Nevada Copper Announces Positive Feasibility Study Results for Stage 1 Underground Mine
VANCOUVER, BRITISH COLUMBIA -- (Marketwire) -- 11/19/12 -- Nevada Copper Corp. (TSX: NCU) ("Nevada Copper") is pleased to announce positive results of its Feasibility Study for its 100% owned Pumpkin Hollow Copper Project near Yerington Nevada. The Feasibility Study, with capital costs defined to within plus/minus 15%, builds upon two previous Preliminary Economic Assessments and a Feasibility Study published in February 2012 as prepared by Tetra Tech ("Tetra Tech"), an industry leading international engineering firm.
The Feasibility Study confirms the technical and financial viability of constructing and operating an underground Stage 1 mine development of the East deposit, with ore hoisted to surface by way of a 24 foot diameter production shaft to an associated 6,500 ton per day processing facility. The mine development footprint is confined to patented private claims and requires only Nevada State permits - no Federal permits are required. These State permits are expected to be issued in early 2013.
Assuming Nevada Copper moves forward with a staged development approach, the Stage 1 underground operation will be followed by a Stage 2 development of a much larger open pit operation on the North and South deposits ("Western Deposits").
A separate feasibility study, due for release by early 2013, will optimize the feasibility study published in February 2012 and will consist of a larger combined open pit and underground mine development. This feasibility study will incorporate the recently-expanded mineral resources in the Western Deposits as previously reported in a News Release dated September 7, 2012.
Highlights of the Feasibility Study (All amounts are stated in United States dollars):
-- The project development consists of a 6,500 ton-per-day underground
operation at the East deposit, feeding a single 6,500 ton-per-day
concentrator located near the East shaft;
-- First production targeted for early 2015, with an initial mine life of
12 years;
-- Proven and Probable Mineral Reserves (East deposit only):
823 million pounds of copper
220,765 ounces of gold and 4.7 million ounces of silver;
-- Life-of-Mine ("LOM") metal production contained in concentrates totals
759 million pounds of copper
167,439 ounces of gold and 2.7 million ounces of silver;
-- Average annual copper production in concentrates:
Years 1 to 5: 74.6 million pounds per year
Years 1 to 10: 66.9 million pounds per year
-- Average annual gold and silver production in concentrates:
Years 1 to 5: 23,700 ozs gold per year
Years 1 to 10: 15,900 ozs gold per year
Years 1 to 5: 340,100 ozs silver per year
Years 1 to 10: 248,600 ozs silver per year
-- Initial capital costs are estimated to be $329 million including
contingency, excluding working capital of $15.4 million and excluding
approximately $17 million already expended for shaft related activities.
A further $40 million will be allocated from current cash on hand to
fund future capital costs.
-- Life-of-Mine ("LOM") site operating costs are $41.46 per ton of ore-
milled. Copper production costs, net of gold and silver revenue credits
are:
Year 1 to 5: $1.21 per pound of payable copper
Years 1 to 10: $1.51 per pound of payable copper
-- Summary of Economic Results:
1. Base Case: Three year trailing average price of $3.59/lb. copper,
$1,419/oz. gold and $27.14/oz. silver:
Net Present Value at 5% is $419 million, pre-tax.
Net Present Value at 8% is $309 million, pre-tax.
Internal Rate of Return is 28.6% and payback is 2.5 years.
2. Alternate Case: Quoted copper forward prices to 2022 then long term
price of $2.75/lb. copper; gold and silver same as Base Case:
Net Present Value at 5% is $276 million, pre-tax.
Net Present Value at 8% is $201 million, pre-tax.
Internal Rate of Return is 24.3% and payback is 2.7 years.
3. Average annual operating cash-flow (Years 1 to 5):
Base Case: $149 million.
Alternate Case: $139 million.
"We are extremely pleased with the results of this Feasibility Study. This Study demonstrates a robust Stage 1 underground project that has further upside and does not require any Federal permits. In our view, Stage 1 is both financeable by Nevada Copper with minimal dilution, while also providing a clear path towards development of a much larger open pit operation while allowing us to move to production by early 2015," commented Giulio Bonifacio, President & CEO.
