September 10, 2014
Trading Symbol: TSX:GGD
Shares Issued: 147,814,830
Initial PEA for Santa Gertrudis Indicates a US$150 Million NPV and an IRR of 58% at 5% Discount with Substantial Increase to Mineral Resource Estimate
GoGold Resources Inc. (TSX: GGD), (GoGold), is pleased to announce the results of a Preliminary Economic Assessment (“PEA”) for its 100-per-cent-owned Santa Gertrudis gold mine located in Sonora State, Mexico. The PEA was prepared by P & E Mining Consultants Inc. (“P&E”) of Brampton, Ontario.
The initial PEA confirms that the company could potentially develop a low cost open-pit heap leach mine in Sonora, Mexico that could represent a very robust economic opportunity. More specifically, at a gold price of US$1,250 per ounce, the base case price assumption, Santa Gertrudis has an estimated US$232 million after-tax net cash flow, a US$150 million after-tax net present value at a 5-per-cent discount rate, a highly attractive after-tax internal rate of return of 58 per cent, and a low initial capital expenditure of US$32 Million for construction and mine preparation.
The report has also significantly increased the Indicated mineral resource estimate by over 200,000 ounces of gold and the Inferred mineral resource estimate by over 113,000 ounces of gold from the original mineral resource estimate of June 17, 2014 also prepared by P&E. The completed PEA technical report will be filed on SEDAR within 45 days of this news release. It should be noted that only oxide and mixed (oxide / sulphide) material was used in the preparation of the PEA study.
Base Case Operating Highlights and Project Performance ($US)
|Gold price:||Base case economic evaluation: 1,250/oz Au|
|Updated Mineral Resource:||Indicated: 23.3 Mt @ 1.08 g/t Au containing 810,000 oz Au
Inferred: 7.7 Mt @ 1.02 g/t Au containing 255,000 oz Au
|Production:||56,000 oz Au/year (average) over 12-year mine life|
|After Tax Net Cash Flow||$232 Million|
|Cash costs:||$622 per ounce Au|
|All In Sustaining Cost:||$699 per ounce Au|
|Initial CAPEX:||$32 million (incl. 20% contingency)|
|NPV @ 5% (after tax):||$150 million|
|IRR (after tax):||58%|
|Payback (after tax):||1.7 years|
|Sustaining Capital:||$16 million|
|Low Gold Price Resilience:||34% IRR at $1,000/oz Au|
Terry Coughlan, President and CEO of GoGold stated: “We are extremely pleased with the results of the initial PEA study for Santa Gertrudis. The large increase in gold ounces along with the robust economic opportunity to develop our second low cost producing mine in Mexico, substantiates the reasons why the company was so eager to secure this gold project for our shareholders. The PEA report shows an initial NPV of US$150 million, and has the potential for exploration upside and additional gold ounces through targeted exploration. Our strategy, as it was with our initial low cost producing Parral Mine that went from grass roots to production in under twenty four months, is to fast track this second project, the Santa Gertrudis gold mine into production.”
Project Design and Economics
The proposed project is a 7,500-tonne-per-day heap leaching facility fed by several open pits, resulting in a projected 12-year mine life with total metal production of 671,000 ounces of gold. Start-up capital costs including owner's cost and a 20% contingency are estimated at US$32 million. This includes the development of a centrally located heap leach pad, CIL plant and ADR plant required for the start of mining operations. Sustaining capital costs over the project's life are projected to be an additional US$16 million and total life-of-mine capital costs are estimated at US$48 million. Projected life-of-mine average cash operating costs are US$622 per ounce of recovered gold. The total all-in cost of production (including cash operating costs and total capital (initial and sustaining) and contingency costs over the life of the mine) is estimated at US$699 per ounce of gold, which represents one of the lower costs per gold ounce when compared to other producers in the region. Payback for initial capital comes after 1.7 years.
The PEA provides a basis to estimate project operating and capital costs and establish a projection of the potential minable resource, including Measured, Indicated and Inferred categories, as permitted under National Instrument 43-101. The mineral resource model prepared by P&E was subsequently utilized to undertake the open-pit mine, design and production schedule.
Updated Mineral Resource Estimate
In June 2014, P&E completed a National Instrument 43-101 mineral resource estimate for the Santa Gertrudis project (see news release dated June 17, 2014). Since that date, a number of diamond drill holes along with further block modeling on the existing data base have increased the mineral resource estimate at Santa Gertrudis (see Table 1) which was used for the PEA.
