Osisko Metals Incorporated (TSX-V: OM) (OTCQX: OMZNF) (FRANKFURT: 0B51) is pleased to announce results of an independent Preliminary Economic Assessment including the results of an updated Mineral Resource Estimate that converts approximately 25.5% of the global resource to the Indicated Mineral Resource category for its wholly-owned Pine Point Project, located near the town of Hay River in the Northwest Territories, Canada. The PEA was prepared in collaboration with independent engineering firms BBA Inc., WSP Canada Inc., and Tetra Tech.
Table 1: PEA Highlight Results (all figures in CAN$ unless otherwise noted)
After-Tax Internal Rate of Return (“IRR“) | 29.6% |
After-Tax Net Present Value (“NPV“) (Discount Rate 8%) | $500M |
After-Tax Payback Period (Years) | 2.8 |
Pre-Production CAPEX (including $71.2M Contingency) | $555M |
Average Annual LOM Production Zinc | 327Mlb |
Average Annual LOM Production Lead | 143Mlb |
Life of Mine (“LOM“) | 10 Years |
Total Mineral Resources Mined | 39.1Mt |
Average ZnEq Diluted (12%) Grade of Mineral Resources Mined | 6.17% |
Gross Revenue After Royalty (LOM) | $4,371M |
After-tax Operating Cash Flow (LOM) | $1,064M |
C1 Costs over LOM (ZnEq)* | US$0.67/lb |
Estimated All-In Costs (Total CAPEX plus OPEX, ZnEq)** | US$0.82/lb |
LOM Zinc Price | US$1.15/lb |
LOM Lead Price | US$0.95/lb |
FX Rate (CAD:USD) | 1.31 |
*C1 cost is mine site cost plus smelting, transport and royalty | |
**All-in costs are C1 plus sustaining CAPEX |
Cautionary Statement: The reader is advised that the PEA summarized in this press release is preliminary in nature and is intended to provide an initial, high-level review of the project’s economic potential and design options. The PEA mine plan and economic model includes numerous assumptions and the use of Inferred Resources. Inferred Resources are considered to be too speculative geologically to have 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.
Robert Wares, Executive Chairman & CEO, commented: “I am very pleased with the PEA study showing an impressive after-tax IRR of 29.6% and after-tax NPV of C$500 M. The proposed mine plan would produce over 450Mlb of zinc in its peak year and an annual average of nearly 330Mlb of zinc and 145Mlb of lead over its estimated 10-year mine life. On a zinc-only basis, Pine Point could potentially, if it entered into production, become a low-cost zinc-lead producer ranking 4th largest in the Americas and 9th in the world, yielding an exceptionally clean and high-grade zinc concentrate.”
Robert Wares continued: “Furthermore, the concurrent release of an updated 2020 MRE for Pine Point demonstrates that continued drilling will improve the classification of the resources and potentially yield further expansion of known deposits. With several deposits open, I am particularly excited to continue exploring and expanding the resource base across the Project. We strongly believe in the Pine Point Project and Osisko Metals will continue developing this asset within the context of improving global zinc markets.”
Jeff Hussey, President & COO, added: “The current PEA concept is a large scale operation (11,250 tonne per day), where the mineral resource mined would be sourced mainly from small, near-surface open pits with additional contributions from 8 high grade, shallow deposits mined by underground methods from the West and Central Zones. The PEA considers historical data from the Cominco Ltd. era and incorporates significant technological improvements in the mining industry since the closure of the Pine Point operation in 1988. While the PEA already outlines a base-case for a potential top-ten zinc producer of high-quality clean concentrate, we foresee several areas for improvement as we continue to optimize these great initial economic metrics and move towards initiating a feasibility study.”
