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Superior Gold Announces Positive Preliminary Economic Assessment for the Plutonic Main Pit Push-Back Project

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Superior Gold Inc. (TSX-V: SGI) is pleased to announce positive results from the independent Preliminary Economic Assessment of a push-back of the previously producing main pit as well as an updated Mineral Resource estimate at its 100%-owned Plutonic gold operations, located in Western Australia.  The PEA demonstrates the potential of the Plutonic Main Pit to be a robust open pit gold mine with compelling project economics.  Based on the results of the PEA, the Company expects to proceed to a Pre-Feasibility Study for the Plutonic Main Pit push-back project. 

 

PEA Highlights:

 

  • Robust economics with after-tax Net Present Value (5% discount rate) of $120 million and an after-tax Internal Rate of Return of 35% at $2,150 per ounce of gold (US$1,505 per ounce)
  • Low capital intensity project with only $82 million pre-production capital cost net of $22 million of pre-production revenue
  • Average production of 60,000 ounces gold per year over six years for 357,000 ounces of total production
  • Low life-of-mine All-In Sustaining Cost of US$863 per ounce gold
  • Technically simple project based on a push-back of the existing Plutonic Main Pit utilising existing processing and other existing infrastructure
  • Significant leverage to gold price: $265 million NPV5% at recent spot price of $2,850 per ounce of gold (US$2,000 per ounce)
  • Value enhancement potential available through removing open pit constraints, resource expansion and exploration drilling
  • Proceeding to a PFS expected to be completed in the first half of 2022

 

Updated Mineral Resource Highlights:

  • Updated Measured and Indicated Mineral Resources of 1.89 million ounces of gold (16.26 million tonnes at a 3.6 g/t Au grade)
  • Updated Inferred Mineral Resources of 3.07 million ounces of gold (30.55 million tonnes at a 3.1 g/t Au grade)

 

Tamara Brown, Interim CEO of Superior Gold stated: “The Plutonic Main Pit push-back project starts to unlock the significant value sitting within the Plutonic Gold Operations.  It is a technically simple, high-return, brownfield gold project in one of the most favourable mining jurisdictions in the world, with all necessary infrastructure already in place. The PEA defines robust project economics based on reasonable capital expenditures. This low capital intensity derives from leveraging the existing Plutonic infrastructure and the simplicity of the project which will utilize conventional open pit mining techniques and proven existing processing operations.

 

We are extremely pleased to present the results of a PEA on the Plutonic Main Pit project which in management’s view clearly demonstrates the potential of significantly increasing production at the Plutonic Gold Operations. The project shows robust economics with an after-tax IRR of 35%, a payback of 2.6 years and an NPV5% of $120 million at a $2,150 per ounce gold price. The PEA supports a 3,300 tonnes per day open pit operation with production spanning six years, with very attractive cash costs, AISC and low capital intensity as we are able to leverage off our existing infrastructure. The production from the open pit operations of an average of 60,000 ounces per year for six years, peaking at 78,000 ounces in year three, will supplement our existing production from the Plutonic underground operations, potentially significantly boosting our annual production levels.  Importantly, the project provides a steady base load of feed supply for our primary mill, repositioning the Plutonic Gold Operations for long-term success.”

 

Cautionary Statement: The reader is advised that the PEA summarized in this news release is preliminary in nature and is intended to provide an initial, high-level review of the Plutonic Main Pit’s economic potential and design options. The PEA is preliminary in nature, includes Inferred Mineral Resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as Mineral Reserves, and there is no certainty that the PEA will be realized. Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability. There are no Mineral Reserves contained in the PEA.

 

PEA Summary

 

The PEA was prepared by RPM Advisory Services Pty Limited, based on an updated Mineral Resource estimate prepared by the Company, all in accordance with National Instrument 43-101.  The updated Mineral Resource estimate and PEA were completed under the supervision of Stephen Hyland, FAusIMM who is a “qualified person” as defined by NI 43-101 and is independent of the Company.

 

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 news release, which include associated assumptions, risks, uncertainties and other factors.

