Alamos Announces Positive Feasibility Study for Agi Dagi Project and Preliminary Economic Assessment for Camyurt Project
Agi Dagi Net Present Value Increased 240% with After-Tax IRR of 39%; Robust Initial Economics Outlined for Camyurt
(firmenpresse) - TORONTO, ONTARIO -- (Marketwired) -- 02/22/17 -- Alamos Gold Inc. (TSX: AGI)(NYSE: AGI) ("Alamos" or the "Company") today reported results from the positive feasibility study conducted on its Agi Dagi gold project, located in the Canakkale Province in northwestern Turkey. The study is a continuation of the pre-feasibility study completed on the project in 2012. The Company also reported results from a positive preliminary economic assessment ("PEA") completed on its Camyurt gold project, located approximately 4 kilometres ("km") from Agi Dagi.
Agi Dagi Feasibility Study Highlights
Camyurt Preliminary Economic Assessment Highlights
"With the step-change improvement in Agi Dagi's economics, we now have three of the highest return, undeveloped gold projects in the world. With Kirazli, followed by Agi Dagi and Camyurt, we own a pipeline in Turkey that can provide low cost production and free cash flow growth for more than a decade," said John A. McCluskey, President and Chief Executive Officer.
Key Changes from the 2012 Agi Dagi Pre-Feasibility Study
Agi Dagi Mineral Reserves and Resources
A large portion of the Measured and Indicated mineral resource at Agi Dagi has been successfully converted to an initial Proven and Probable Mineral Reserve totaling 54.4 million tonnes, grading 0.67 g/t Au and 5.4 g/t Ag, containing 1.17 million ounces of gold and 9.5 million ounces of silver.
Compared with the mineral resources included within the pre-feasibility mine plan, the initial mineral reserve is slightly smaller but significantly higher grade. The mineral reserve contains 22% higher gold grades, 21% fewer tonnes and 5% lower contained gold ounces. The mine plan in the pre-feasibility study included Measured and Indicated mineral resources of 69.1 million tonnes grading 0.55 g/t Au and 3.3 g/t Ag, containing 1.23 million ounces of gold and 7.3 million ounces of silver. Of the Inferred mineral resource, approximately 74,000 ounces of gold is contained within the mineral reserve pit and treated as waste in the feasibility mine plan. This represents an opportunity to add to the mine plan with its conversion through additional infill drilling.
Mineral Reserves - Effective as of December 31, 2016
Mineral Resources at a 0.2 g/t gold cut-off grade - Effective as of December 31, 2016
Economic Analysis
Agi Dagi's estimated base case after-tax IRR is 39% and after-tax NPV is $298 million, using an 8% discount rate based on an economic analysis conducted as part of the feasibility study. This represents a 1.9 year payback and assumes a gold price of $1,250 per ounce and silver price of $16.00 per ounce, and incorporates only Proven and Probable mineral reserves. The project's economics are sensitive to discount rates, metal price assumptions and input costs as detailed in the tables below.
Agi Dagi After-Tax NPV (8%) Sensitivity ($ Millions)
Agi Dagi After-Tax NPV (8%) and IRR Sensitivity to Gold Price
Agi Dagi After-Tax NPV Sensitivity to Discount Rate
Permitting
The Environmental Impact Assessment ("EIA") for Agi Dagi has been approved by the federal government. The key remaining permits are the Forestry permits which are also granted by the federal government, and the GSM (Business Opening and Operation) permit which is granted by the Canakkale Governorship. The Company has not started pursuing the Forestry or GSM permits with the current focus on completing the permitting process at Kirazli and proceeding with its development. Incorporating the Camyurt project into Agi Dagi would require the submission and approval of an amended EIA.
The Company expects to first develop Kirazli and then utilize cash flows from that operation to help fund development of Agi Dagi. Following a construction decision, the Company expects a 36 month development timeline for Agi Dagi, including approximately three months of pre-commercial production. The critical path task for the completion of the Agi Dagi project will be the construction of the water reservoir.
Mining
Conventional open pit mining methods will be utilized at Agi Dagi with contract mining to be employed. Agi Dagi is comprised of two deposits which form the Baba and Deli pits. Baba and Deli are located approximately 2.5 km apart. The final pit designs are based on a 5 metre ("m") bench height. A traditional drill, blast, load and haul sequence will be used to deliver ore to the crushing circuit. Waste produced over the life of the mine will be used as engineered fill for the leach pad foundation, primarily during the pre-production phase, trucked to the waste rock dump located directly north of the Deli pit, or backfilled into the pits once the ultimate pit bottoms are achieved.