Table 2: Capital Costs (in C$M)
Initial | Sustaining | Total | |
Owner’s Cost | 17.0 | – | 17.0 |
Underground Mine | – | 220.7 | 220.7 |
Surface Mine | 14.9 | 75.7 | 90.6 |
Electrical | 15.5 | 15.5 | |
Infrastructure | 52.5 | 11.2 | 63.7 |
Processing | 249.3 | – | 249.3 |
TMF and Water Management | 67.1 | 85.1 | 152.2 |
Indirect Costs | 68.2 | – | 68.2 |
Contingency | 71.2 | 18.2 | 89.4 |
Reclamation (net of salvage) | – | 47.1 | 47.1 |
Total | 555.7 | 458.0 | 1,013.6 |
Table 3: Operating Costs (Costs per Tonne Mined)
Mining Costs | |
Surface* | $3.05 |
Underground – West Zone** | $31.54 |
Underground – Central Zone** | $41.54 |
Processing Costs | $12.18 |
G&A Costs | $7.64 |
*LOM Average and inclusive of ore, overburden and waste rock | |
**Inclusive of transport to the mill |
Figure 1: Annual Metal Production
Figure 1 is available at
https://www.globenewswire.com/NewsRoom/AttachmentNg/388cd1d8-24a3-462d-b408-51589d9ec039
Opportunities to Enhance Value
Trade-off studies will be performed to determine the best overall processing and dewatering methods, mining schedules, and infrastructure to further optimize the operation leading to increasingly attractive economics to be included in the eventual feasibility study. These will include:
Exploration Potential
The Pine Point Project has a high potential for mineral resource expansion. There are 11 deposits within the 2020 MRE having unconfined high-grade drill intercepts indicating mineralization may extend into open areas of sparse drilling (see Resource Target Map), immediately adjacent to reported Mineral Resources. A significant brownfield exploration drilling program will aim to increase resources by expanding open pit deposit boundaries as noted.
Drilling to date was focused on decreasing drilling spacing within the deposit boundaries in order to convert historical resources to NI43-101 Inferred Resources and then to convert a portion to Indicated Resources.
The Company has been actively exploring the 46,552-hectare Project area and believes the potential for new discoveries is excellent within proximity to existing infrastructure. Only one third of the favorable stratigraphy thickness has been tested to date, so this large area has exceptional shallow depth potential as well. The exploration program is applying new and contemporary technology that was not available in the past to the search for new deposits.
Sensitivity
The Pine Point Project is expected to be a robust operation and profitable at a variety of prices and assumptions. Metal prices used in the study are based on long-term forecasted estimates. Two lower price stress test scenarios were run to better ascertain the viability of the Project:
Mining
The Pine Point Project LOM plan will consist of the simultaneous exploitation of open pit deposits in the East Mill, Central, North and N204 Zones concurrent with underground operations in the West and Central Zones (Central Zone Underground Development) that are scheduled between Year 3 to Year 9. The overall strategy is to achieve an average LOM production rate of 11,250 tonnes per day mined.
The open pit mineral resource inventory used in the LOM plan is contained in 47 open pits over a strike length of 50 kilometres and is mainly located above 125 metres depth from surface. Most of the deposits are characterized by multiple shallow tabular panels dipping approximately 2-5 degrees to the West.
The open pit mining method incorporates five metre benches in mineralized material, ten metre benches in waste and an overall open pit wall angle of 45 degrees. Mineral resources will be extracted using a fleet of long-haul trucks with a payload of 90 tonnes. The production rate will vary between 8,000 tpd and 11,250 tpd. The strip ratio is expected to average 5.2 to 1.
Underground operations will use 45 tonne haul trucks with a ramp access to produce at a rate of 4,000 tpd in the West Zone and 1,500 tpd in the Central Zone. The mining methods used are a mixture of Long Hole Stoping (80%) combined with Room and Pillar (20%). All mineral resources will be transported to a central concentrator located adjacent to the existing electrical substation. Additional power will be supplied by LNG fuelled generators.
Mining sequence/development scheduling and dewatering trade-off studies will continue to optimize the LOM plan and associated economics. They will be included in the eventual Feasibility study.
Metallurgy and Processing
The Pine Point process plant (Mill 3D Model) is designed to treat up to 11,250 tpd Run Of Mine material. The processing plant consists of a three-stage crushing circuit incorporated with an XRT based mineral sorting system that will reject 40% waste material on average. The mineral sorter concentrate will be blended with the crushing circuit fines to feed a ball mill (6,700 tpd) followed by conventional lead and zinc flotation circuits. The process plant will produce on average 168 tpd of lead concentrate at 62 % Pb and 687 tpd of zinc concentrate at 58% Zn.