Project Opportunities
Mineralization in the East Deposit remains open in several directions and has not been drilled since October 2010 in view of current mineable reserve. Nevada Copper expects to resume drilling on the East and JK-34 deposits from underground drill stations once the shaft is completed. Reserve expansion in these areas will likely extend mine life beyond the current 12 year mine life while an underground definition drilling program will better define tonnages and ore grades.
In addition, the proven & probable reserves at the E2 deposit are potentially available for development by way of a 4,800 foot ramp and will be subject to a future development decision. The E2 mine plan and associated reserves were published in the Integrated Feasibility Study filed on SEDAR in February 2012. The E2 mineral reserve as previously published are summarized below for information purposes only.
Mineral Reserve - East Deposit
The mineral reserve was developed from the East deposit's measured and indicated mineral resource after the application of an 0.8% cut-off grade, stope design, dilution, and mining recovery parameters. The reserve estimate is as of October, 2012.
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Mineral Reserves - East Underground Deposit
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Contai- Contai- Contai- Copper
Classif- ned ned ned Equiv.
ication Ore Copper Gold Silver Copper Gold Silver (1)
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000's Oz./ Oz./ Million Million
tons % ton ton lbs. Ozs. Ozs. %
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Proven 10,979 1.55 0.011 0.22 340,349 120,769 2,360 1.81
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Probable 16,666 1.45 0.006 0.14 483,314 99,996 2,350 1.60
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Proven &
Probable 27,645 1.49 0.008 0.17 823,663 220,765 4,710 1.68
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(1) Copper equivalency calculations are based on $3.00 per pound for copper,
$1,400 per ounce gold and $20 per ounce silver, and metallurgical recoveries
of 92.1%, 78% and 57.5% for copper, gold and silver respectively.
Approximately 70% of the total East Deposit measured and indicated mineral resource was converted to a mineral reserve by the mine plan. The East Deposit's mineral resource is composed of resources located in the main East Deposit and the deeper JK-34 Deposit. The current mine plan does not include material from the JK-34 Deposit.
In addition, while not part of this feasibility study mine plan, the proven & probable reserves at the E2 deposit summarized below are potentially available for future development, subject to a future development decision. The E2 mine plan and reserves were previously disclosed in the Integrated Feasibility Study filed on SEDAR in February 2012.
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Mineral Reserves - E2 Underground Deposit
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Contai- Contai- Contai- Copper
Classif- ned ned ned Equiv.
ication Ore Copper Gold Silver Copper Gold Silver (1)
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000's Oz./ Oz./ Million Million
tons % ton ton lbs. Ozs. Ozs. %
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Proven 1,382 1.81 0.012 0.23 50,898 16,584 327 2.06
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Probable 6,738 1.62 0.006 0.18 218,131 40,428 1,185 1.77
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Proven &
Probable 8,120 1.65 0.007 0.19 269,029 57,012 1,512 1.82
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Permitting
Shaft construction permits are in hand with construction having started in February 2012 on a 2,200 foot, 24 foot diameter production-sized shaft to access the East underground deposit. This shaft is targeted for completion by January 2014.
State permit applications for a 6,500 tons per day underground mine development and processing operation were submitted in July 2012. These permits typically take 6 to 8 months for issuance and are expected to be issued by early 2013 and do not require Federal permits. These permits are not reliant on passage of the Yerington Land Conveyance and Sustainable Development Act (the "Yerington Bill") - See News Releases dated June 20 and October 30, 2012.
Development Schedule
Shaft construction activities at the site are proceeding normally. Shaft pre-sink developments are completed, all major hoist components have been delivered to site, the hoist foundation is complete, and head frame engineering is complete with steel fabrication well underway. In addition, foundation work for the head frame is also well advanced, and line power has been established at the site. The target date for the start of hoist and headframe operations is February 2013. This will allow for resumption of shaft sinking operations to the East Shaft 2140 foot level total depth.
Subject to a decision to proceed and conclusion of financing arrangements, detailed engineering and ordering of key long-lead-time mining and process equipment is targeted to commence by Q1-2013 with actual construction starting on the issuance of key state permits. Ramp-up of underground production is anticipated to commence in the second quarter of 2015.