As with Kirazli, an opportunity to improve the design of the pit slopes at Agi Dagi was outlined in the 2012 pre-feasibility study and additional geotechnical work was subsequently undertaken. The geotechnical evaluation was based on core logging, point load testing and laboratory analysis of the geotechnical core holes. Based on the findings, the recommended inter-ramp/overall pit slope angles have been increased to a range of 35 to 48 degrees depending on the sector of the pits with all but one of the sectors between 40 and 48 degrees. This has reduced the amount of waste to be mined resulting in a lower life of mine waste-to-ore ratio of 1.03:1, from 1.16:1 in the 2012 pre-feasibility study. This has helped reduce the mining cost per tonne of ore and improved the overall economics of the project.
Processing, Metallurgy and Infrastructure
Agi Dagi has been designed as a 30,000 tonnes per day ("tpd") heap leach operation utilizing a multiple lift, single use leach pad. Ore will be mined from both the Baba and Deli pits and processed through two primary crushers, one located near each pit. The primary crushed ore will then be conveyed to a central secondary crushing circuit where it will be crushed to a nominal size of 26 millimetres. The secondary crushed ore will be drum agglomerated, stacked on the leach pad by conveyor stacking and processed with conventional heap leaching methods.
The crushed ore will be stacked in 10 m lifts with the leach pad facility to be constructed in three phases to an ultimate height of 70 m. Phase 1 will have a capacity of 29.7 million tonnes, phase 2, a capacity of 19.8 million tonnes, and phase 3, a capacity of 24.1 million tonnes for an ultimate capacity of 73.6 million tonnes. This is approximately 19.2 million tonnes larger than the current mineral reserve of 54.4 million tonnes to accommodate future potential exploration success and the current 16.6 million tonnes of ore included within the PEA mine plan for Camyurt. The capital required for all three phases is included within the total life of mine capital estimate for Agi Dagi.
A dilute cyanide solution will be applied to the crushed ore over a 90 day leaching cycle with the pregnant solution collected and processed through the adsorption-desorption-recovery ("ADR") plant where gold and silver dore will be produced.
Based on column tests conducted on the different alteration types at Agi Dagi, gold and silver recoveries are expected to average 80% and 25%, respectively.
Agi Dagi will be supplied with power by connecting to commercial power. Overhead power lines will connect 34.5 kV, three phase and 50 Hz power system to a metering and switching substation located on site near each primary crusher. In the event of a power failure, a diesel-fired backup generator will be used to supply emergency power.
Operational water will be supplied via a pipeline from a planned reservoir to be constructed by Alamos. The reservoir for Agi Dagi will be independent of the reservoir to be constructed for the Kirazli project. In conjunction with the Ministry of Forestry and Water Affairs - State Hydraulic Works ("DSI"), a water reservoir project has been designed to supply the process water requirements of the Agi Dagi project and clean drinking water for the nearby communities. The feasibility study on the reservoir project has been approved by DSI.
Operating Costs
Total cash costs are expected to average $374 per ounce of gold and mine-site all-in sustaining costs $411 per ounce, net of silver as a by-product credit. Similar to Kirazli, these are both among the lowest in the industry. Total unit costs per tonne of ore processed are expected to average $6.46 per tonne. This is down from $8.85 per tonne assumed in the 2012 pre-feasibility study reflecting the depreciation of the Turkish Lira, lower unit mining costs per tonne of material, and a lower waste-to-ore ratio.
Unit mining costs have decreased to $1.72 per tonne of material with the application of Turkish mining contractor rates. This compares to $3.21 per tonne assumed in the 2012 pre-feasibility study which reflected North American mining costs. Unit mining costs per tonne of material at Agi Dagi are expected to be slightly higher than Kirazli reflecting longer haulage distances. Approximately 60% of Agi Dagi's operating and capital costs are denominated in Turkish Lira. Of the remaining 40%, the majority is denominated in US dollars.
The breakdown of unit costs is summarized as follows.
Royalty
Agi Dagi and Camyurt are subject to a Mining State Right Royalty payable to the Turkish government. It is a top line sliding scale royalty based on the price of gold with a 50% deduction to the royalty for producing dore in country. Including certain other eligible deductions available for expenses related to transportation and processing costs, the Company expects the gross royalty of 4% would be reduced to a net payable royalty of approximately 1.5% (at a $1,250 per ounce gold price).
In addition to the State Right Royalty, production from Agi Dagi and Camyurt is subject to a 2% net smelter return ("NSR") royalty payable to Franco-Nevada Corporation.