Table 4: Processing Overview
Crushing and Pre-Concentration Circuit Throughput | 11,250tpd |
Coarse Fraction | 70% |
Fine Fraction | 30% |
XRT Mass Recovery | 42% |
Total Mass Recovery (including crusher fines) | 59% |
Grinding and Flotation Circuit Throughput | 6,700tpd |
XRT LOM Recoveries | |
Zinc | 93.4% |
Lead | 99.0% |
Flotation LOM Recoveries | |
Zinc | 92.9% |
Lead | 94.1% |
Overall LOM Recoveries | |
Zinc | 86.7% |
Lead | 92.8% |
Overall zinc and lead recoveries, inclusive of sorting, are expected to be approximately 87 % and 93%, respectively over the LOM. The flotation concentrates will be filtered and trucked to Hay River for transloading into rail cars for shipment. Flotation tailings will be thickened and pumped for disposal within mined out pits.
Smelting and Transport
The zinc and lead concentrates were analyzed for impurities (See press release dated August 7, 2019). Based on the results, at this time, Osisko Metals does not anticipate any smelter or refinery penalties for the Pine Point Project’s concentrates and believes the historical high purity concentrate will be replicated.
Pine Point zinc and lead concentrates are not encumbered by any offtake agreements. It is expected that this type of high-quality material will be sought after by most smelters. The forecasted future zinc supply will be dominated with concentrates with high impurities which will require blending. Table 5 summarizes the main impurities (deleterious elements) that were analyzed in the zinc concentrates and lists typical minimal thresholds for smelter penalties.
Concentrate would be hauled approximately 80 km by truck to the intersection of Highway 5 and 2 to a transloading facility at Pine Point Junction. Concentrate will be sent to North American smelters by railway, and further afield to Asian smelters by bulk sea freight.
Table 5: Zinc Concentrate Trace Element Analysis
Element | Symbol | Unit | Reported Concentration | Typical Smelter Penalty Threshold o |
Arsenic | As | ppm | Less than 2* | 2,000 |
Antimony | Sb | ppm | Less than 0.5* | 1,000 |
Bismuth | Bi | ppm | Less than 0.1* | 1,000 |
Cadmium | Cd | ppm | 864 | 4,000 |
Cobalt | Co | ppm | 3 | 1,000 |
Copper + Lead | Cu + Pb | % | 0.23 | 3.0 |
Fluorine | F | ppm | Less than 20* | 300 |
Iron | Fe | % | 2.6 | 8.0-9.0 |
Magnesium | MgO | % | 0.36 | 0.35 |
Manganese | Mn | ppm | 100 | 12,500 |
Mercury | Hg | ppm | 0.31 | 50 |
Silica | SiO2 | % | Less than 0.21* | 3.5 |
The Pine Point zinc concentrates are expected to be predominantly smelted in North America using long-term benchmark contract prices with positive adjustments to account for its high-quality. The remaining portion is expected to be sold into both the Asian spot and benchmark contract markets.
Lead concentrates will be mainly sold into the Asian spot and benchmark contract markets with only a minor North American component. Both spot and benchmark contracts used long-term averages.
Proposed Infrastructure Upgrades and Indirect Costs
The Pine Point Project is located 60 km east of the town of Hay River in the Northwest Territories, on the south side of Great Slave Lake. Established infrastructure consists of an active power substation, paved GNWT highway access and one hundred kilometres of pre-existing 25-metre-wide haul roads from the original mining operation that provide access to all major deposit areas. The town of Hay River is serviced by an airport and a paved road from Alberta. The town is also host to a railway head operated by the Canadian National Railway.
The proposed Project will comprise of 55 mining sites (47 Open Pits and 8 Underground deposits), one central concentrator plant site, and envisions the main electrical substation will feed 9 MW during the winter months and 12 MW during the summer. The power requirements will be provided by the Northwest Territories Power Corporation through the Taltson hydro-electric grid. The construction period is estimated to be 18 months long.
Additional power will be supplied by mobile LNG fuelled generators that can be quickly moved to the various sites requiring power and minimizing the amount of transmission lines needed as several open pit mines have a mine life of less than three years. Further studies will aim to optimize the number and capacity of these LNG power generation units.
The main offices, warehouse, and auxiliary camp facilities will include the new central concentrator, maintenance and truck shop, administration offices and service buildings, mine dry, cafeteria, fitness room and dormitory, a pumping station for fresh drinking water and fire protection, as well as a control gate and parking area.