Table1. Santa Gertrudis Property Updated Mineral Resource Estimate1,2,3,4,5
- Mineral resources which are not mineral reserves do not have demonstrated economic viability. The estimate of mineral resources may be materially affected by environmental, permitting, legal, title, taxation, sociopolitical, marketing, or other relevant issues.
- The quantity and grade of reported Inferred resources in this estimation are conceptual in nature and there has been insufficient exploration to define these Inferred resources as an Indicated or Measured mineral resource, and it is uncertain if further exploration will result in upgrading them to an Indicated or Measured mineral resource category.
- The mineral resources in this estimate were calculated in accordance with the Canadian Institute of Mining, Metallurgy and Petroleum (CIM), CIM Standards on Mineral Resources and Reserves, Definitions and Guidelines as prepared by the CIM Standing Committee on Reserve Definitions, as well as the requirements of National Instrument 43-101.
- All resources are reported within an optimized pit shell developed using the following economic parameters: Gold Price $1,300 per ounce. G&A cost $0.80 per tonne. Mining cost $1.40 per tonne. Processing cost $4.00 per tonne for oxides, carbonaceous oxides and mixed oxide/sulphide deposits, and $22.00 per tonne for sulphides. Process recoveries used are 75% for oxides and leach pad material, and 50% for mixed oxide/sulphide deposits, and 90% for sulphides. Optimized pit slopes are 50 degrees.
- The mineral resource table incorporates 35 deposits and associated optimized pit shells as well as one leach pad.
The Santa Gertrudis Property updated mineral resource estimate incorporates results from thirty-five deposit areas constrained by optimized pit shells as well as three existing leach pads. The effective date of the updated mineral resource is August 22, 2014, and incorporates updated economic parameters, revised interpretation of local geological features, and a limited amount of additional drilling. The database used for the updated mineral resource estimate consists of 2,076 validated drill holes within the local area of interest, of which 1,217 drill holes directly intercept the modeled deposits. In addition to drill hole data, the database includes over 200,000 assayed production blast holes (digitized for modeling by GoGold), as well as metallurgical, geological, geotechnical, and geochemical data.
The updated mineral resource estimate represents an increase of 33% in total Au ounces over the previous mineral resource in the Indicated class, and 80% in the Inferred class. The increase is primarily attributable to the revised economic and optimization parameters developed for the PEA. The revised economic parameters developed for the PEA have also resulted in a decrease in the cut-off grade for oxide mineralization from 0.23 g/t Au to 0.16 g/t Au. The updated mineral resource includes oxide, sulphide, and mixed material.
Each deposit except the Amelia pads was defined by a series of mineralization wireframes based on a nominal 0.30 g/t Au assay grade cut-off, incorporating where possible the trend of the local geology and a revised interpretation of the local oxide boundaries. The mineral resource estimate involved three dimensional modeling methods and statistical and grade continuity analysis. Gemcom GEMS modeling software was used for the three dimensional block model and subsequent grade estimates. Grade capping of composite samples was used to restrict the influence of statistical outliers utilizing Inverse Distance Cubed (“ID3”) interpolation of block grades. For each deposit except the Amelia pads, a two-pass ID3 linear weighting of capped composite grades was used for block estimation. Indicated resources were defined by blocks estimated during the first pass, and in general were located within 30 metres of two or more drill holes. All remaining blocks estimated during the second pass were classified as Inferred resources.
All mineral resources are based on a US$1,300 per ounce gold price. With the exception of the Amelia pad material, the reported mineral resources are contained within optimized Lerchs-Grossmann pit shells, and are reported using a cut-off grade of 0.16 g/t Au for oxide material, 0.60 g/t Au for sulphide material and 0.25 g/t Au for mixed oxide and sulphide material. A cut-off grade of 0.20 g/t Au was used for the Amelia pad material.
The mineral resource estimate was completed by P&E of Brampton, Ontario, Canada. P&E prepared the mineral resource estimate for the Santa Gertrudis Property in accordance with the Canadian Securities Administrators (“CSA”) National Instrument 43-101 (“NI 43-101”) and mineral resources have been estimated using the Canadian institute of Mining, Metallurgy and Petroleum (“CIM”), CIM Standards on Mineral Resources and Reserves, Definitions and Guidelines prepared by the CIM Standing Committee on Reserve Definitions and adopted by CIM Council. An independent NI 43-101 PEA technical report including the updated Mineral Resource Estimate for the Santa Gertrudis Property will be filed on SEDAR within 45 days of this news release.