 

Table 1: Plutonic Main Pit Project PEA Economics(1)

 

 

Economics Pre-Tax Post-Tax
Net present value (NPV5%) $ millions 177 120
Net present value (NPV5%) US$ millions 124 84
Internal rate of return (IRR) % 45 35
Payback (undiscounted) years 2.5 2.6
LOM avg. annual cash flow after capital $ millions 55.1 43.0
Total cash flow (undiscounted) $ millions 242 169
Forecasts    
Gold price assumption US$/oz 1,505
A$ to US$ assumption A$/US$ 0.70
Production    
Average annual gold production ounces/yr 60,000
Total LOM recovered gold (excl. pre-production) ounces 357,000
Mine life(2) years 6
Average annual mining rate million tonnes/yr 11.6
LOM strip ratio waste:ore 10.3
Average mill grade g/t gold 2.1
Average recoveries % 86.4
Capital Expenditures    
Initial capital costs (net of pre-production revenue) $ millions 82.5
LOM sustaining capital costs $ millions 5.6
Costs    
Mining cost $/tonne mined 3.89
Processing cost $/tonne milled 19.38
G&A cost $/tonne milled 4.15
Royalty % 2.5%
Total cash cost(3) US$/oz 852
AISC(3) US$/oz 863
NOTES:    
1. The PEA is preliminary in nature, includes Inferred Mineral Resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as Mineral Reserves, and there is no certainty that the PEA will be realized. Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability. There are no Mineral Reserves contained in the PEA.    
2. LOM calculation and “Mine Life” is defined as the duration of mining operations of six years after the first year of pre-stripping and capital spend.    
3. This is a non-IFRS financial measure. Please refer to “Non-IFRS Performance Measures” at the end of this news release for a description of these non-IFRS performance measures and to the Non-IFRS Performance Measures disclosure included in the Company’s MD&A for a description and calculation of these measures.    

 

 

 

The Plutonic Main Pit push-back project is part of the Plutonic Gold Operations located 800 kilometres north-east of Perth in Western Australia. The Plutonic Main Pit was first put into production in 1990 and produced 2.1 million ounces of gold, along with other satellite pits, between 1990 and 2005 when production in respect of the Plutonic Main Pit ceased. The Plutonic Main Pit is situated directly above the existing underground operations and located directly adjacent to the Company’s milling facilities which consist of a 1.8 million tonne per annum (“Mtpa”) primary processing plant (“PP1”) and a 1.2 Mtpa secondary processing plant (“PP2”) which is currently on care and maintenance.  Existing tonnage from the underground mine supplies approximately 800,000 tonnes per annum to PP1. Therefore, PP1 has capacity for open pit sources of feed.

 

The PEA considers a push-back of the past producing Plutonic Main Pit utilizing contractor operated conventional open pit mining methods. Drill and blasting of rock will be followed by conventional truck and shovel operations within the open pit for the movement of plant feed and waste with on-site treatment of mine material by conventional milling and gravity recovery through PP1.  The PEA also contemplates the expansion of PP1 from 1.8 Mtpa to 2.0 Mtpa with only minor modifications to the existing processing flowsheet.  Tailings from the Carbon in Leach circuit will be deposited in the existing on-site paddock style tailings storage facility  and the already permitted TSF paddocks 4 and 5 to be constructed starting in late 2021.

 

 

 

The push-back of the Plutonic Main Pit encounters a number of potential surface constraints impacting the pit size, including the location of processing plant infrastructure and heritage sites. The PEA base case has been completed conservatively assuming no relocation of any of these open pit constraints. Future work will need to be completed to assess the viability of removing one or more of these pit size constraints.

 

Gold Price Sensitivities

 

The following table demonstrates the after-tax sensitivities of NPV and IRR to gold price per ounce. The base case, highlighted in the table below, assumes $2,150 per ounce of gold (US$1,505 per ounce):

 

Table 2: Sensitivity Table

 

Economic Sensitivities to Gold Prices (post-tax)
Per ounce of gold (NPV5%) $ millions IRR%
US$1,300 59 M 20%
US$1,350 74 M 24%
US$1,505 ($2,150) 120 M 35%
US$1,800 206 M 57%
US$1,900 236 M 64%
US$2,000 265 M 72%

 

Opportunities

 