Mining
All underground production (6,500 tons per day) will come from the East deposit only. Longhole stoping with paste backfill was chosen to be the mining method. The tonnage requirement of 6,500 tons per day called for a bulk mining method. Rock quality was high enough to support large open stopes which will require structural backfill. The rock quality was too high for a "block caving" method to be considered. Once mined, ore will be hauled from the stope and delivered to a run-of-mine surge bin which feeds into an underground jaw crusher. One surge bin and jaw crusher is planned. Development waste will be stored in a drift adjacent to the surge bin and fed into the crusher at pre-determined intervals. Once crushed, the material will be transferred by conveyor to the shaft loading pocket where it will be measured, loaded into skips and hoisted to the surface.
Underground mining methods and the mining sequence were developed to maximize grades in the early production years to the extent possible. Underground development will be way of a 24 foot diameter production-sized shaft. Vent and secondary egress shafts will be constructed as required.
Total ore mined and processed from the East deposit, LOM, is 27.6 million tons grading 1.49% copper, 0.008 oz/ton (0.266 g/tonne) gold and 0.17 oz/ton (5.84 g/tonne) silver. LOM metals recovery to concentrates for copper, gold and silver respectively is 759 million pounds, 167,439 ounces of gold and 2,709,187 ounces of silver.
Nevada Copper has the permits necessary for shaft sinking which has started and targeted for completion by January 2014. Construction work is now well under way for the installation of hoist and head frame facilities at the shaft location within the next few months. An underground contractor for purposes of shaft sinking was selected in December 2011 and mobilized to site in early 2012.
Process Plant
Ore will be crushed underground, hoisted to surface and transported to a nominal 6,500 tons per day concentrator located approximately 1,500 feet northwest of the shaft. The concentration circuit is conventional with a single, semi-autogenous grinding mill, secondary ball mill grinding and flotation, followed by thickening and pressure filtration to produce a final concentrate grading 24% copper and containing payable gold and silver. Primary grind size is 100 microns with projected metallurgical recoveries of 92.1%, 78% and 57.5%, for copper, gold and silver respectively.
Metals Production
Projected recovered metals production to the copper concentrate is summarized below. LOM copper recovered to concentrates is estimated to be 759 million pounds.
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Yrs 1-5 Yrs 1-10 LOM
Units Average Average Total
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Mill Feed 000s stons/yr; 000s tons 2,290 2,302 27,645
Copper Grade % 1.77% 1.58% 1.49%
Copper Production in
Concentrates Mlbs/yr; Mlbs 74.6 66.9 759,082
Copper Concentrates
Production tonnes/yr; tonnes 140,900 126,391 1,434,656
Gold in Concentrates ozs 23,744 15,942 167,439
Silver in
Concentrates ozs 340,090 248,597 2,709,187
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Annual operating cashflow averages $149 million in the first five years of production assuming the base metal price scenario.
Tailings Storage
To minimize water usage, tailings will be de-watered, filtered and conveyed to a "dry-stack" on-site storage facility. This water is then recycled to the process plant. This method is considered "best practice" for long term tailings storage in dry environments with finite water resources. It also lowers long term environmental monitoring costs.
Infrastructure
The project area is well supplied with nearby local infrastructure. Project-related infrastructure expenditures include an upgraded power line and substation, and a new water line that connects to the City of Yerington water system. An energy cost of $0.055/kwh during production was used for Feasibility Study purposes, based on NV Energy expected rates. An existing county road will be used to access the mine site. Copper concentrates will be trucked directly from the minesite to a US west coast port. Process make-up water will be piped 6 miles (10 km) from the City of Yerington, where housing and regional services are available and most employees are expected to reside. The communities of Silver Springs, Smith Valley, Fernley, Dayton, Fallon, Carson City and Hawthorne are also all within commuting distance, and have a labor pool and existing housing, particularly for a construction workforce.
Capital Costs
The project initial capital costs are estimated at $329 million, with an accuracy of plus/minus 15% as of November 2012, including a contingency of $25.5 million. The contingency allowance is calculated based on assessed factors for each of the major Direct and Indirect cost categories.
