    process plant 
    
--  Cash costs of $527/ oz gold, $486/oz gold Net of By-Product credits 
    
--  All-in sustaining costs ("AISC") of $567/oz gold, $526/oz gold Net of
    By-Product credits 
    
--  Average annual production of 116,000 gold ounces and 239,000 silver
    ounces over a 8.2 year mine life 
    
--  LOM average head grades of 2.24 g/t gold and 6.89 g/t silver 
    
--  LOM gold and silver recoveries of 75% and 50%, respectively 
    
--  LOM strip ratio of 2.60 to 1 of waste to mineralized material
 

 

 

“This PEA supports our view Ana Paula is one of the best development-stage gold projects in Mexico. It is a straightforward open pit mine, utilizing conventional milling and flotation concentration with robust economics. The combination of high gold grades, low capital requirements with low operating costs makes this a compelling development project,” commented Richard Whittall, President and CEO of Newstrike. “With a positive PEA in hand, our next step is to evaluate the significant underground potential at Ana Paula and to support high priority exploration targets in this prolific gold belt.”
 

In management’s view, the economics concluded by the PEA provide a strong incentive for continued geotechnical, metallurgical and engineering studies. Newstrike believes there are excellent opportunities to refine various project elements and improve the economics through gold recovery optimization.
 

PEA SUMMARY OF RESULTS

 

 
 
                                                         
---------------------------------------------------------
Mine Life                           Years             8.2
Total Resource                   M tonnes            17.8
Total Waste                      M tonnes            33.6
Total Capitalized Waste          M tonnes            12.5
---------------------------------------------------------
Total Mined                      M tonnes            63.9
---------------------------------------------------------
                                                         
---------------------------------------------------------
Strip Ratio                          w:mr            2.60
Mining Rate                           tpd          23,385
Plant Throughput                      tpd           6,000
---------------------------------------------------------
                                                         
Average Head Grades                                      
---------------------------------------------------------
Au                                    g/t            2.24
Ag                                    g/t            6.89
---------------------------------------------------------
Payable Metal                                            
---------------------------------------------------------
Au                               LOM k oz             957
                                                         
                                  k oz/yr             116
---------------------------------------------------------
Ag                               LOM k oz           1,961
                                                         
                                  k oz/yr             239
---------------------------------------------------------
 

 

 

SUMMARY OF ECONOMICS AT BASE CASE US$1,300/Oz GOLD

 

 
 
                                                                            
----------------------------------------------------------------------------
LOM Pre-Tax Cash Flow                                      US $M      $742.6
Avg Pre-Tax Cash Flow per Year                             US $M       $90.4
----------------------------------------------------------------------------
Taxes                                                      US $M      $223.6
----------------------------------------------------------------------------
LOM After-Tax Cash Flow                                    US $M      $519.0
Avg After-Tax Cash Flow per Year                           US $M       $63.2
----------------------------------------------------------------------------
                                                                            
----------------------------------------------------------------------------
Discount Rate                                                             5%
----------------------------------------------------------------------------
Pre-Tax NPV (US$M)                                                    $405.3
Pre-Tax IRR                                                            47.5%
Pre-Tax Payback (Yrs)                                                    2.0
----------------------------------------------------------------------------
After-Tax NPV (US$M)                                                   232.1
After-Tax IRR                                                          32.8%
After-Tax Payback (Yrs)                                                  2.4
----------------------------------------------------------------------------
                                                                            
----------------------------------------------------------------------------
Au Cash Cost (US $/oz)                                               $527.26
Au Cash Cost Net of By-Products (US $/oz)                            $486.29
----------------------------------------------------------------------------
Au Cash Cost incl. Sustaining Capital (US $/oz)                      $566.93
Au Cash Cost Net of By-Products incl. Sustaining Capital (US         $525.97
 $/oz)                                                                      
----------------------------------------------------------------------------
 

 

 

The PEA mine plan and economic model include the use of inferred resources which are considered to be too speculative to be used in an economic analysis except as permitted by NI 43-101 for use in PEA’s. There is no guarantee that inferred resources can be converted to indicated or measured resources and, as such, there is no guarantee that the project economics described herein will be achieved.
 