Several opportunities to potentially improve the economics of the Plutonic Main Pit project contemplated under the PEA have been identified. Examples include, but are not limited to:

 

  • Investigate the potential removal of one or more surface constraints currently limiting the size of the open pit;
  • Complete infill drilling to convert Inferred Mineral Resources to Measured and Indicated Resources;
  • Complete on-strike step-out drilling to potentially expand Inferred Mineral Resources (Figure 5);
  • Investigate existing targets south east of the Plutonic Main Pit (Figure 5);
  • Geotechnical drilling to confirm opportunities to steepen current pit walls;
  • Further optimize mining strategy resulting in operating cost savings;
  • Further optimize mine designs and scheduling resulting in fully-utilized contractor fleet;
  • Investigate interaction with the underground operations to identify optimization opportunities at the overall operation; and
  • Utilize Australian tax losses of approximately $36 million (as of December 31, 2019).

 

 

 

 Mineral Resources Estimate

 

As part of the PEA, the Company completed an updated Mineral Resource estimate for the Plutonic Gold Operations as at December 31, 2019.  The updated Mineral Resource is estimated from a drill hole database containing 35,784 drill holes consisting of 2.9 million metres of drilling.  

 

Mineral Reserves for the Plutonic Gold Operations as at December 31, 2019 did not change and there are no Mineral Reserves contained in the PEA. Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability. Mineral Resources as at December 31, 2019 were estimated using a long-term gold price of $2,150 per ounce (US$1,505 per ounce). Cut off grades for the Mineral Resource estimates were 1.50 g/t Au for underground and 0.40 g/t Au for open pit.

 

 

Table 3: Updated Measured and Indicated Mineral Resources

 

  December 31, 2019 December 31, 2019 (Updated)
  Tonnes
(millions)
Grade

(g/t Au)

Oz Au

(000’s)

Tonnes
(millions)
Grade

(g/t Au)

Oz Au

(000’s)

Underground            
Measured 3.69 5.50 650 3.45 5.5 590
Indicated 5.54 4.60 820 5.15 4.6 750
Total 9.23 5.00 1,470 8.61 5.0 1,330
             
Open Pit            
Measured 1.64 3.9 210
Indicated 2.69 1.40 120 6.02 1.8 350
Total 2.69 1.40 120 7.66 2.3 560
             
Stockpiles            
Measured
             
Grand Total 11.92 4.20 1,590 16.26 3.6 1,890
NOTES:          
1. Mineral Resources are quoted inclusive and not additional to those Mineral Resources converted to Mineral Reserves.          
2. The reporting standard adopted for the reporting of the Mineral Resource estimate uses the terminology, definitions and guidelines given in the CIM Standards on Mineral Resources and Mineral Reserves as required by NI 43-101.          
3. Mineral Resources are not Mineral Reserves and do not have demonstrated economic viability. All figures are rounded to reflect the relative accuracy of the estimate and have been used to derive subtotals, totals and weighted averages.          
4. Mineral Resources are estimated at a cut-off grade of 1.50 g/t Au for the Plutonic underground gold mine.          
5. Plutonic Underground Resources based on Deswik Mining Stope Optimizations using generalized Reserve MSO input parameters and/ or restricted ‘grade shell’ reported Resources. Plutonic Main Pit Resources based on pit optimization parameters derived by the PEA.          
6. Plutonic Open Pit Mineral Resources are estimated at a cut-off grade of 0.40 g/t Au.          
7. Mineral Resources are estimated using an average gold price of $2,150 per troy ounce (~US$1,505 per ounce).          
8. Rounding errors exist in this table and numbers may not add correctly.          