PEA Base Case Operating Highlights and Project Performance (US$1,250 per ounce gold)
|NPV @ 5%||US$240 M|
|NPV @ 5%||US$150 M|
|Capital Costs (US$M)|
|Pre-production (including 20% contingency)||32.1|
|Operating Costs (Average LOM)||US$/tonne Feed||US$/tonne Rock|
|Processing ($/t processed)||3.54|
|General and admin ($/t processed)||0.71|
|Total ($/t processed)||14.29|
|Unit Costs (Average LOM) US$|
|Direct Cash Operating Costs1 ($/oz)||622|
|Total Cash Costs2 ($/oz)||628|
|All-in Sustaining Cash Costs3 ($/oz)||699|
- Includes all mining costs, processing costs, on-site G&A
- Includes all direct cash operating costs plus refining cost and royalties
- Includes all total cash costs plus initial and sustaining capex
|Pre-strip period (yrs)||1|
|Operating life (yrs)||12|
|Average mining rate (tpd)||46,000|
|Average annual mine production (Mt)||16.6|
|Total material mined (LOM Mt)||192.7|
|Overall average Strip ratio (W:O)||5.5:1|
|Process rate (Mtpa)||2.46|
|Average annual gold production (oz)||55,900|
|Total gold production (koz)||671,300|
|Metallurgical recovery (Avg LOM %)||73.3|
|Gold price sensitivity (after-tax US$M)|
- Base Case
|NPV sensitivity (after-tax US$M)|
- Base Case
|IRR sensitivity (after-tax %)|
- Base Case
The mining operation is planned to utilize conventional truck and shovel methods. Approximately 30 Mt of mineralized material would be mined from 27 individual open pits over the course of the estimated project life. No sulphide mining was considered in this PEA. Compared to the 35 deposits in the mineral resource estimate, in a few cases two deposits formed one pit when the pits were designed, and several small deposits did not contain enough gold to warrant a pit design. The open pits will be mined to deliver approximately 30 Mt of mineralized material to the process facility and 163 Mt of waste to storage facilities located near each pit over the mine life. The overall strip ratio for the project is 5.5:1 with mining being conducted 360 days/yr by a contractor-operated fleet at total material movement rates ranging from 31,000 to 55,000 tpd.
The contractor mining fleet will generally consist of CAT 992 type front-end loaders and 90 tonne haul trucks, along with support equipment such as drills, dozers, and graders. The waste stripped from the pits will be hauled to an adjacent waste dump a short distance from each pit. The heap leach feed material will be hauled to a central leach pad facility, with haul distances ranging from 1 km to 15 km. In any given year, mining may be occurring in two to six different pits at the same time in order to better distribute waste over time and blend heap leach feed grades.
The Santa Gertrudis project is comprised of 35 discrete deposits; of which 13 have been subjected to preliminary metallurgical testing including bottle roll and column testwork, and a few have been partially mined. Operating records for past operations are not available and recovery estimates are therefore based on the available test data.
The deposits are typically comprised primarily of oxide material with lesser amounts of mixed and some sulphide material. In portions of some deposits, there is an active carbonaceous component which is capable of adsorbing gold from solution. Sulphide material, representing a minor component of the mineralization, may be partially refractory to conventional processing. Oxide material leaches relatively rapidly with low reagent consumption and is fully amenable to heap leaching. Gold extraction under heap leach conditions is relatively insensitive to rock size and fine crushing is not required. Additionally, agglomeration of mineralized material is not beneficial based on the available testwork and is not included in the proposed flowsheet.
The metallurgical testwork (bottle roll and column tests) yielded a wide range of gold extractions for oxide material, although apparently insensitive to head grade. Gold extractions for oxide were typically between 75% and 90% and reagent consumptions were moderate. Recovery of gold from mixed material was typically lower and not well defined. For purposes of the PEA heap gold recoveries of 75% and 50% have been adopted for oxide and mixed material respectively and have been applied to all deposits.
