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Rubicon Minerals Delivers New PEA Demonstrating a 40.2% After-Tax IRR and C$191 million Free Cash Flow Potential of the Phoenix Gold Project

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Rubicon Minerals Delivers New PEA Demonstrating a 40.2% After-Tax IRR and C$191 million Free Cash Flow Potential of the Phoenix Gold Project

 

 

 

 

 

Rubicon Minerals Corporation (TSX: RMX) (OTCQX: RBYCF) released a positive new Preliminary Economic Assessment1 for the Phoenix Gold Project demonstrating its strong free cash flow potential and robust estimated returns on capital. The New PEA has been prepared by T. Maunula and Associates Consulting Inc. and the Company plans to file an updated technical report for the Project reflecting the New PEA, prepared in accordance with National Instrument 43-101 of the Canadian Securities Administrators, on www.sedar.com within 45 days.

 

This news release contains information from a preliminary economic assessment, which is a conceptual study, and other forward-looking information about potential future results and events. Please refer to the cautionary statements in the footnotes below and the Cautionary Statements located at the end of this this news release, which include associated assumptions, risks, uncertainties and other factors.

 

New PEA Highlights:

 

Table 1:Economic analysis summary (base case estimates)1

 

 

Economic Analysis (base case estimates): Conceptual Project Life of Mine (“LOM”)
After-tax Internal Rate of Return (“IRR“) (%) 40.2%
After-tax Net Present Value2 (“NPV5%“)

(in Canadian dollars, “C$” or “CAD“)

C$135.2 million
After-tax free cash flow potential C$191.5 million
Exchange ratio (U.S. dollars, “US$ or “USD“/C$) 0.7519
Gold price assumption (US$) US$1,325/payable troy ounce (“oz“)
Gold price assumption (C$) C$1,762/oz
Payback period 3.9 years

 

 

Table 2: Conceptual LOM plan summary

 

 

Conceptual LOM Plan Metrics: Total Per Unit
Operating period (from potential initial production)(“LOM year“) 6.2 years
Commercial Production period3 (“CP“) 5.1 years
Construction, development, commissioning and ramp-up to CP (“Pre-CP“) 20 months  
LOM tonnes milled (including Pre-CP tonnes)(“LOM tonne“) 3,045,196 1,370 tpd
CP tonnes milled (“CP tonne“) 2,799,863 1,530 tpd
LOM mill head grade (after external dilution, backfill and mining recovery)4 5.31 g/t Au
Dilution (%) (external + backfill dilution)/mining recovery 14%/95%
LOM payable gold production (including Pre-CP oz)(“LOM oz“) 493,583 oz 79,610 oz per LOM year
Payable gold production during CP (“CP oz“) 449,536 oz 88,675 oz per CP year
Payable gold during Pre-CP (“Pre-CP oz“) 44,047oz
Total stopes 341 8,930 LOM tonnes/stope
Bulk mining stopes 281 10,031 LOM tonnes/stope
Cut-and-fill stopes 60 3,774 LOM tonnes/stope
Gold recoveries/via gravity 95.0%/43.0%  
Numbers may not add due to rounding      
       

 

 

Table 3: Conceptual LOM capital and operating cost summary (base case estimates)

 

 

Capital and operating cost estimates: Total

 (millions)

Per Unit Per Ounce
Capital cost estimates:      
(A)  Initial Capital (including 15% contingency) (Pre-CP) C$101.2
(B)  Capitalized Pre-CP operating cost C$45.7 C$186.2/pre-CP tonne US$780/pre-CP oz
(C)  Royalties (3%) and other production taxes5 (Pre-CP) C$3.0 C$12.2/pre-CP tonne US$51/pre-CP oz
(D)  Proceeds from sale of Pre-CP oz C$77.5
(E)  Net Pre-CP operating cash flow: (D) – (B) – (C) C$28.8
Net Pre-CP Capital: (A) – (E) C$72.4
Projected Funding Requirement6 C$80.9
(F)  Sustaining Capital (CP) C$154.0 C$30 million/CP year US$258/CP oz
(G)  Total LOM capital expenditures: (A) + (F) C$255.2 C$41 million/LOM year US$389/LOM oz
       
Operating cost estimates:      
          Mining C$268.4 C$88.1/LOM tonne US$409/LOM oz
          Processing C$99.6 C$32.7/LOM tonne US$152/LOM oz
          Site G&A C$23.8 C$7.8/LOM tonne US$36/LOM oz
(H) Total conceptual LOM operating costs C$391.8 C$128.7/LOM tonne US$597/LOM oz
(I)  Total commercial operating costs (CP): (H) – (B) C$346.1 C$123.6/CP tonne US$579/CP oz
(J)  Royalties (3%) and other production taxes7 (CP) C$26.9 C$9.6/CP tonne US$45/CP oz
(K)  Total Cash Costs (CP): (I) + (J)  C$373.0 C$133.2/CP tonne US$624/CP oz
(L)  All-in sustaining costs[8] (“AISC”)(CP): (F) + (K) C$527.1 C$188.2/CP tonne US$882/CP oz
(M) All-in costs (“AIC”): (G) + (H) + (C) +(J) C$677.0 C$222.3/LOM tonne US$1,031/LOM oz
       