Overburden stockpiles and waste rock stockpiles will be located nearby planned open pit mines where necessary and waste rock will also be deposited in former historical open pit mines. The overburden and waste rock will also be used for progressive reclamation where feasible.
There will be no Tailings Management Facility as certain former open pits from the Cominco Ltd. era will be used for tailings disposal and then covered by Pre-concentrator reject waste rock material and finally covered with coarser sterile waste rock.
Indirect costs such as engineering, procurement and construction management, temporary facilities for construction and other related items are estimated at $68.2 million. An additional $89.4 million has been budgeted over the LOM as contingency for specific direct and indirect costs.
Water Management and Dewatering Plan
Over its 24-year production history from 1964 to 1988, several studies were completed to evaluate and manage water during the Cominco Ltd. era. Using methodologies such as dewatering wells, grouting and mine planning which considered hydrogeology, a preliminary dewatering plan was prepared for the Pine Point Project’s PEA.
For the North, Central and East Mill Zones, open pit mines were grouped into clusters measuring 3 kilometers long and 1 kilometer wide. Generally, pits located within a cluster are mined in sequence to reduce dewatering requirements. Lowering the water table within the deepest pit within a cluster will potentially reduce water management at that time for surrounding pits. Utilizing this type of dewatering strategy will help to optimize overall pumping rates and power requirements.
To reduce water management in underground mines in the West Zone, grouting was selected as the preferred water inflow restriction methodology. Discussions with experts and previous employees of Pine Point Mines during the Cominco Ltd. era benefitted the analysis and grouting was chosen as the preferred method to reduce water inflow.
Current overall dewatering costs are approximately in-line with historical dewatering records.
Environment and Closure Plan
All mining projects located in the Northwest Territories are assessed in accordance with the Mackenzie Valley Resource Management Act Environmental assessments are conducted by the Mackenzie Valley Environmental Review Board and includes all relevant federal agencies, such as ECCC and DFO, as parties to the process.
At the completion of the environmental assessment if the board recommends the Project be approved, the Mackenzie Valley Land and Water Board will process the proponents’ applications for a Water License and Land Use Permit through a public process.
A closure and rehabilitation plan estimate for the Project has been developed by WSP as required by the MVRMA. Reclamation costs were estimated at $62.8 million, less $15.6 million of equipment salvage value, resulting in a reclamation cost (net of salvage value) of $47.1M.
Activities during closure will include the dismantling of the buildings and infrastructure erected for the operations of the mines and processing plant, the closure of the tailing deposition areas in the former open pit mines, waste rock stockpiles and reclamation of other areas disturbed during the project life. This cost estimate includes both the cost of site reclamation as well as post-closure monitoring.
Stakeholder Engagement
The Company has taken a proactive approach toward working and consulting with local indigenous and non-indigenous communities that would be impacted by the Project. Consultation on the Project with the communities was initiated in 2017 and has continued with frequent notifications on project activities, meetings, open house presentations and employment and contracting opportunities.
Both the Aboriginal and non-Aboriginal communities have expressed strong support for the Project, with the objective of maximizing the economic benefits for local communities – specifically with a focus on employment and entrepreneurial opportunities throughout the various phases of the Project.
The realized Project would have a significant impact in the Northwest Territories, with the potential of generating over C$529M in combined federal and territorial tax revenue and contributing approximately 258 well remunerated jobs during the production phase and approximately 395 jobs during the construction period.
MRE Highlight
The difference in tonnage between the 2019 and 2020 MRE is almost exclusively attributed to the change of mining concept in the West Zone to underground which was partially offset by the addition of tonnage in the East Mill Zone. The tonnage that was removed from the mineral inventory in the West Zone were tonnes that graded between the cut-off of 2.0% ZnEq in the previous pit-constrained methodology and the new underground cut-off grade of 5.0% ZnEq. All other zones saw minor change in tonnes and grade.
Table 6: 2020 Mineral Resource Estimate for Pine Point as reported by BBA.
Table 6 is available at
https://www.globenewswire.com/NewsRoom/AttachmentNg/b13f5554-5346-4ae5-a87f-b94e9497a735
Notes:
Underground Mineralization
The underground portion of the 2020 MRE utilizes similar financial and smelting assumptions to the pit-constrained portion of the 2020 MRE. The West Zone mining methodology has been changed to underground to be consistent with the PEA. Similar to the 2019 MRE, tonnage in the Central Zone consists of mineralization found adjacent to the pit wall boundaries of certain deposits, as well as mineralization that is relatively continuous over longer distances near pit-constrained mineralization or historical pits.