The process design is based on the use of conventional heap leach technology with a production rate of 2.5 million tonnes/yr. Mined mineralization will be crushed in two stages and conveyed to the leach pad where it will be stacked in 6 metre or 8 metre lifts and irrigated with dilute cyanide solution. Leached gold will be adsorbed onto activated carbon in a carbon-in-column circuit. Gold will be eluted from the carbon, electrowon and smelted to produce doré on site.
GoGold recently announced it has executed a land agreement to mine and explore on the Ejido property associated with the Santa Gertrudis Gold Mine in Mexico has been executed. The agreement allows GoGold to mine and explore the 2,006 hectares of land that is owned by the local Ejido for a period of ten years with an option to renew for a further five years. With the Company's intent to re-establish mining, this agreement will allow GoGold to fast track the Santa Gertrudis gold mine to production.
The compensation for the agreement is $1,500,000 Mexican pesos (C$123,450 at June 30, 2014 exchange rate) on signing and 500,000 Mexican pesos (C$41,150 at June 30, 2014 exchange rate) paid each year on the anniversary date of the agreement. The old waste material from past production on the 2,006 hectares of land will remain with the Ejido.
About the Santa Gertrudis Mine
The Santa Gertrudis mine was discovered by Phelps Dodge in 1986 and advanced to open pit heap leach production in 1991. From May 1991 to October 2000, the Santa Gertrudis Gold Mine historic production was 564,000 ounces of gold with 75% recovery, required minimal crushing and had an average grade of 2.13 grams gold per tonne which is a relatively high grade for an open pit heap leach mine in Mexico. Phelps Dodge sold part of the Santa Gertrudis Gold Mine to Campbell Resources in 1994. Campbell Resources later ceased operations mid-mine life due to low gold prices (under $300 per ounce) during the late 1990's.
About P&E Mining Consultants Inc.
P&E Mining Consultants Inc. is an established geological and mine engineering consulting firm specializing in the area NI 43-101 geological reports and has undertaken over 200 mineral industry projects worldwide including mineral resource estimates, scoping studies, preliminary economic assessments, prefeasibility studies and has jointly collaborated with major consulting firms on Feasibility Studies.
Fred Brown, P.Geo. a Senior Associate Geologist with P&E, is the Independent Qualified Person responsible for preparing the mineral resource estimate. Mr. Brown and Eugene Puritch, P.Eng. President of P&E, have reviewed and approved the technical contents of this news release.
For further information please contact:
Terence F. Coughlan, President and CEO,
Sean Tufford, Vice President, Corporate Development
GoGold Resources Inc.,
T: 902 482-1998
F: 902 442-1898
Or visit : www.gogoldresources.com
The securities described herein have not been, and will not be, registered under the United States Securities Act of 1933, as amended (the “U.S. Securities Act”), or any state securities laws, and may not be offered or sold within the United States or to, or for the benefit of, U.S. persons (as defined in Regulation S under the U.S. Securities Act) except in compliance with the registration requirements of the U.S. Securities Act and applicable state securities laws or pursuant to exemptions therefrom. This release does not constitute an offer to sell or a solicitation of an offer to buy of any of GoGold’s securities in the United States.
This news release may contain "forward-looking information" as defined in applicable Canadian securities legislation. All statements other than statements of historical fact, included in this release, including, without limitation, future plans and objectives of GoGold, constitute forward-looking information that involve various risks and uncertainties.Forward-looking information is based on a number of factors and assumptions which have been used to develop such information but which may prove to be incorrect, including, but not limited to, assumptions in connection with the continuance of GoGold and its subsidiaries as a going concern, general economic and market conditions, mineral prices, the accuracy of mineral resource estimates, and the ability to satisfy all conditions to funding of the second tranche under the credit agreement. There can be no assurance that such information will prove to be accurate and actual results and future events could differ materially from those anticipated in such forward-looking information.
Important factors that could cause actual results to differ materially from GoGold's expectations include exploration and development risks associated with the GoGold’s projects, the failure to establish estimated mineral resources or mineral reserves, volatility of commodity prices, variations of recovery rates and global economic conditions. For additional information with respect to risk factors applicable to GoGold, reference should be made to GoGold's continuous disclosure materials filed from time to time with securities regulators, including, but not limited to, GoGold's Annual Information Form. The forward-looking information contained in this release is made as of the date of this release.