CAPITAL AND OPERATING COSTS SUMMARY

 

 
 
                                                                            
----------------------------------------------------------------------------
                                Pre-Production  Sustaining/Closure       LOM
Capital Costs                             ($M)                ($M)      ($M)
----------------------------------------------------------------------------
Capitalized Stripping                     16.7                13.4      30.2
Contractor Mob/Demob                       0.4                 0.4       0.8
Process Plant                             45.7                 2.8      48.5
General Site & Utilities                   5.1                   0       5.1
Laboratory                                 1.5                   0       1.5
Construction Camp                          0.6                   0       0.6
Camp Site (Operations)                     1.5                 0.3       1.8
Administration Facilities                  1.1                 0.2       1.3
Tailings Facility                           13                14.8      27.8
Electrical Supply &                                                         
 Distribution                              4.6                 0.2       4.8
Water Supply &                                                              
 Distribution                              1.8                   0       1.8
Royalty Purchase                           2.8                   0       2.8
----------------------------------------------------------------------------
Reclamation/Closure                          0                14.4      14.4
Indirects                                 22.4                   0      22.4
EPCM                                      15.4                   0      15.4
Owners Costs                               4.4                   0       4.4
----------------------------------------------------------------------------
Subtotal                                 137.1                46.5     183.6
----------------------------------------------------------------------------
Contingency (20%)                         26.9                 9.3      36.2
----------------------------------------------------------------------------
Total Capital Costs                      163.9                55.8     219.7
----------------------------------------------------------------------------
                                                                     
                                                                     
---------------------------------------------------------------------
Operating Costs                                             LOM Total
---------------------------------------------------------------------
Resource & Waste Mined for OPEX                  tonnes         51.4M
Pre-Stripping and Capitalized Waste              tonnes         12.5M
Resource Processed                               tonnes         17.8M
Mining+                       US$/t processed     $6.58       $116.7M
Resource Rehandle(i)          US$/t processed     $0.12         $2.1M
Processing                    US$/t processed    $17.75       $315.0M
G&A                           US$/t processed     $2.49        $44.2M
---------------------------------------------------------------------
Total Operating Costs         US$/t processed    $26.93       $478.1M
---------------------------------------------------------------------
                                                                     
+Mining Cost is based on $2.30/t mined                                      
(i)Rehandle Cost is based on $0.50/t rehandled
 

 

 

SENSITIVITIES

 

 
 
                                                                         
-------------------------------------------------------------------------
Gold Price US$/oz          $1,000  $1,100  $1,200  $1,300  $1,400  $1,500
-------------------------------------------------------------------------
Pre-Tax NPV5%US$            186.7   259.6   332.4   405.3   478.2   551.1
-------------------------------------------------------------------------
After-Tax NPV5%US$           91.5   138.4   185.2   232.1   278.9   325.8
-------------------------------------------------------------------------
Pre-Tax IRR                 27.8%   34.8%   41.4%   47.5%   53.3%   58.8%
-------------------------------------------------------------------------
After-Tax IRR               17.6%   23.1%   28.1%   32.8%   37.2%   41.4%
-------------------------------------------------------------------------
Pre-Tax Payback Yrs           2.6     2.4     2.1     2.0     1.8     1.6
-------------------------------------------------------------------------
After-Tax Payback Yrs         3.3     2.9     2.6     2.4     2.2     2.1
-------------------------------------------------------------------------
 

 

 

As shown above, the Project has the potential to provide investors with commodity resilience as well as significant leverage to movements in the gold price.
 

PROJECT DESCRIPTION
 

The Ana Paula Project is located in the Guerrero Gold Belt in the State of Guerrero, Mexico, roughly half way between the cities of Mexico City and Acapulco. Mexico is a favourable jurisdiction for mining investment with clearly established mining law and regulatory due process as demonstrated by the existence of operating gold mines such as Goldcorp’s Los Filos, located in close proximity to Ana Paula. Furthermore, Torex Gold’s El Limon/Guajes Mine is currently under construction in close proximity to the Project. Ana Paula is close to all necessary infrastructure including water, road, power, and people.
 

Mining is via conventional open pit mining methods. Mining will be contracted so no capital is included for mining equipment, instead contractor mining rates used as the basis for mining costs.
 

Open pit mining costs were calculated from first principles based on equipment required and include pit and dump operations, road maintenance, mine supervision and technical services cost.
 

PREPARATION OF PEA
 

The PEA was independently prepared by JDS Energy & Mining Inc. of Tucson, Arizona. A technical report following the guidelines of the Canadian Securities Administrators’ National Instrument 43-101 will be filed on SEDAR and on the Newstrike Capital’s Inc. website within 45 days.
 

The PEA is based on a mineral resource estimate prepared by Independent Mining Consultants, Inc., Tucson Arizona, USA. This mineral resource estimate has been developed under the direction of Mr. H. E. Welhener. The resource is based on 223 diamond core drillholes aggregating 108,832 metres and containing 77,183 assay intervals, of which effectively all are assayed for gold and silver. The mineral resource estimate has an effective date of August 8th, 2014.
 