Notes Regarding Mineral Resource Estimate
Independent Qualified Persons
This PEA was prepared for Osisko by BBA Inc, WSP Canada Inc. and other industry consultants, all Qualitied Persons under National Instrument 43-101. The study was coordinated by the Company’s Project Manager Annie Beaulieu P.Eng. and in collaboration with the Osisko Gold Royalties Technical Services Group. The QPs have reviewed and approved the content of this press release. Independent QPs include:
Colin Hardie, P.Eng., Pierre-Luc Richard, P. Geo. (BBA)
Hugo Latulippe, P.Eng., Eric Poirier, P. Eng. (WSP)
About Osisko Metals
Osisko Metals Incorporated is a Canadian exploration and development company creating value in the base metal space with a focus on zinc mineral assets. The Company controls Canada’s two premier zinc mining camps. The Company’s key properties are: 1) the Pine Point Mining Camp, located in the Northwest Territories, for which the current PEA has indicated an after-tax NPV of $500M and IRR of 29.6%. The proposed mine, if it entered into production, would be the 4th largest in the Americas and the 9th in the world producing clean, high grade zinc and lead concentrates. The Project is host to a Mineral Resource of 12.9Mt of Indicated Mineral Resources grading 6.29% ZnEq and 37.6Mt of Inferred Mineral Resources grading 6.80% ZnEq. The PPMC is located on the south shore of Great Slave Lake in the Northwest Territories, near infrastructure and paved highway access and with 100 kilometres of viable haulage roads already in place. 2) The Bathurst Mining Camp, located in northern New Brunswick, has Indicated Mineral Resources of 1.96 Mt grading 5.77% zinc, 2.38% lead, 0.22% copper and 68.9g/t silver (9.00% ZnEq) and Inferred Mineral Resources of 3.85 Mt grading 5.34% zinc, 1.49% lead, 0.32% copper and 47.7 g/t silver (7.96% ZnEq) in the Key Anacon and Gilmour South deposits. Please refer to the technical report entitled “NI 43-101 Maiden Resource Estimate for the Bathurst Mining Camp, New Brunswick, Canada” dated April 4, 2019 (with an effective date of February 20, 2019) which has been filed on SEDAR.
The mineral resources mentioned in this press release conform to NI43-101 standards and were prepared by independent qualified persons, as defined by NI43-101 guidelines. The above-mentioned mineral resources are not mineral reserves as they do not have demonstrated economic viability. The quantity and grade of the reported Inferred Mineral Resources are conceptual in nature and are estimated based on limited geological evidence and sampling. Geological evidence is sufficient to imply but not verify geological grade and/or quality of continuity. Zinc equivalency percentages are calculated using metal prices, forecasted metal recoveries, concentrate grades, transport costs, smelter payable metals and charges (see respective technical reports for details).
Photos accompanying this announcement are available at
https://www.globenewswire.com/NewsRoom/AttachmentNg/5cf0de74-448a-4661-b982-01c73064d5d6
https://www.globenewswire.com/NewsRoom/AttachmentNg/96dce4cf-79f7-4d10-89fa-695bbf1f025e
https://www.globenewswire.com/NewsRoom/AttachmentNg/5cb05a3e-9ff8-4624-b2d7-6f8ac81d5266
https://www.globenewswire.com/NewsRoom/AttachmentNg/923253c3-32f2-4018-8ceb-81b23a66ec26
https://www.globenewswire.com/NewsRoom/AttachmentNg/503c74f7-1d6c-45e6-b08c-3a6cd5c99890
Significant copper and molybdenum intersections include: HM09: 13... READ MORE
Aya Gold & Silver Inc. (TSX: AYA) (OTCQX: AYASF) is pleased t... READ MORE
Key Highlights – Preliminary Economic Assessment Pre-Tax Net Pr... READ MORE
Aris Mining Corporation (TSX: ARIS) (NYSE-A: ARMN) announces its ... READ MORE
Orla Mining Ltd. (TSX: OLA) (NYSE: ORLA) announces the results fo... READ MORE