Taxes:      
Existing tax loss pools C$690    
Estimated remaining tax loss pools after conceptual LOM C$521    
Numbers may not add due to rounding        
         

 

 

Key Takeaways from the New PEA:

 

  • New PEA economics1 benefits from more than C$770 million in sunk capital in place, including a fully-operational state-of-the-art mill, a 730-metre deep shaft and hoisting facility, and more than 14,000 metres (“m“) of developed mine workings;
  • Most estimates and costs were derived from 5 years of test trial mining data at the Project, including actual numbers achieved during the 2018 test trial mining and 35,000-tonne bulk sample processing program (see November 29, 2018 news release for more details on the 2018 program);
  • Early operating cash flow estimate of C$28.8 million during the Pre-CP period and expected application of tax loss pools over the LOM plan help drive estimated key metrics such as IRR and NPV, lower the Projected Funding Requirement, and conceptual LOM free cash flow potential1; and
  • Potential to increase mineral resource estimates with further diamond drilling and engineering studies and expand the conceptual LOM plan with further engineering studies.

 

Path Forward:

 

  • Updated mineral resource estimate anticipated to be delivered in fourth quarter of 2019; and
  • Commence additional feasibility work in the first half of 2020.

 

CEO’s Comments

 

Rubicon President and CEO George Ogilvie, P.Eng., stated, “The New PEA represents a significant milestone in demonstrating the free cash flow generating potential of the Phoenix Gold Project, using prudent assumptions. We are confident that this potential can be achieved in the near-term due to the very manageable Projected Funding Requirement, the new, fully-functional infrastructure at site, and the realistic cost and capital estimates outlined in the New PEA, which is below the cost of a similar greenfield project.”  

 

“We believe that the New PEA has a lower margin of error and risk because the estimates we used were derived from five years of operating data at the Project, including actual results achieved in our 2018 test trial mining and 35,000-tonne bulk sample processing program. The New PEA reflects a purposeful focus on rigor and prudence as the foundation for the potential construction and operation of the Project, following the prospective completion of a potentially positive feasibility study. We believe readers will view this New PEA as a well-designed, comprehensive plan put together under the direction of a management team and Consultants with successful and extensive underground mine construction, operational, and turnaround experience.”

 

“Early positive cash flow forecasts during Pre-CP and the application of tax loss pools helps drive the after-tax IRR to 40.2% and lower the Projected Funding Requirement. In addition, the Project benefits from a strong leverage to the Canadian dollar gold price; the conceptual Project economics are even more compelling at the current Canadian dollar gold price of C$2,008 (or US$1,5139) per ounce. Please refer to Table 10 on page 8 of this news release to see the positive impact of a long-term gold price of US$1,500 per ounce on the IRR and NPV estimates for the Project. Furthermore, a sustained higher gold price environment translates to potentially adding more stopes in the conceptual LOM plan, which could manifest in further improvements to the Project’s forecast IRR and NPV.”

 

“We believe an opportunity to enhance the Project is through the potential expansion of mineral resource estimates at depth and along strike. We have identified Explore Target areas10 of approximately 0.9 to 1.2 million tonnes of sparsely-drilled mineralized material grading 5.0 to 7.0 g/t Au that could potentially be added to the mineral resource estimates with future infill drilling. In addition, we have targets within two kilometres (“km“) of the Project that we plan to drill in the near future to potentially provide incremental gold ounces that could further upgrade the potential economics of the Project and extend its conceptual mine life. Other opportunities to potentially improve the Project include evaluating the expanded utilization of raise mining with mass blasts, a method which reduces stope cycle time and costs, evaluating ore-sorting technology to potentially improve mill head-grade, and the use of electric underground trucks to reduce ventilation costs.”

 

2019 Mineral Resource Estimate – New PEA Conceptual LOM Conversion1

 

The 2019 Mineral Resource Estimate11 for the Project (see Table 4 on page 11 of this news release) provided the basis for the New PEA conceptual LOM plan. In the 2019 MRE, the Company observed a robust conversion of Inferred mineral resource estimates to Measured and Indicated mineral resources. Factoring in New PEA assumptions on gold price, foreign exchange, mining recovery, external and backfill dilution, mill recovery, and operating costs, the New PEA contemplates a conceptual mining cut-off grade of 3.5 g/t Au. Table 5 below outlines the conceptual conversion estimates applied towards the tonnes and the diluted mill head grade in the New PEA conceptual mine plan based on the 3.5 g/t Au cut-off:

 

Table 5: Conceptual conversion of 2019 MRE using a 3.5 cut-off grade sensitivity12

 

 

Categories 2019 MRE using a 3.5 g/t cut-off grade sensitivity New PEA Conceptual LOM plan

(@ 3.5 g/t Au mining cut-off grade)

Net
conversion
of tonnes
Tonnes In situ grade

(g/t Au)

Tonnes Mill head grades

(g/t Au)

Measured & Indicated 2,289,000 7.11 1,561,000 5.23 68.2%
Inferred 2,038,000 7.39 1,484,300 5.39 72.8%
Numbers may not add due to rounding. Tonnes were rounded and may not add up to LOM tonnes    

 

 

The Company believes this estimated conversion of tonnes to the New PEA conceptual mine plan is a function of rigor and prudence. The New PEA contemplates mining 341 conceptual stopes. The Company and its Consultants identified an additional 359 conceptual stopes that fell below the 3.5 g/t Au cut-off grade and could potentially be included in a future conceptual LOM plan with further engineering, infill diamond drilling, and higher gold price assumptions.

