Orezone releases NI 43-101 Bombore PEA with 23% IRR
OREZONE ANNOUNCES POSITIVE PRELIMINARY ECONOMIC ASSESSMENT
Orezone Gold Corp. has released the results of an independent preliminary economic assessment for its wholly owned Bombore gold project in Burkina Faso, West Africa. The base case financial model yields a robust after-tax internal rate of return of 23.9 per cent to Orezone with a mine plan optimized to deliver better grade in early years, revenues using a $1,250 gold price and current costs based on operations in the region. The after-tax IRR improves to 37.1 per cent from revenues at a $1,500 gold price, based on the same mine plan. Orezone expects to complete detailed heap leach metallurgical and geotechnical studies in June, update the social and environmental assessments by September and be in a position to complete a full feasibility study and apply for a mining permit before year-end. (All figures in U.S. dollars.)
“The results of the study are quite compelling and the project benefits from size, location, low reagent consumption, rapid leaching kinetics, low capital requirements and low all-in operating costs,” said Ron Little, chief executive officer of Orezone. “Bombore is one of the largest and most advanced undeveloped deposits in the region that is truly multiphase. Commencing with a HL operation positions the company to move and grow rapidly with a carbon-in-leach expansion if warranted under better capital market and gold price conditions.”
The study was completed by G Mining Services Inc. of Montreal, and included Kappes, Cassiday and Associates, and Golder and Associates of Reno, Nev. The National Instrument 43-101-compliant study was based on the resource estimate prepared by SRK Consulting of Toronto and reported in Orezone’s press release dated April 29, 2013, which includes 139.9 million tonnes of measured and indicated resources grading 1.01 grams per tonne for 4.6 million ounces plus 18.4 million tonnes inferred resources grading 1.22 grams per tonne for 700,000 ounces. The HL minable resource is limited to only the measured and indicated near-surface saprolite and transition resources (average depth of 45 metres) which includes 44.7 million tonnes grading 0.88 gram per tonne for 1.3 million ounces. The sulphide resources, although extensive, indicate relatively poor heap leach gold recoveries and can be processed later under a CIL expansion scenario. G Mining did not audit the SRK National Instrument 43-101 resource.
Summary of base case financials
The base case assumptions include revenues using a gold price of $1,250 and current prices for fuel, reagents, labour, mining and other current costs from operations in the region as of the third quarter of 2013.
BASE CASE FINANCIALS Description Heap leach Mineral resource used in mine plan (ounces) 1,271,567 Average grade (g/t) 0.88 Processing throughput (Mt/yr) 5.5 Mine life (years) 8.1 Average annual production (ounces) 123,000 Gold production (ounces recovered) 1,008,000 Waste to ore strip ratio 1.63 Gross revenue ($M) $1,256.2 Direct cash cost ($/oz) $627 Operating cost ($/oz) $677 Initial capital ($M) $180.0 Sustaining capital ($M) $53.8 Closure costs ($M) $10.0 Orezone (1) NPV after tax (0%) ($M) $246.6 NPV after tax (5%) ($M) $158.9 IRR after tax 23.9% Government (2) NPV (0%) with taxes ($M) $135.5 NPV (5%) with taxes ($M) $102.3 (1) Represents Orezone's Burkina Faso subsidiary cash flows net of royalties and local taxes. The government of Burkina Faso benefits from its 10-per-cent free-carried shareholding, the gold royalty, corporate tax and withholding taxes. (2) Government cash flows are underestimated as customs fees and duties on imports and indirect taxes built into the delivered fuel price have not been incorporated. Note: All figures in U.S. dollars. Exchange rate: $1 (U.S.) to 485 West African CFA francs.
This study constitutes a preliminary economic assessment for National Instrument 43-101 purposes, is considered preliminary in nature but does not use inferred resources. Mineral resources that are not mineral reserves have not demonstrated economic viability.
Mineral resources used in the mine plan
Final pits were designed to account for access ramps and compatible pit slopes, which then produced the total diluted mineral resource to be used in the mine plan.
MINERAL RESOURCES USED IN THE MINE PLAN
Measured mineral resource Indicated mineral resource
Cut-off Tonnes Grade Contained Tonnes Grade Contained
Category g/t Mt g/t ounces Mt g/t ounces
North
Laterite/oxide 0.33 12.70 0.89 365,500 8.35 0.83 222,500
Transitional 0.32 5.37 0.91 157,500 1.08 1.11 38,000
----- ---- ------- ---- ---- -------
Subtotal 18.08 0.90 523,000 9.43 0.86 260,500
South
Laterite/oxide 0.32 8.33 0.85 227,000 2.81 0.87 78,000
Transitional 0.31 4.30 0.87 120,500 0.70 1.07 24,000
----- ---- ------- ---- ---- -------
Subtotal 12.63 0.86 347,500 3.51 0.91 102,500
Southeast
Laterite/oxide 0.34 0.27 1.14 10,000 0.40 0.94 12,000
Transitional 0.33 0.20 1.47 9,500 0.21 0.99 6,500
----- ---- ------- ---- ---- -------
Subtotal 0.47 1.28 19,500 0.61 0.96 18,500
Combined
Laterite/oxide 0.33 21.30 0.88 602,500 11.56 0.84 313,000
Transitional 0.32 9.87 0.91 287,500 1.98 1.08 69,000
----- ---- ------- ---- ---- -------
Total 31.17 0.89 890,000 13.54 0.88 381,500
Measured plus indicated
Cut-off Tonnes Grade Contained
Category g/t Mt g/t ounces
North
Laterite/oxide 0.33 21.06 0.87 588,000
Transitional 0.32 6.45 0.94 195,500
----- ---- -------
Subtotal 27.50 0.89 783,500
South
Laterite/oxide 0.32 11.13 0.85 305,500
Transitional 0.31 5.01 0.90 144,500
----- ---- -------
Subtotal 16.14 0.87 450,100
Southeast
Laterite/oxide 0.34 0.67 1.02 22,000
Transitional 0.33 0.40 1.23 16,000
----- ---- -------
Subtotal 1.08 1.10 38,000
Combined
Laterite/oxide 0.33 32.86 0.87 915,000
Transitional 0.32 11.86 0.93 356,500
----- ---- ---------
Total 44.71 0.88 1,271,500
Estimated annual gold production for base case
The HL scenario assumes an average mining rate of 15 million tonnes per year and a rate of ore placement on the leach pad of 5.5 million tonnes per year.
