SolGold Plc (LSE & TSX: SOLG) is pleased to announce the release of its Preliminary Economic Assessment ("PEA") for the Alpala Copper-Gold-Silver Deposit, Cascabel Project Northern Ecuador. SolGold holds an 85% registered and beneficial interest in ENSA (Exploraciones Novomining S.A.) which holds 100% of the Cascabel Project (see "ownership" below).
Key aspects and findings from this study are summarised below.
Ø Net Present Value ("NPV") estimates range from US$4.1Bn to US$4.5Bn (Real, post-tax, @ 8% discount rate, US$3.3/lb copper price, US$1,300/oz gold price and US$16/oz silver price) depending on production rate scenario (see below).
Ø Internal Rate of Return ("IRR") estimates range from 24.8% to 26.5% (Real, post-tax, US$3.3/lb copper price, US$1,300/oz gold price and US$16/oz silver price) depending on production rate scenario (see below).
Ø Pre-production Capex estimated at approx. US$2.4B to US$2.8B, and total Capex including life of mine sustaining Capex of US$10.1B to US$10.5B depending on production rate scenario (see below).
Ø Payback Period on initial start-up capital - Range from 3.5 to 3.8 years after commencement of production depending on production rate scenario.
Ø Preferred Mining Method - Underground low-cost mass mining using Block Cave methods applied over several caves designed on two vertically extensive Lifts.
Ø Four mine production cases have been pre-selected and assessed as part of the PEA:
Ø Resources scheduled in the PEA block cave designs that account for 2.4Bt @ 0.54% CuEq ROM grade (0.36% Cu, 0.27g/t Au and 1.1g/t Ag), including:
o 89% of the MRE#2 Indicated Mineral Resources: 1.83Bt @ 0.61% CuEq ROM (0.41% Cu, 0.31g/t Au and 1.2 g/t Ag)
o 61% of the MRE#2 Inferred Mineral Resources: 0.55Bt @ 0.36% CuEq (0.27%Cu, 0.13g/t Au and 0.8g/t Ag)
Ø Annual Metal Production (average for the first 25 years) - Estimated at 207,000t of copper; 438,000oz of gold and 1.4Moz of silver in concentrate per year (based on the 50Mtpa mining scenario).
Ø Annual Metal Production (life-of-mine average) - Estimated at 150,000t of copper, 245,000oz of gold and 913,000oz of silver in concentrate per year.
Ø High copper (28.2%), gold (22.1 g/t) and silver (65.7g/t) contents in sales concentrates.
Ø The high quality of the concentrates and the relatively low arsenic contents in comparison to a number of other major producers are expected to deliver a sales premium for SolGold's concentrates.
Ø Activities for rest of 2019 will focus on continued exploration at Alpala, a further update to the Mineral Resource Estimate (MRE#3), metallurgy and process design, tailing disposal options and incorporation of further geotechnical and hydrogeological data into the study basis.
Ø Permitting and fiscal discussions with the Ecuadorean Government, and financial discussions with third party financiers for SolGold's share of the project costs to commence.
Ø The Pre-Feasibility Study is expected to be completed in December 2019 with a Definitive Feasibility Study scheduled for completion at the end of 2020.
References to figures and tables relate to the version visible in PDF format by clicking the link below:
Commenting on the findings of the PEA, SolGold CEO Mr Nick Mather said: "The SolGold Board is excited by the opportunity demonstrated for the Alpala Project, and that it continues to grow. The unusually low operating costs modelled are due to the relatively soft, fractured nature of the ore, resulting in enhanced caveability, a high degree of fragmentation in the cave and ease of crushing and millability, combined with low hydroelectric (consumption and unit) costs. The overall scale efficiencies also assist in the delivery of modelled low operating costs.
The low start-up capex of $2.4-$2.8Bn, high net present value (NPV) range, of $4.1 ‑ $4.5Bn at an 8% discount (well in excess of the global cost of capital for a project of this nature) signifies outstanding financial metrics for a project of this nature and outstanding modelled internal rates of return of 24.8-26.5% presents an outstanding value proposition for SolGold shareholders. SolGold looks forward to delivery of the same blueprint across its 12 other wholly owned projects throughout Ecuador.
The study team has been careful to separately identify start-up capital costs ($2.4Bn - $2.8Bn) and ongoing sustaining capital costs ($7.5Bn - $7.8Bn over the life of mine) and has differentiated this from operating costs.
The vertically extensive nature of the cave configurations, the high modelled resource tonnages and production rates also contribute to the high capital efficiency and returns, low mining costs, and low overall costs of the project.
Metallurgical work, which is ongoing, indicates that gold contents in the pyrite concentrate will require additional investigation to identify an efficient recovery strategy, but this represents only 13% of the contained gold in MRE#2 and less than 4% of the contained metal value in the base case. Metal values of US$3.30/lb copper and US$1300 gold used in the study.
Additional metallurgical work is expected to identify solutions for recovery of gold and copper in the pyrite concentrate along with a sulphuric acid product.
High copper 28.2%, gold 22.1 g/t and 65.7g/t silver contents in sales concentrates over the first 15 years are expected to attract premium values. The high quality of the concentrates and the relatively low arsenic contents in comparison to a number of other major producers are expected to deliver a sales premium for SolGold's concentrates and relatively low tolling and refining charges.
In addition, Alpala's location contributes significantly to the low capital expenditures estimated (capex). Situated at a relatively low elevation, Alpala is near to available water and is also close to key transport at landmarks such as the port of Esmeraldas, Quito International Airport and the regional city of Ibarra, all accessible via sealed roads and highways. The capex outlined also includes an amount of 11% of start-up capex for Engineering Procurement and Construction Management. SolGold will utilise internal management as much as possible to reduce costs, improve work quality and expedite delivery by building a strong in-house team.
Over the period to the end of 2019 when SolGold aims to complete the prefeasibility study, activities will focus on exploration, a new MRE#3, metallurgy and process design, investigation of further tailing disposal options and incorporation of further geotechnical and hydrogeological data into the Prefeasibility Study basis. SolGold will also commence permitting and fiscal discussions with the Ecuadorean Government and financial discussions with third party financiers for SolGold's share of the project costs following completion of the Feasibility Study."