 

The conceptual LOM plan predominantly focuses on mineral resource estimates within the high-titanium basalt units, the main host rock for gold mineralization. The strong competency of the High-Ti Basalt units enabled the Company to limit external dilution, as was seen during the 2018 test trial mining program.   

 

The F2 Gold Deposit remains open at depth and along strike. Furthermore, Rubicon has identified Explore Target areas11 (drilling greater than 80-m centres) where the Company intends to infill diamond drill. Please see Diagram 1 on page 13 of this news release for a longitudinal section of Zone 2 of the F2 Gold Deposit. The Company is also evaluating the McFinley and other close proximity targets, which are located within 2 km of the Project shaft and mill and could potentially result in additions to the current mineral resource estimates.

 

Underground Development and Conceptual Mining

 

The Rubicon management and site teams have extensive and successful mine operations and turnaround experience. The Company successfully demonstrated this capability at the Project during the successful 2018 test trial mining and 35,000-tonne bulk sample processing program. The Company tested both the Sub-Level Longhole and Uppers bulk mining methods on the deposit, achieving an external dilution of 8.7%, and more importantly, delivered a positive reconciliation of the mill results with the block model. Cost and technical data generated during 5 years of underground development and test trial mining activities between 2013 and 2018 were foundational to the estimates used in the New PEA. 

 

Underground Development

 

The Project benefits from more than 14,000 m of extensive developed mine workings and related site infrastructure. The Project has an operational shaft down to 730 m below the surface, with loading pockets located at the 337- and 610-m Levels. The shaft has a peak hoisting capacity of approximately 3,000 tonnes of material per day. The majority of the existing underground development, including lateral development, a partially completed ramp system, waste/ore passes, and ventilation raises, are primarily located between 122- and 305-m Levels.

 

The New PEA contemplates 26,608 m of underground development (17,279 m lateral and ramp, and 9,329 m vertical) throughout the conceptual LOM plan. Approximately 6,000 m of underground development, including a ramp to surface, is planned during Pre-CP, providing access to approximately 40 to 50 of working stopes. Rubicon believes this work could provide approximately 12 months of development flexibility. Peak development rates of 14 m (or 5 rounds) per day, using a maximum of 4 development crews, are expected to be achievable, especially once multiple headings have been opened up. Please see Diagram 2 on page 14 of this news release for an image of the conceptual underground development and stope shapes and Table 6 on page 11 of this news release for the conceptual LOM lateral and ramp development schedule.

 

Mining Methods

 

The amenability of bulk mining methods was demonstrated during the test trial mining program in 2018. The conceptual LOM plan contemplates mainly bulk mining methods. Please see Table 2 for a conceptual LOM plan summary. Four mining methods were contemplated: Sub-Level Longhole (bulk mining, 52.4%), Uppers (bulk mining, 23.3%), Mass Blasting Raise Mining (“MBRM“)(bulk mining, 16.9%) and cut-and-fill (selective mining, 7.4%). Table 7 below provides additional detail on these mining methods as contemplated in the conceptual LOM plan:

 

Table 7: Mining methods contemplated for the New PEA Conceptual LOM (base case estimates)

 

 

Metrics Sub-Level

Longhole

Uppers MBRM Cut-and-Fill
Conceptual LOM tonnes 1,595,921 708,880 513,974 226,420
Conceptual LOM tonnes (%) 52.4% 23.3% 16.9% 7.4%
Total stopes 66 172 43 60
Average stope size (tonnes) 24,181 4,121 11,953 3,774
Average dimensions
(height x width x strike)
36m x 8m x 25m 16m x 6m x 12m 37m x 3m x 22m 12m x 6m x 16m
External dilution12 10% 15% 10% 3%
Average diluted grade
(after dilution and mining-loss)
5.34 g/t Au 5.30 g/t Au 5.31 g/t Au 5.16 g/t Au
Mining cost per tonne
(including indirect costs)
C$82.88 C$86.88 C$92.15 C$120.58
Typical productivity rates for
these mining methods (tpd)
400 300 600 130
Numbers may not add due to rounding        

 

 

Both the Sub-Level Longhole and Uppers method were successfully tested by the Company during the 2018 test trial mining program. The Uppers method involves drilling a stope with up-holes including a slot raise (between 16-20 m in length) from an under-cut drift without the development of an over-cut. See Diagram 3 on page 15 of this news release for a conceptual diagram of the Sub-Level Longhole and Uppers mining methods.