GOLD PRODUCTION AND OPERATING COSTS FOR EACH YEAR
Year -1 1 2 3 4 5 6 7 8 9 Total
Gold prod'n (koz) 3 125 128 131 120 121 123 119 119 19 1,008
Head grade (g/t) 0.83 0.94 0.91 0.93 0.85 0.87 0.88 0.85 0.85 0.83 0.88
SUMMARY OF OPERATING COSTS
Heap leach
Total costs Avg. cost Avg. cost
Category $M $/t milled $/oz
Mining $276.6 $ 6.25 $275
Processing 246.3 5.57 245
General services 101.8 2.30 101
Transport and
Refining 2.5 0.06 3
CSR 3.1 0.07 3
------ ------ ----
Total (C1 costs) 630.3 14.25 627
Royalties 50.3 1.14 50
------ ------ ----
Total (C2 costs) $680.6 $15.39 $677
Initial project capital cost estimates
Initial capital costs were estimated on the basis of fourth-quarter 2013 quotes on equipment and databases for similar projects in West Africa and South America adjusted for inflation.
INITIAL CAPITAL COSTS
U.S.$M
Infrastructure $ 11.1
Power 5.4
Water 4.5
Mining and support equipment 32.3
Process plant 39.6
Indirects 17.3
Resettlement 5.6
General services 29.4
Preproduction 12.8
Contingencies 22.0
------
Total capital costs $180.0
Total capital includes a total contingency of $22-million based on rates that varied per item.
Sustaining capital cost estimates
Sustaining capital costs were estimated on the basis of fourth-quarter 2013 quotes on equipment and databases for similar projects in West Africa and South America adjusted for inflation. Taxes and freight are included along with contingencies that are varied per item (20 per cent on leach pads).
SUSTAINING CAPITAL COSTS
U.S.$M
Mining and G&A $ 8.6
Plant 0.9
Leach pads 31.2
Resettlement 5.5
Contingencies 7.5
-----
Total $53.8
Project sensitivities
The project is sensitive to gold price, and to a lesser extent the fuel price.
PROJECT SENSITIVITIES Gold price (per oz) $1,000 $1,100 $1,250 $1,400 $1,500 To Orezone NPV (0%) after tax ($M) 85.3 151.2 246.6 344.3 399.8 NPV (5%) after tax ($M) 27.1 82.1 158.9 236.5 280.4 IRR after tax 8.2% 14.9% 23.9% 32.4% 37.1% To gov't Burkina Faso NPV (0%) after tax ($M) 46.2 80.6 135.5 188.2 232.9 NPV (5%) after tax ($M) 36.4 60.4 102.3 143.2 178.3
Full details of the preliminary economic assessment in the form of a National Instrument 43-101 technical report will be filed on SEDAR within the next 45 days.
Development timetable
Orezone has completed over 400,000 metres of drilling and much of the full feasibility-level technical studies required for a CIL and HL operation. In order to finalize an HL full feasibility study by year-end additional metallurgical tests are required, including but not limited to column and compaction tests. Some geotechnical follow-up on the new HL pad site location is also required. This work is expected to be completed in the second quarter of 2014. Social and environmental studies will continue in parallel in order to prepare an application for a mining permit based on the latest project footprint and design.
Qualified person
The preliminary economic assessment was prepared by G Mining under the supervision of Rejean Gourde, Richard Taylor of Kappes, Cassiday and Associates, Todd Minard of Golder Associates Inc., and Glen Cole of SRK Consulting Inc., who are qualified persons under the standards set forth in National Instrument 43-101. (All four are independent of Orezone for purposes of National Instrument 43-101.) Dr. Pascal Marquis, senior vice-president exploration, and Ron Little, president and chief executive officer, are the company’s designated qualified persons for the purposes of the study. All parties have reviewed and approved their respective content of this press release.
Conference call
Orezone will be hosting a conference call on Wednesday, Jan. 22, 2014, at 11 a.m. EST, where representatives from senior management and G Mining will discuss the study and be available to respond to questions from analysts and investors. Those interested in participating in the conference call should dial in at 1-800-743-4304 (Canada and the United States) and an operator will direct participants to the call.
http://www.orezone.com/news/press-releases
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