The tonnage and grades of the Ana Paula mineral resource(i) at a 0.46 g/t AuEq cutoff are shown in the table below:

 

 
 
----------------------------------------------------------------------------
Category                                                Contained Ounces    
----------------------------------------------------------------------------
                           AuEq,       Au,       Ag,                        
              k tonnes       g/t       g/t       g/t        Gold      Silver
----------------------------------------------------------------------------
Measured        27,767     1.661     1.608      4.90   1,176,748   3,587,101
----------------------------------------------------------------------------
Indicated       18,243     1.229     1.163      5.95     682,243   3,488,565
----------------------------------------------------------------------------
Sum M&I         41,010     1.469     1.410      5.37   1,858,991   7,075,666
----------------------------------------------------------------------------
                                                                            
----------------------------------------------------------------------------
Inferred         1,904     1.233     1.113     10.85      68,145     664,484
----------------------------------------------------------------------------
                                                                            
(i)The resources are classified according to their proximity to sample      
locations and are reported, as required by NI 43-101, according to the CIM  
Definition Standards for Mineral Resources and Mineral Reserves.            
Notes and assumptions:                                                      
1. Mineral Resources are not Mineral Reserves until they have demonstrated  
economic viability                                                          
2. Mineral Resources are reported as undiluted                              
3. Mineral Resources were developed in accordance with CIM (2010) guidelines
4. Mineral Resources are reported using a long-term gold price of $1,450/oz 
and silver price of $23/oz                                                  
5. Mining costs used are estimated at $1.85/ton plus $0.02/bench below 900m 
elevation                                                                   
6. Processing costs +general and administrative expenses are estimated at   
$17.25 per tonne                                                            
7. Gold recoveries are estimated at 80%                                     
8. Silver recoveries are estimated at 55%. A silver divisor of 91.7 was used
to calculate equivalent gold. (Silver is assumed to be recovered along with 
gold during processing.)                                                    
10. Pit slope angles are 55 degrees east-facing, 45 degrees west-facing     
11. Resource QP is H. E. Welhener of IMC                                    
12. M&I = measured and indicated, Mt = million tonnes, g/t = grams per      
tonne, Moz = million ounces, Au = gold, Ag = silver, AuEq = gold equivalent 
13. There can be no assurance that all or any part of this resource will be 
converted into a mineral reserve
 

 

 

PROJECT DEVELOPMENT PLAN
 

The proposed project concept is to develop a green-fields gold-silver deposit with open pit mining and gravity/flotation/CIL process plant with a production rate assumed of 6,000 tonnes per day.
 

The PEA forecasts an 8.2 year mine life and a LOM strip ratio (the ratio of waste rock to economic mineralized rock) of 2.60 to 1. A total of 17.8 million tonnes of mineralized resource could be mined and processed with 33.6 million tons of waste and 12.5 million tonnes of capitalized waste. Some of the waste rock would be stockpiled and an undetermined portion may be reclassified as a resource at a later date should metallurgical testwork support economic viability. Throughout the life-of-mine, an estimated 957,000 ounces of payable gold and 2.0 million ounces of payable silver would be produced at an average head grade of 2.24 g/t gold and 6.89g/t silver.
 

METALLURGY AND PROCESSING
 

A metallurgical testwork program for the PEA was carried out on samples of composited drill core selected to represent the first four years of feed to the process plant. The composites were made from six rock types and subjected to direct cyanidation testing, flotation and gravity concentration followed by cyanidation, coarse particle leaching, and mineralogical deportment. The composite responded positively to both direct cyanidation and flotation concentration followed by cyanidation. Testwork was conducted by ALS Metallurgy in Kamloops BC and reported January 31st, 2014.
 

The flowsheet selected for Ana Paula consists of a tertiary crushing system, followed by ball mill grinding and gravity recovery, flotation, disposal of flotation tails, leaching of a combined gravity and flotation concentrate, and recovery of precious metals by the carbon-in-leach method. This flowsheet is commonly used throughout the world.
 

ENVIRONMENT, PERMITTING AND CORPORATE SOCIAL RESPONSIBILITY
 

The project area is not within a known environmental protection area. Formal environmental baseline studies have not been initiated but will be required to obtain the environmental permits for future mining operations. Communication with the local community, private land owners and the “Ejido” (cooperative land tenure system) was initiated as part of the exploration program.
 
About Newstrike Capital
 

Newstrike Capital Inc. is a precious metal focused explorer, targeting known and historic mining districts in Mexico. Newstrike’s flagship property, ‘Ana Paula’, is an advanced-stage, high grade, near surface gold/silver resource with robust economics in the Guerrero Gold Belt. Key senior members of the Company’s current management and directors have participated in Guerrero Gold Belt discoveries, including Goldcorp Inc.’s producing Los Filos Mine and Torex Gold Resources advanced stage Morelos Project in Guerrero State.
 

Newstrike holds a 100% interest in certain exploration properties in Mexico located within two established mining districts; the Au (Ag-Cu) skarn-porphyry camp of the Guerrero Gold Belt, and the polymetallic Pb-Zn-Ag (Au-Cu) rich epithermal camp of the mining districts of Oaxaca State.

Posted September 15, 2014

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