 

An opportunity for the Project is the expanded use of MBRM. MBRM involves an Alimak access raise along the mineralization, with short horizonal drilling from the Alimak raise into the mineralization. The mineralized material is blasted from the short holes and mucked out in the under-cut. MBRM does not require sub-level development within the stope, reducing stope cycle times and costs. The Company reviewed and visited the Hemlo Mine near Marathon, Ontario and determined MBRM as amenable for the Project. Members of Rubicon’s management and site teams have prior experience with MBRM at mining operations in Ontario and Manitoba. See Diagram 4 on page 16 of this news release for a conceptual diagram of the MBRM method.

 

The conceptual LOM plan estimates total potential gold production of 493,583 oz, of which 44,047 ounces of potential production are anticipated during Pre-CP period. Please see Diagram 5 on page 16 of this news release for the conceptual LOM potential production profile.

 

Mill Processing, Tailings Management Facility, and Water Treatment

 

The Project has a fully-built and operational mill processing facility at site. The main components of the Project mill are a semi-autogenous grinding unit, Knelson gravity concentrators, a ball mill, and the carbon-in-leach circuit. The Project mill has an estimated top-end capacity of 1,800 tpd at the current configuration with minor upgrades. Further capital upgrades could allow the mill to process up to an estimated 2,500 tpd. During the 2018 bulk sample processing program, the Project mill achieved 1,540 tpd (based on 22-hour mill availability) and gold recoveries of 95.0% (43.0% from gravity).

 

The New PEA contemplates a 20-month period to potential Commercial Production (the start of Year 1 in the conceptual LOM financial model; See Table 9 on page 12 of this news release), which is defined as 75% of the 1,250 tpd average permitted mill capacity over a period of 60 consecutive days, or approximately 937 tpd. In the conceptual LOM plan, processing from stockpiles is forecast to commence in the 8th month of Pre-CP (in Year -2). The New PEA assumes that Rubicon would apply to amend its permits to a higher throughput rate of 1,800 tpd during the Pre-CP period. After the receipt of the permit amendments, the Company would gradually increase throughput to a peak rate of 1,800 tpd, after sufficient stope development has been completed. The mill processing recovery is estimated to be 95% (43% from gravity).

 

The Project currently has a fully-operational tailings management facility and a water treatment plant in place. The New PEA contemplates minor upgrades to the TMF and water treatment plant, including the addition of a more efficient treatment of ammonia. These costs are all captured in the Initial Capital estimate.

 

Capital and Operating Cost Estimates

 

Please see Table 3 for a summary of the New PEA capital and operating cost estimates.

 

Capital Cost

 

Total conceptual LOM capital expenditures is estimated to be C$255.2 million. The New PEA has defined capital costs for estimation purposes as follows:

 

  • Initial Capital (Pre-CP) – C$101.2 million: These are estimated capital expenditures up to conceptual Commercial Productions, including a 15% contingency. During Pre-CP, the Company plans to generate net cash flow of approximately C$28.8 million from early potential production, which translates to a Net Pre-CP Capital of C$72.4 million; and
  • Sustaining Capital (CP) – C$154.0 million, or C$30 million per year of CP: Estimated capital expenditures incurred from the declaration of conceptual Commercial Production to the end of the LOM, inclusive of closure costs.

 

The majority of the estimated capital costs (Initial and Sustaining Capital) are comprised of expected underground development (lateral, ramp, and vertical) below the 305-m Level and connecting the ramp from the 244-m Level to surface. Including indirect costs, the New PEA estimates that the average cost per underground development metre ranges between C$5,500 to C$6,500. This rate is based on actual development costs incurred by the Company during its 2018 test trial mining program, and at the higher-end of the range of peer estimates. The equipment fleet assumes equipment lease financing. Table 8 below provides the breakdown of the capital cost estimates:

 

Table 8: Capital cost breakdown – Conceptual LOM (base case estimates)

 

 

Capital item: Pre-CP

(millions)

Sustaining

(millions)

Underground development and infrastructure C$43.2 C$86.7
Equipment C$16.9 C$53.1
Surface and mill (including TMF, water treatment,
crushers, camp upgrades, buildings, etc.)
C$22.8 C$6.5
Closure costs C$7.7
Contingency (15%) C$18.4
Total Initial Capital C$101.2
Total Sustaining Capital C$154.0
Total conceptual LOM capital C$255.2
Capitalized Pre-CP operating costs C$45.7
Proceeds from sale of Pre-CP oz C$74.5
Net Pre-CP operating cash flow C$28.8
Net Pre-CP Capital C$72.4
Projected Funding Requirement8 C$80.9
Numbers may not add due to rounding      
       

 

 

Operating Cost

 

The operating cost estimates were derived from the Company’s 2018 test trial mining and bulk sample processing program, allowing the Company to collect actual operating cost information. The largest component of operating cost is labour (50-60%). The majority of the operating costs is anticipated to be in CAD. Please see Table 3 for a summary of the operating cost estimates and Table 7 for the estimated cost per tonne of each conceptual mining method contemplated.