The major direct cost items include: underground mine development on the East deposit, process plant, tailing storage facility, and site infrastructure. Indirect costs include such major areas as engineering and procurement, construction management, freight and commissioning, spares inventory, first fills, and Owners Costs.
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Initial Capital Costs
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Item US$ Millions
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Direct Costs
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Underground Mine Equipment $49.9
Underground Mine Development & Shaft 59.9
Process and Concentrates Handling 92.4
Tailings Dewater and Dry Stack Facility 7.7
Infrastructure 15.4
Power and Electrical 15.4
Hydrology 1.0
Reclamation 1.0
Environmental 1.0
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Total Direct Costs 243.7
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Indirect Costs
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Engineering and Procurement 9.2
Construction Management 9.2
Construction Indirect 19.5
Freight and Logistics 5.5
Vendor and Consultant Assistance 0.9
Owner's Costs 8.6
Spares First Fills And Inventory 3.6
Commissioning and Start-up 3.1
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Total Indirect Costs 59.6
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Total Direct and Indirect Costs $303.3
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Contingency 25.5
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Total Initial Capital $328.8
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Working capital required for initial operations is estimated to be $15.4 million.
The initial capital cost excludes approximately $17 million expended by Nevada Copper to September 30, 2012 for shaft surface facilities already purchased or installed, including a production hoist, head frame, power line and substation, water supply and warehouse.
Nevada Copper will fund the balance of the projected shaft costs, approximately $20 million, from its current cash balance and has allocated a further $20 million of the current cash balance of $48.7 million, as of September 30, 2012 towards initial capital costs.
Sustaining Capital
Sustaining capital totals $221.6 million, and includes ongoing underground mine development & equipment replacement, and expenditures for expansion of the tailings storage facility.
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Sustaining Capital Costs
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Area US $Millions
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Underground Mine Development $79.9
Underground Mine Equipment 84.6
Process 38.5
Tailings 11.0
Reclamation 5.2
Hydrology/Dewatering 2.4
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Total Sustaining Capital $221.6
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Operating Costs
LOM site unit operating cash costs are $41.46 per ton-milled, as summarized in the table below:
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LOM Unit Operating Cost Summary
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LOM
Area $/ton-milled
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Mining (underground average) $29.46
Processing 7.45
Dry-stack Tailings Facility 0.65
Reclamation, Infrastructure, Hydrology 0.60
General & Administrative 3.30
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Total $41.46
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Ongoing underground mine development costs are included in sustaining capital. Copper production cash costs per payable pound, including site operating costs and copper conversion costs such as smelter charges and concentrate transport, net of gold and silver revenue credits, are estimated to average $1.21/lb. for Years 1 to 5 and $1.63/lb. for LOM, excluding royalties.
Concentrate Marketing
The copper concentrate grade is 24% copper and contains payable gold and silver values. The concentrates are considered good quality. The concentrates will be marketed primarily to Asia via a west coast port, but some may also be shipped to US smelters if demand emerges.
Economic Analysis Summary
Project economics were evaluated using a cash flow analysis, with future revenues and costs projected into the future to yield annual net cash flow and a Net Present Value. The cash flows are calculated both before and after corporate income taxes, and include the cost of all royalties, local property taxes and Nevada Net Proceeds of Mining tax. Cash flows were discounted at 5% and 8% to reflect the time value of money and risk factors. An Internal Rate of Return ("IRR") and payback period for the project were also calculated.
The most significant input that affects projected revenues are metals prices. The following two metal price scenarios were used:
1. Base metal price scenario:
Three year trailing average London Metal Exchange ("LME") prices were used as at September 7, 2012 and are as follows:
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Copper $3.59/lb
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Gold $1,419/oz
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Silver $27.14/oz
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Note that the cash LME copper price on November 1, 2012 was $3.54/ lb; and the three year trailing average price is $3.64 as of November 1, 2012.