Capital Costs
Initial capital cost of $250 million is down 10% from the $278 million assumed in the 2012 pre-feasibility study primarily reflecting lower capital required for pre-stripping. With good infrastructure and the ability to connect to the commercial electricity grid, the bulk of pre-production capital will be spent on construction of the leach pad, crushing circuit, process plant facilities, water management and the reservoir.
The construction workforce is expected to ramp up to a maximum of 735 personnel and average approximately 500 over the peak phase of construction. Following a construction decision, the Company expects a 36 month development timeline, including approximately three months of pre-commercial production.
A breakdown of the capital requirements is detailed as follows.
Taxes
The statutory corporate tax rate in Turkey is 20%; however, the Company expects to benefit from tax investment incentives that have been implemented by the Turkish Government to reduce the corporate tax rate on the Agi Dagi project to 2%. Effective June 19, 2012, the Turkish Government legislated certain tax investment incentives designed to promote investment in specific industries and regions of Turkey. The Company has evaluated these investment incentives in consultation with a recognized international accounting firm and the Turkish Government, and expects that the Agi Dagi project will qualify for the following incentives on successful application:
Under the incentive program, the Company is expected to be eligible for a reduction to the corporate tax rate, resulting in an effective corporate tax rate of 2% over the current life of the Agi Dagi based on the gold and silver price assumptions used in the financial analysis.
For the purpose of the feasibility study, the Company has only incorporated the corporate tax rate reduction into the economic analysis.
Additional Opportunities
Project Background
The Agi Dagi project consists of 10,514 hectares and is located in the Canakkale Province on the Biga Peninsula of northwestern Turkey. The project is located approximately 50 km southeast of Canakkale, the largest centre on the Biga Peninsula with a population of approximately 100,000. There is excellent, well-serviced infrastructure in close proximity to the project with paved roads, electricity, transmission lines, and electricity generating facilities, the most significant being a large coal-fired power plant adjacent to the nearby Town of Can, which has a population of approximately 30,000.
The Camyurt project is located approximately 4 km southeast of Agi Dagi and is expected to utilize its processing infrastructure. The Company also owns the Kirazli development project, located approximately 25 km northwest of Agi Dagi. Both Kirazli and Agi Dagi are standalone open pit heap leach projects.
Camyurt Preliminary Economic Assessment
The PEA for Camyurt was conducted on the basis that the project will have minimal standalone infrastructure. Ore from Camyurt will be mined and trucked approximately 8 km to be processed through the infrastructure at Agi Dagi once the Baba and Deli pits have been mined out. As more detailed economic studies are completed on Camyurt, there are opportunities to both accelerate the processing of the Camyurt ore before the end of the mine life at Agi Dagi and build a standalone crushing circuit and leach pad facility at Camyurt which would reduce haulage and mining costs.
Camyurt Mineral Reserves and Resources
The PEA for Camyurt is based on the Measured and Indicated mineral resource of 17.7 million tonnes grading 0.89 g/t Au and 6.1 g/t Ag, containing 0.51 million ounces of gold and 3.5 million ounces of silver.
The mine plan in the PEA incorporates Measured and Indicated mineral resources of 16.6 million tonnes grading 0.92 g/t Au and 6.3 g/t Ag, containing 0.49 million ounces of gold and 3.4 million ounces of silver. The mineable ounces were determined using an optimized pit shell based on gold and silver price assumptions of $1,200 and $18.00 per ounce, respectively.
An Inferred mineral resource of 55,000 ounces of gold and 298,000 ounces of silver is contained within the pit shell and treated as waste in the PEA mine plan. This represents an opportunity to add to the mine plan with its conversion through additional infill drilling.
Mineral Resources at a 0.2 g/t gold cut-off grade - Effective as of December 31, 2016
Economic Analysis
Camyurt's estimated base case after-tax IRR is 253% and after-tax NPV is $86 million, using an 8% discount rate based on an economic analysis conducted as part of the PEA. This represents a 1.4 year payback and assumes a gold price of $1,250 per ounce and silver price of $16.00 per ounce, and incorporates only Measured and Indicated mineral resources. The project's economics are sensitive to discount rates, metal price assumptions and input costs as detailed in the tables below.
Camyurt After-Tax NPV (8%) Sensitivity ($ Millions)
Camyurt After-Tax NPV (8%) and IRR Sensitivity to Gold Price
Camyurt After-Tax NPV Sensitivity to Discount Rate
Permitting
Camyurt is not covered under the EIA that was completed and approved by the federal government for Agi Dagi. Incorporating the Camyurt project into Agi Dagi will require a new EIA submission or an amendment to the existing Agi Dagi EIA.