 

Royalties and Other Production Taxes and Tax Loss Pools

 

The Project minerals claims that comprise the F2 Gold Deposit are subject to:

 

  • 2.0% NSR payable to Franco-Nevada Corporation
  • 1.0% NSR payable to Royal Gold Inc.

 

Other production taxes include estimated LOM community payments.

 

The Company currently has approximately C$690 million of tax-deductible pools, tax losses, and tax credits available for deduction at the potential commencement of Commercial Production. Application of these tax loss pools is estimated to result in the payment of no income taxes against the conceptual LOM net income from the Project. In the conceptual LOM plan, Rubicon will utilize approximately C$169 million of federal tax loss pools. The New PEA estimates that the application of tax loss pools improves conceptual LOM free cash flow by approximately C$95.5 million. It is estimated that Rubicon would have C$521 million of unused federal tax loss pools at the end of the conceptual LOM.

 

Economics, Cash Flow Model and Valuation Sensitivities

 

The New PEA demonstrates robust economic potential as summarized in Table 1. The Company believes that the 40.2% after-tax IRR estimated for the Project is a product of, among other things, significant sunk capital, application of tax loss pools, new and fully-operational infrastructure and equipment in place and a shortened timeline to cash flow from operations. Rubicon has a strong and successful management team with extensive operating experience in underground mining and improving operations, which will be a key factor in the Company’s effort to realize the Project’s estimated economic potential.  In addition, considering that the majority of expenditures for the Project are expected to be in CAD, the depreciated CAD versus USD further enhances the estimated Project economics. Please refer to Table 9 on page 12 of this news release for the conceptual cash flow model for the Project. The Company believes that the Project’s estimated NPV provides compelling value for current and potential investors of the Company. Furthermore, the Company owns the second largest land package (more than 28,000 hectares) with regional exploration potential in the prestigious Red Lake Gold Camp, in one of the safest mining jurisdictions worldwide.

 

Sensitivities of the estimated Project IRR and NPV are provided for gold price and USD/CAD exchange rate ratio estimates in Table 10 below. Other such sensitivities under different scenarios for grade, throughput, capital and operating costs are provided in Table 11 on pages 12 and 13 of this news release.

 

Table 10: New PEA after-tax IRR and NPV estimated sensitivities to gold price and USD/CAD exchange rate ratio

 

After-Tax IRR (%)/After-tax NPV5% (C$ millions)

 

 

USD/CAD

exchange ratio

Gold Price (US$/oz)
$1,100 $1,200 $1,325

(base case)

$1,400 $1,500
0.83 (4.4%)/($30.1) 9.3% / $14.9 24.4%  / $71.1 32.8%  / $104.8 43.5%  / $149.7
0.81 (0.4%) /($17.8) 13.1% / $28.4 28.2%  / $86.0 36.6%  / $120.5 47.4%  / $166.5
0.79 4.6% / ($1.3) 18.0% / $46.4 33.1%  / $105.8 41.6%  / $141.5 52.6%  / $189.0
0.77 8.2% / $11.1 21.5% / $59.9 36.6%  / $120.7 45.3%  / $157.2 57.4%  / $205.8
0.7519 (base case) 11.7% / $23.5 25.0%  / $73.4 40.2%  / $135.2 48.9%  / $172.9 60.2%  / $222.6
0.73 16.3% / $40.0 29.5%  / $91.3 44.8%  / $155.4 53.7%  / $193.8 65.2%  / $245.1
0.71 20.6% / $56.5 33.9%  / $109.3 49.4%  / $175.2 58.4%  / $214.8 70.1%  / $267.5

 

 

Permitting, Consultation, Closure and Rehabilitation Costs

 

The Company will qualify for the material permits required for an average production rate of 1,250 tpd upon the successful implementation of an ammonia treatment upgrade to the Project water treatment system. At a future juncture, Rubicon will evaluate the permit amendments required for the increased projected production rate. The Company believes the increased production rate envisaged in the New PEA will not materially increase the surface area of the site, which could simplify the permit amendments and associated consultation process.

 

Rehabilitation measures have been designed using a precautionary approach targeting the long-term physical and environmental stability of the site in accordance with applicable legislation and the associated First Nations’ consultation process. The rehabilitation measures are intended to return the site to a productive land use that will not require long-term care and maintenance. The conceptual end of LOM rehabilitation cost is estimated to be C$7.7 million, equivalent to the estimated salvage value of material site assets at closure. Salvage values were not included in the New PEA.

 

The Company is continuing consultations with the First Nations communities, and local municipalities. Rubicon currently has Exploration Agreements in place with the First Nations communities in the region.

 

Measures to Enhance the Accuracy of Estimates and Mitigate Risk

 

The Company believes that the combination of data collected from the 2018 test trial mining and bulk sample processing program, sunk capital in the Project, and deep operating experience from underground operations amongst the management team, contribute towards the mitigation of risks and the accuracy of the estimates in the New PEA. 