2. Alternate metal price scenario:
Copper: Long term forward prices as at September 6, 2012, supplied by Barclays Capital, were used. These forward prices are available to 2022, and thereafter copper prices were reduced to a long term price of $2.75 per pound - See table below.
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Year 2015 2016 2017 2018 2019 2020 2021 2022 2023+
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Copper Price $3.48 $3.46 $3.43 $3.41 $3.39 $3.36 $3.33 $3.31 $2.75
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Gold and silver prices used were the same as for the Base metal price scenario.
Summary of Economic Results
Key economic indicators extracted from the Feasibility Study are summarized below:
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Base Metal Alternate Metal
Price Price
Scenario Scenario
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US$ 000s US$ 000s
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Cumulative LOM cash-flow $691,799 $452,358
NPV@ 5%, pre-tax $419,235 $275,681
NPV@ 8%, pre-tax $308,819 $200,735
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Average annual operating cash-flow
(Years 1-5) $149,502 $138,984
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Internal rate of return, pre-tax 28.6% 24.3%
Payback (years from first
production) 2.5 years 2.7 years
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The economic results after an estimate of corporate income taxes are presented below.
Royalties and Nevada Mining Taxes - The economic results above include the costs of all third party royalties, and an estimate of local property taxes and Nevada Net Proceeds Tax payable on income from operations.
Corporate Income Tax - The possible effects of corporate income taxes on project cashflows were calculated by TetraTech on a stand-alone project basis. Income tax calculations related to mining income can be complex in the United States. Although nominal corporate tax rates are 35%, deductions such as percentage depletion deductions and others available to mining operations, typically reduce the effective tax rate to 20% or less. The tax calculation is an estimate only; actual corporate taxes payable will be affected by other corporate activities such as the further development of Stage 2 open pit operation.
The after-tax NPV8% for the Base Metal Price and Alternate Metal Price cases are estimated to be $256 million and $164 million respectively. The after-tax IRR for the same cases are 24.7% and 20.9% respectively.
After tax figures are provided for informational purposes only and are TetraTech estimates of the potential effect of US corporate income tax on the project economics on a stand-alone basis. Readers should consult a tax advisor should they require more definitive information on US income taxation of income from mining operations.
Qualified Persons
In August 2012 Nevada Copper commissioned Tetra Tech Inc. to complete the Feasibility Study in accordance with NI 43-101. The scientific and technical information in this release has been reviewed and approved by Mr. Ed Lips, P.E., Project Manager with Tetra Tech, and overall manager for the Feasibility Study. Mr. Lips is an Independent Qualified Person within the meaning of NI 43-101.
This release was also reviewed by Gregory French, P.G., Vice-President & Project Manager of Nevada Copper and Robert McKnight, P. Eng., Executive Vice-President of Nevada Copper, both of whom are Non-independent Qualified Persons within the meaning of NI 43-101.
Readers should refer to the Feasibility Study Technical Report for further details of the project development. The Feasibility Study Technical Report will be filed in accordance with NI 43-101 on SEDAR (www.sedar.com) within the required 45 day statutory period and will be made available on Nevada Copper's website (www.nevadacopper.com).
NEVADA COPPER CORP.
Giulio T. Bonifacio, President & CEO
Cautionary Language
We seek safe harbor.
Alternative Performance Measures
"Copper Production Costs", "LOM Operating Costs", "LOM site unit operating costs" and similar terms are alternative performance measures. These performance measures are included because these statistics are key performance measures that management may use to monitor performance. Management may use these statistics in future to assess how the Company is performing to plan and to assess the overall effectiveness and efficiency of mining operations. These performance measures do not have a meaning within International Financial Reporting Standards ("IFRS") and, therefore, amounts presented may not be comparable to similar data presented by other mining companies. These performance measures should not be considered in isolation as a substitute for measures of performance in accordance with IFRS.
Contacts:
Nevada Copper Corp.
Eugene Toffolo
Corporate Communications
604-683-8266 or Toll free: 1-877-648-8266
etoffolo@nevadacopper.com
Nevada Copper Corp.
Robert McKnight, P.Eng.
Executive Vice President & CFO
604-683-1309
bmcknight@nevadacopper.com
www.nevadacopper.com