Mining, Processing, Metallurgy and Infrastructure
Conventional open pit mining methods will be utilized at Camyurt with contract mining to be employed as with Agi Dagi. The final pit designs are based on a 5 m bench height. A traditional drill, blast, load and haul sequence will be used to deliver ore to the crushing circuit at Agi Dagi. Waste produced over the life of the mine will be sent to the waste rock dump located near the Camyurt pit, or backfilled into the pit once the ultimate pit bottom has been achieved.
Camyurt has been designed as a 15,000 tpd mining operation with ore to be hauled approximately 8 km to the crushing circuit at Agi Dagi where it will be processed by primary and secondary crushing to a nominal size of 26 millimetres. The secondary crushed ore will be drum agglomerated, stacked on the leach pad by conveyor stacking and processed with conventional heap leaching methods.
The crushed ore will be stacked in 10 m lifts on the Agi Dagi leach pad facility which will be expanded in three phases and have an ultimate capacity of 73.6 million tonnes. This is sufficient to accommodate the 54.4 million tonne Agi Dagi mineral reserve and 16.6 million tonnes of ore included in the PEA mine plan for Camyurt. A dilute cyanide solution will be applied to the crushed ore over a 90 day leaching cycle with the pregnant solution collected and processed through the ADR plant where gold and silver dore will be produced.
Based on column tests conducted on the different alteration types at Camyurt, gold and silver recoveries are expected to average 76% and 48%, respectively.
Operating Costs
Total cash costs are expected to average $604 per ounce of gold and mine-site all-in sustaining costs $645 per ounce, net of silver as a by-product credit. Total unit costs per tonne of ore processed are expected to average $14.03 per tonne. This is higher than Agi Dagi reflecting higher unit mining costs per tonne of material, a higher waste-to-ore ratio and higher administration costs with Camyurt being a smaller tonnage operation.
Unit mining costs of $3.31 per tonne moved are higher than that of $1.72 per tonne estimated at Agi Dagi, primarily reflecting the longer haulage distances with ore to be trucked to the crushing circuit at Agi Dagi. Approximately 60% of Camyurt's operating and capital costs are denominated in the Turkish Lira. Of the remaining 40%, the majority is denominated in US dollars.
The breakdown of unit costs is summarized as follows.
Capital Costs
Initial capital is estimated to be $10 million. The life of mine capital, including sustaining capital and closure costs, is estimated to be $26 million. With ore to be trucked to Agi Dagi for processing, minimal infrastructure is required. In addition, the estimated capital for Agi Dagi includes a leach pad expansion which is expected to provide enough capacity for all ore to be processed from Camyurt in the PEA mine plan.
A breakdown of the capital requirements is detailed as follows.
Royalty and Taxes
As with Agi Dagi, Camyurt is subject to the same Mining State Right Royalty payable to the Turkish government, and a 2% NSR royalty payable to Franco-Nevada.
Given the small initial capital required to develop Camyurt, and the minimal impact of tax incentives, the Company expects it will be taxed at the statutory rate of 20% for the majority of the life of the project.
The feasibility study for the Agi Dagi project and preliminary economic assessment for the Camyurt project was consolidated by JDS Energy & Mining Inc. ("JDS"), an international engineering firm with extensive experience in both the construction and operation of mining projects, in collaboration with third party consulting firms and Alamos Gold's technical team.
Technical Disclosure
Chris Bostwick, FAusIMM, Alamos Gold's Vice President, Technical Services, has reviewed and approved the scientific and technical information contained in this news release. Chris Bostwick is a Qualified Person within the meaning of Canadian Securities Administrator's National Instrument 43-101 ("NI 43-101"). The Feasibility Study has been prepared by several independent Qualified Persons (QPs) along with Alamos' internal technical staff.
With the exception of Mr. Cormier and Mr. Bostwick, each of the foregoing individuals are independent of Alamos Gold. They are all Qualified Persons within the meaning of NI 43-101.
The Company expects to file a technical report prepared in accordance with NI 43-101 on SEDAR at within 45 days of the date of this release.
About Alamos
Alamos is a Canadian-based intermediate gold producer with diversified production from three operating mines in North America. This includes the Young-Davidson mine in northern Ontario, Canada and the Mulatos and El Chanate mines in Sonora State, Mexico. Additionally, the Company has a significant portfolio of development stage projects in Canada, Mexico, Turkey, and the United States. Alamos employs more than 1,300 people and is committed to the highest standards of sustainable development. The Company's shares are traded on the TSX and NYSE under the symbol "AGI".