 

  • Mill operation and recoveries: The Project mill processed more than 100,000 tonnes of material (both waste and mineralized material) between 2015 and 2018. During the 2018 bulk sample processing program, the Company achieved 95.1% recovery (43.2% from gravity) from the processing of more than 35,000 tonnes of mineralized material. The Project mill construction was completed in mid-2015 with a sunk cost of over C$150 million.
  • Validated mineral resource estimate: Rubicon achieved positive reconciliation results from its bulk sample processing program in 2018, achieving grades, tonnes, and ounces that were 6.1%, 7.2%, and 13.8% higher, respectively, compared to the mineral resource block model estimate for the stopes mined (see November 29, 2018 news release for more details on the 2018 bulk sample processing program). The Company believes these results validate the geological model and the current mineral resource estimate.
  • Mining method: The Company successfully tested both the Sub-Level Longhole and Uppers mining methods at the Project during its 2018 test trial mining program, achieving external dilution of 8.7% and demonstrating the amenability of the bulk mining to the deposit.
  • Actual underground development and processing costs: Underground development comprises the biggest portion of capital and operating costs of underground operations. The Company has collected actual underground development costs, productivity rates, and other important information from its 2018 test trial mining program and from a 14,000 m of historical underground development.
  • Additional sunk capital: In addition to the Project mill, critical items that have been mostly constructed include the TMF, a water treatment plant, earth and civil works, electrical substation, head frame and hoisting facility, and more than 14,000 m of well-maintained, underground development including a fully-operational shaft.
  • Extensive underground mining experience: Management has underground operating and construction experience in challenging mines around the world, including the Witwatersrand basin in South Africa, in Northern Ontario (Sudbury, Timmins, Kirkland Lake, and Red Lake mining camps), Northern Manitoba, Val d’Or mining camp in Quebec, Northern New Brunswick, Northern Saskatchewan, and in Newfoundland. This collective experience will help to mitigate risks associated with future mine building and mine operations.

 

The Company understands that bringing development-stage projects to commercial production has numerous risks.

 

Potential Opportunities to Optimize the New PEA

 

Rubicon has identified the following opportunities to enhance the New PEA:

 

  • Evaluate infill and step-out drilling of Explore Target areas11 (below the 854-m level).
  • Evaluate McFinley, and close proximity targets to potentially increase mineral resource estimates.
  • Evaluate the expanded usage of MBRM.
  • Electric and/or battery operated underground mobile equipment (e.g. haul trucks).
  • Evaluate the mining cut-off grade with a higher gold price assumption, which could potentially include more stopes into the conceptual LOM plan.
  • Evaluate ore-sorting technology to potentially improve mill head grade.

 

Strategy Going Forward

 

Rubicon plans to release an updated mineral resource estimate incorporating drilling results from 2019 in Q4/2019 with the goal of further increasing the Measured and Indicated mineral resource estimate above the current estimate of 589,000 contained ounces11, 13.

 

Within the Phoenix Gold Property claim boundary, the Company has identified exploration targets within 2 km from the Phoenix Gold Project shaft and surface infrastructure, which the Company intends to explore in 2020. Rubicon believes these targets have strong mineral potential based on historical mining and exploration.

 

Company plans to file an updated Technical Report for the Project reflecting the New PEA on www.sedar.com within 45 days of this news release.

 

Qualified Persons and Quality Assurance and Quality Control

 

The content of this news release has been read, verified and approved by Michael Willett, P.Eng., Director of Projects, and Isaac Oduro, P.Geo., Manager of Technical Services for Rubicon, and Andrew Mackenzie, P.Eng. and Tim Maunula, P.Geo. for TMAC. All are Qualified Persons as defined by NI 43-101.

 

Underground drilling was conducted by Boart Longyear Drilling of Haileybury, Ontario and was supervised by the Rubicon exploration team. All assays reported are uncut unless otherwise stated. All samples reported herein were performed by SGS Mineral Services of Red Lake, Ontario. All NQ core assays reported were obtained by fire assay with AA-finish or using gravimetric finish for values over 10.0 g/t Au.

 

Intercepts cited do not necessarily represent true widths, unless otherwise noted, however drilling is generally intersecting interpreted mineralized zones at angles between -30o and +30o. True width determinations are estimated at 65-80% of the core length intervals for the 305 m Level drilling, and estimated at 75-95% of the core length for the 610 and 685 m Level drilling. Rubicon’s quality control checks include insertion of blanks, standards and duplicates to ensure laboratory accuracy and precision.

 

About Rubicon Minerals Corporation

 

Rubicon Minerals Corporation is an advanced gold exploration company that owns the Phoenix Gold Project, located in the prolific Red Lake gold district in northwestern Ontario, Canada. Additionally, Rubicon controls the second largest land package in Red Lake consisting of over 285 square kilometres of prime, strategic exploration ground, and more than 900 square kilometres of mineral property interests in the emerging Long Canyon gold district that straddles the Nevada-Utah border in the United States. Rubicon’s shares are listed on the Toronto Stock Exchange (RMX) and the OTCQX markets (RBYCF). For more information, please visit our website at www.rubiconminerals.com.  