 

 

Table 4: Updated Inferred Mineral Resources

 

  December 31, 2019 December 31, 2019 (Updated)
  Tonnes
(millions)
Grade

(g/t Au)

Oz Au

(000’s)

Tonnes
(millions)
Grade

(g/t Au)

Oz Au

(000’s)

Underground            
Inferred 19.45 4.20 2,640 18.15 4.2 2,400
             
Open Pit            
Inferred 4.73 1.20 180 12.40 1.7 670
             
Grand Total 24.19 3.60 2,820 30.55 3.1 3,070
NOTES:          
1. Mineral Resources are quoted inclusive and not additional to those Mineral Resources converted to Mineral Reserves.          
2. The reporting standard adopted for the reporting of the Mineral Resource estimate uses the terminology, definitions and guidelines given in the CIM Standards on Mineral Resources and Mineral Reserves as required by NI 43-101.          
3. Mineral Resources are not Mineral Reserves and do not have demonstrated economic viability. All figures are rounded to reflect the relative accuracy of the estimate and have been used to derive subtotals, totals and weighted averages.          
4. Mineral Resources are estimated at a cut-off grade of 1.50 g/t Au for the Plutonic underground gold mine.          
5. Plutonic Underground Resources based on Deswik Mining Stope Optimizations using generalized Reserve MSO input parameters and/ or restricted ‘grade shell’ reported Resources. Plutonic Main Pit Resources based on pit optimization parameters derived by the PEA.          
6. Plutonic Open Pit Mineral Resources are estimated at a cut-off grade of 0.40 g/t Au.          
7. Mineral Resources are estimated using an average gold price of $2,150 per troy ounce (~US$1,505 per ounce).          
8. Rounding errors exist in this table and numbers may not add correctly.          

 

Next Steps

 

The results of the PEA indicate that the proposed Plutonic Main Pit push-back project has technical and financial merit using the base case assumptions. It has also identified additional upside opportunities to remove pit constraints with trade-off studies and analysis required.

 

In 2021, the Company expects to move forward with enhancing the project through exploration and further drilling. Superior Gold will drill resource expansion targets, high-priority Caspian and Carribean exploration targets and several infill holes to improve confidence in geo-tech, metallurgy and resource estimation data. The Company will also continue to generate additional drill targets.

 

The Company expects to commence permitting activities which will include the commencement of heritage surveys for the project  The results of the surveys and the engineering work completed for the PEA will be used to initiate the permitting process for the Plutonic Main Pit push-back project in the second half of 2021.

 

Filing of Technical Report

 

A technical report prepared in accordance with NI 43-101 will include the results of the PEA discussed in this news release together with an updated Mineral Resource estimate for the Plutonic Gold Operations will be filed on SEDAR at www.sedar.com under the Company’s profile within 45 days in accordance with NI 43-101.

 

Qualified Persons

 

The updated Mineral Resource estimate and PEA were completed under the supervision of Stephen Hyland, FAusIMM who is a “qualified person” as defined by NI 43-101 and is independent of the Company. Mr. Hyland  is a Fellow of the Australasian Institute of Mining and Metallurgy (FAusIMM) and a member of the Canadian Institute of Mining, Metallurgy and Petroleum (CIM) and a “qualified person” within the meaning of NI 43-101. Mr. Hyland is employed by Hyland Geological and Mining Consultants (HGMC) and has been engaged on the basis of professional association between client and independent consultant.

 

The PEA was prepared under the supervision of the Qualified Person, Mr. Hyland by the following individuals at RPM Global, all of whom are Qualified Persons under the terms of NI 43-101:

  • Mining: Mr Igor Bojanic, FAusIMM
  • Processing and Infrastructure: Dr Andrew Newell, MAusIMM (CP), MIE(CP)

 

Though the RPM Global team were not designated Qualified Persons for the purposes of this PEA, they do meet the requirements for Qualified Persons under the terms of NI 43-101.

 

Scientific and technical information in this news release has been reviewed and approved by Keith Boyle, P.Eng., Chief Operating Officer of the Company, who is a “qualified person” as defined by NI 43-101. Mr. Boyle is not independent of the Company within the meaning of NI 43-101.

 

About Superior Gold

 

Superior Gold is a Canadian based gold producer that owns 100% of the Plutonic Gold Operations located in Western Australia. The Plutonic Gold Operations include the Plutonic underground gold mine and central mill, numerous open pit projects including the Plutonic Main Pit push-back project, the Hermes open pit projects and an interest in the Bryah Basin joint venture. Superior Gold is focused on expanding production at the Plutonic Gold Operations and building an intermediate gold producer with superior returns for shareholders.

 

Posted December 2, 2020

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