The TSX and NYSE have not reviewed and do not accept responsibility for the adequacy or accuracy of this release.
Cautionary Note to U.S. Investors - Mineral Reserve and Resource Estimates
All resource and reserve estimates included in this news release or documents referenced in this news release have been prepared in accordance with Canadian National Instrument 43-101 - Standards of Disclosure for Mineral Projects ("NI 43-101") and the Canadian Institute of Mining, Metallurgy and Petroleum (the "CIM") - CIM Definition Standards on Mineral Resources and Mineral Reserves, adopted by the CIM Council, as amended (the "CIM Standards"). NI 43-101 is a rule developed by the Canadian Securities Administrators, which established standards for all public disclosure an issuer makes of scientific and technical information concerning mineral projects. The terms "mineral reserve", "proven mineral reserve" and "probable mineral reserve" are Canadian mining terms as defined in accordance with NI 43-101 and the CIM Standards. These definitions differ materially from the definitions in SEC Industry Guide 7 ("SEC Industry Guide 7") under the United States Securities Act of 1933, as amended, and the Exchange Act. Under SEC Industry Guide 7 standards, a "final" or "bankable" feasibility study is required to report reserves, the three-year historical average price is used in any reserve or cash flow analysis to designate reserves and the primary environmental analysis or report must be filed with the appropriate governmental authority.
In addition, the terms "mineral resource", "measured mineral resource", "indicated mineral resource" and "inferred mineral resource" are defined in and required to be disclosed by NI 43-101 and the CIM Standards; however, these terms are not defined terms under SEC Industry Guide 7 and are normally not permitted to be used in reports and registration statements filed with the U.S. Securities and Exchange Commission (the "SEC"). Investors are cautioned not to assume that all or any part of mineral deposits in these categories will ever be converted into reserves. "Inferred mineral resources" have a great amount of uncertainty as to their existence, and great uncertainty as to their economic and legal feasibility. It cannot be assumed that all or any part of an inferred mineral resource will ever be upgraded to a higher category. Under Canadian rules, estimates of inferred mineral resources may not form the basis of feasibility or pre-feasibility studies, except in very limited circumstances. Investors are cautioned not to assume that all or any part of an inferred mineral resource exists or is economically or legally mineable. Disclosure of "contained ounces" in a resource is permitted disclosure under Canadian regulations; however, the SEC normally only permits issuers to report mineralization that does not constitute "reserves" by SEC standards as in place tonnage and grade without reference to unit measures.
Cautionary Note Regarding Forward Looking Statements
This news release includes certain "forward-looking statements". All statements other than statements of historical fact included in this release, including without limitation statements regarding outcomes of the Agi Dagi feasibility study and Camyurt PEA, gold grades, recoveries, potential mineralization, reserves and resources, exploration results, and future plans and objectives of Alamos, are forward-looking statements that involve various risks and uncertainties. These forward-looking statements include, but are not limited to, statements with respect to expectations with respect to ongoing exploration, changes in mineral resources and conversion of mineral resources to proven and probable reserves, and other information that is based on forecasts of future operational or financial results, estimates of amounts not yet determinable and assumptions of management.
Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or performance (often, but not always, using words or phrases such as "expects" or "does not expect", "is expected", "anticipates" or "does not anticipate", "plans", "estimates" or "intends", or stating that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved) are not statements of historical fact and may be "forward-looking statements." Forward-looking statements are subject to a variety of risks and uncertainties that could cause actual events or results to differ from those reflected in the forward-looking statements.
There can be no assurance that forward-looking statements will prove to be accurate and actual results and future events could differ materially from those anticipated in such statements. Important factors that could cause actual results to differ materially from Alamos' expectations include, among others, risks related to ongoing permitting requirements in Turkey, risks due to geopolitical risks of operating in Turkey, the actual results of current exploration activities, further conclusions of economic evaluations and changes in project parameters and costs as plans continue to be refined as well as future prices of gold, as well as those factors discussed in the section entitled "Risk Factors" in Alamos' Annual Information Form and other disclosures of "Risk Factors" by Alamos, available on SEDAR and EDGAR. Although Alamos has attempted to identify important factors that could cause actual results to differ materially, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements.
Table 1: Agi Dagi Annual Mine Production Schedule
Table 2: Camyurt Annual Mine Production Schedule
Table 3: Summary of Kirazli, Agi Dagi & Camyurt Economic Studies
Contacts:
Alamos Gold Inc.
Scott K. Parsons
Vice President, Investor Relations
(416) 368-9932 x 5439
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Datum: 22.02.2017 - 11:00 Uhr
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