 

Table 4: 2019 MRE at 3.0 g/t Au Cut-Off Grade1 – Effective March 18, 201913

 

 

Mineral Resource Category Quantity
(000’tonnes)
Grade

(g/t Au)

Contained
Gold Ounces
Measured (M) 442 6.99 99,000
Indicated (I) 2,485 6.13 490,000
M + I 2,927 6.26 589,000
Inferred 2,570 6.53 540,000
• Effective date for this Mineral Resource Estimate March 18, 2019
• Mineral Resource Estimate uses a break-even economic cut-off grade of 3.0 g/t Au based on assumptions of a gold price of US$1,400 per ounce, an exchange rate of US$/C$0.77, mining cash costs of C$97/t, processing costs of C$24/t, G&A of C$6/t, sustaining capital C$20/t, refining, transport and royalty costs of C$57/oz, & average gold recoverability of 95%
• Mineral Resource Estimate reported from within an envelope accounting for mineral continuity
• All figures are rounded to reflect the relative accuracy of the estimates and totals may not add correctly

 

 

Table 6: New PEA Conceptual LOM development schedule

 

Levels (m) Conceptual LOM Lateral and Ramp Development (m) Total
Pre-CP CP
-2 -1 1 2 3 4 5
Surface 400 400
122 512 512
183 187 187
244 42 42
305
366 747 603 1,350
427 46 1,639 462 2,147
488 523 924 1,447
549 570 1,451 173 2,194
610 183 395 756 518 1,852
640
671 374 1,310 1,684
685 95 95
732 310 310
793 290 100 20 616 1,026
854 435 1,087 1,522
915 486 186 306 978
976 209 1,493 1,702
1,037 505 203 708
1,098 453 950 1,403
1,159 266 833 1 1,100
1,220 448 1,174 1,622
1,281 448 649 395 1,492
1,342 252 196 448
1,403 448 696 1,144
1,464 289 639 928
Totals 2,117 4,799 4,823 4,738 5,023 3,281 1,827 26,608
Numbers may not add up due to rounding      
*Year -2 (stub year) includes only 8 months of construction.      

 

 

Table 9: New PEA Conceptual LOM cash flow model1

 

Pre-CP = Years -2#, -1
CP = Years 1 to 6#

 

 

                           
 Conceptual LOM Summary Unit   YEAR   -2 -1 1 2 3 4 5 6 7
                           
Macro Assumptions                          
Gold Price US$ / oz       1,325 1,325 1,325 1,325 1,325 1,325 1,325 1,325
CAD/USD     0.7519   0.7519 0.7519 0.7519 0.7519 0.7519 0.7519 0.7519 0.7519
                           
Mill Feed                          
Throughput  Tpd   1,370   133 670 1,225 1,516 1,691 1,699 1,577 823
Mineralized Tonnage Tonnes   3,045,196   4,000 241,333 440,942 545,907 608,731 611,763 567,823 24,697
Diluted Grade g/t   5.31   4.06 5.91 5.67 4.91 4.71 5.17 5.87 7.38
Mill Recovery %   95.0%   95% 95% 95% 95% 95% 95% 95% 95% 0%
                           
Conceptual Payable Gold                          
Gravity  oz   223,411   224 19,713 34,568 37,025 39,587 43,683 46,093 2,518
CIL oz   270,172   271 23,839 41,803 44,775 47,873 52,826 55,740 3,045
Total Conceptual Payable Gold oz   493,583   496 43,551 76,371 81,800 87,460 96,510 101,833 5,563
                           
Estimated Post-Tax Cash Flow                          
Net Revenue C$ 000   868,442   872 76,627 134,371 143,923 153,882 169,806 179,172 9,788
Royalties and other production taxes C$ 000   (29,907)   (78) (2,924) (4,656) (4,943) (5,241) (5,719) (6,000) (346)
Net Revenue Less Royalty C$ 000   838,534   794 73,703 129,715 138,981 148,641 164,087 173,171 9,442
Mining costs C$ 000   (268,404)   (4,075) (25,388) (41,326) (45,975) (49,313) (49,903) (49,773) (2,651)
Milling costs C$ 000   (99,584)   (411) (11,264) (15,390) (17,479) (18,505) (18,161) (17,398) (976)
Site G&A C$ 000   (23,824)   (1,642) (2,898) (3,476) (3,779) (3,961) (3,970) (3,843) (255)
Mining Tax C$ 000    
Total Operating Cost     (391,812)   (6,128) (39,550) (60,193) (67,233) (71,778) (72,033) (71,014) (3,882)
Operating Cash Flow C$ 000   446,723   (5,334) 34,153 69,523 71,747 76,863 92,053 102,158 5,561
Mine Development & U/G Infrastructure C$ 000   (129,956)   (14,227) (28,993) (21,590) (22,177) (21,776) (15,533) (5,660)
Equipment C$ 000   (69,917)   (6,710) (10,140) (11,241) (10,227) (11,569) (10,118) (8,930) (982)
Surface & Mill Infrastructure C$ 000   (29,309)   (20,639) (2,145) (2,525) (1,500) (2,500)
Income tax C$ 000    
Closure Costs C$ 000   (7,700)   (7,250) (450)
Contingency (15%) C$ 000   (18,351)   (7,036) (11,315)
Total Capital Costs     (255,233)   (48,611) (52,594) (35,355) (33,904) (35,845) (25,651) (14,590) (8,232) (450)
Estimated Cash Flow Before Financing Activities C$ 000   191,489   (53,946) (18,441) 34,167 37,843 41,017 66,402 87,567 (2,671) (450)
Change in Working Capital C$ 000   $   (693) 2,135 2,232 (84) 262 1,295 908 (5,724) (330)
Post Tax Cash Flow  C$ 000   191,489   (54,639) (16,306) 36,399 37,759 41,279 67,697 88,475 (8,395) (780)
Post Tax NPV Unlevered Cash Flows  5%   $135,233                    
Post Tax IRR     40.2%                    
                           
Unit Cost Metrics  – Pre-CP excluded from calculation                        
Operating Cost (LOM) C$ / tonne   $128.67   137 123 118 118 125 157
Operating Cash Cost (C1, CP) US$ / ounce   $623.93   638 663 662 606 569 571
AISC* US$ / ounce   $881.55   987 975 970 806 676 1,684
AIC* US$ / ounce   $1,031.21   1,183 1,158 1,141 961 823 4,375
* Exempt of Corporate Costs                          
#Year -2 (stub year) includes only 8 months of construction. Year 6 (stub year) includes only 1 month of operation.  
                             

 

 

Table 11: Other sensitivity tables – New PEA Conceptual LOM

 

  1. a)  Diluted Head Grade (g/t Au) vs. Average Daily Mill Throughput (tpd)

 

Estimated After-tax IRR (%)/After-tax NPV5% (C$ millions)

 

 

LOM Avg.
Throughput
(tpd)
LOM diluted head grade (g/t Au)
4.50 4.75 5.00 5.31

(base case)

5.50 5.75 6.00
1,200 (5.9%)/($34.6) 2.8%/($7.4) 10.9%/$20.4 20.0%/$54.0 25.3%/$74.7 32.0%/$101.3 38.6%/$128.8
1,300 6.9%/$6.6 15.2%/$36.0 23.0%/$65.6 32.3%/$102.4 37.6%/$124.5 44.4%/$153.4 51.2%/$182.9
1,370 (bc) 14.9%/$34.8 23.0%/$65.4 30.9%/$96.9 40.2%/$135.2 45.7%/$158.8 53.0%/$190.6 59.9%/$221.4
1,500 28.7%/$87.8 37.0%/$121.9 45.1%/$156.4 54.6%/$197.5 60.5%/$223.7 68.1%/$257.9 75.5%/$291.9
1,600 38.5%/$128.2 47.1%/$165.0 55.3%/$200.5 65.6%/$246.7 71.5%/$273.6 79.4%/$309.7 87.2%/$346.4
1,700 48.2%/$169.8 57.0%/$208.1 65.6%/$246.9 75.8%/$293.4 82.3%/$323.5 90.5%/$361.7 98.7%/$397.9
1,800 57.5%/$210.4 66.4%/$250.6 75.6%/$292.5 86.5%/$342.9 93.0%/$373.2 101.4%/$408.3 109.8%/$438.8

 

 

  1. b)  Total Operating Cost (C$/tonne) vs. LOM Capital Cost Change (%) – Conceptual LOM

 

Estimated After-tax IRR (%)/After-tax NPV5% (C$ millions)

 

 

LOM Capital Cost Change (%) Total Operating Cost (C$/tonne)
$110.00 $128.67

(base case)

$150.00
-25% 80.9%/$234.9 65.6%/$189.4 48.7%/$137.3
-15.0% 67.6%/$213.2 54.0%/$167.7 38.8%/$ 115.6
$255.2M (base case) 51.6%/$180.1 40.2%/$135.2 27.0%/$83.8
+ 15.0% 39.6%/$148.2 29.2%/$102.7 17.1%/$50.6
+25% 32.8%/$126.4 23.0%/$80.9 11.6%/$28.8

 

*Year -2 (stub year) includes only 8 months of construction. Year 6 (stub year) includes only 1 month of operation.

 


Diagram 1: 2019 MRE block model – long section (see footnotes 10,11,13) (CNW Group/Rubicon Minerals Corporation)

 


Diagram 2: Diagram of New PEA Conceptual LOM development – Looking north (CNW Group/Rubicon Minerals Corporation)

 


Diagram 3: Conceptual diagram of Sub-Level Longhole and Uppers mining methods (Diagram not to scale) (CNW Group/Rubicon Minerals Corporation)

 


Diagram 4: MBRM long section schematic – Courtesy of ManRocDevelopments Inc. (Diagram not to scale) (CNW Group/Rubicon Minerals Corporation)

 


Diagram 5: Conceptual LOM potential production* profile (see footnote 1) (CNW Group/Rubicon Minerals Corporation)

 

Posted August 19, 2019

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