Sage Reports Clavos PEA-71% Internal Rate of Return and $23MM NPV (pre-tax)
TORONTO, ONTARIO -- (Marketwire) -- 03/01/13 -- Sage Gold (TSX VENTURE: SGX) ("the Company") is pleased to announce the results of a Preliminary Economic Assessment ("PEA or the Study") for the Clavos Gold deposit located east of Timmins, Ontario.
The Company commissioned Mr. Robert Ritchie P.Eng, (Ontario & Manitoba), an independent engineer, on behalf of the Clavos Joint Venture Committee (60% Sage- 40% St Andrew Goldfields Ltd TSX-SAS), to prepare an independent Technical Report (PEA), in accordance with National Instrument 43-101 (NI43-101) and Form 43-101F1 guidelines, on the Clavos deposit.
Highlights of the Study include:
-- NET PRESENT VALUE ("NPV") of $23.2MM (pre-tax)and $12.6MM (after- tax)
at a 8% discount
-- INTERNAL RATE OF RETURN of 71% (pre-tax) and 47% (after-tax) based on
USD$1500/oz of gold
-- ANNUAL AVERAGE PRODUCTION of approximately 20,000 oz. of gold per year
-- Initial CAPEX of $14.1 million
-- 2.00 YEAR PAYBACK from start of production with 7 year mine life
-- AVERAGE HEAD GRADE of gold ranging from 6.45 g/t in Year 1 to 4.37g/t in
Year 7
-- PROJECT IS FULLY PERMITTED to initiate mining
Sage President and CEO Nigel Lees comments, "This positive and very robust PEA is a significant step towards bringing the Clavos deposit into production and advancing our strategy to develop positive cash flow over the near term. Despite the difficult market environment, we believe the project can be financed due to the near term profit potential, a low initial capital cost of $14.1 million, rapid 2.00 year payback and an excellent return on investment. The Company plans to minimize equity dilution on production financing through securing debt and/or gold backed financing."
A sensitivity analysis of the Clavos JV project economics was completed to assess the effect of the overall project economics due to changes in the gold price on the IRR and NPV values. To account for gold price fluctuation, an analysis was made plus or minus $100.00 per ounce. Displayed below are the sensitivity trends. A PEA is deemed to be reliable +/- 50 % level.
The following table presents a list of project parameters and assumptions derived from the PEA and cash flow model at a base case of USD$1,500 and at USD$1,600 and USD$1,400 per ounce.
Project Parameters
ECONOMIC MODEL SUMMARY CLAVOS JV
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GOLD PRICE US$ / Oz (Au) $1400/Oz $1500/Oz $1600/Oz
Base Case
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Gold Production Oz/Au 145,448 145,448 145,448
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Revenue Cdn$ million 203.6 218.2 232.7
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Initial Capital Expenditures Cdn$ million 14.1 14.1 14.1
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Sustaining Capital Cdn$ million 21.1 21. 1 21.1
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Total Capital Cdn$ million 35.1 35.1 35 .1
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Operating Expense Cdn$ t/Ore 142.5 142.5 142.5
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Net Smelter Return Cdn$ t/Ore 6.1 6.5 7.0
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Cash flow (undiscounted) Cdn$ million 19.9 34.0 48.1
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Pre Tax
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Net Present Value (NPV) 8% Cdn$ million 13.5 23.2 33.0
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Internal Rate Of Return (IRR) % 48% 71% 94%
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After Tax
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Net Present Value (NPV) 8% Cdn$ million 5.6 12.6 19.5
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Internal Rate Of Return (IRR) % 27% 47% 67%
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Life of Mine Year 7 7 7
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Payback Period Year 2.25 2.00 1.75
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Note - assumes an exchange rate of 1:1 of Cdn to US Dollar;
- tax rates are based on a blended rate between Sage and SAS
- excludes any financing costs
- contingency on capital expenditures of 30%
LOM Capital Expense and Sustaining Capital per ounce is $1266.00 including Operating Cost and Royalties.
Sustaining capital of $21.1 million has been budgeted in the financial model. The reader should note that the PEA report contains a large sustaining capital cost allocation (contingency) which was incorporated in the financial model to support underground development, diamond drilling and equipment. These costs will be used to both increase the confidence and further define the resource blocks. It is expected that capital for primary development and exploratory diamond drilling will be funded from cash flow generated by the project.
The economic analysis is based, in part, on Inferred Resources, and is preliminary in nature. Inferred Resources are considered too geologically speculative to have mining and economic considerations applied to them and to be categorized as Mineral Reserves. There is no certainty that economic forecasts on which this PEA is based will be realized.
The Resource
The PEA is based on Roscoe Postle Associates Inc. (RPA)'s independent Mineral Resource Estimate, in accordance with National Instrument 43-101 (NI43-101) and Form 43-101F1 guidelines (see Press Release dated Oct 23, 2012) which defined an Indicated mineral resource of 1,258,400 tonnes at 4.81 g/t Au totalling 194,600 ounces of gold and Inferred mineral resources of 796,000 tonnes at 4.7 g/t Au representing 120,000 ounces. These resources are reported at a base case cut-off grade of 2.75 g/t Au and individual high assays have been capped at 60.0 g/t.
Proposed Mining Plan and Processing
A mine production rate of 600 tonnes per day was selected as being optimum for the mineralized structures contained within the Clavos deposit. This tonnage was based on a 2.75 g/t cut-off proposed tonnage estimate, with a 60.0 g/t cut grade, and would permit a life of mine of seven years to extract 70% of the outlined mineral resource estimated tonnage of Indicated 1,258,400 tonnes plus Inferred 796,000 tonnes.
Both Indicated and Inferred resources (70%) were included in the mine design, scheduling of mineralized material extraction and economic analysis for the Clavos JV deposit.
In the Clavos JV mine plan, there is readily available 847,133 tonnes of the 1,148,900 tonnes to be extracted prior to having to extract the remaining 301,767 tonnes which includes removing the crown pillar. The remaining 30% of the Indicated and Inferred resource estimate was not included in the mineralized material extraction scheduling process.
A 23 month period to permit mine dewatering, mine rehabilitation, definition/delineation diamond drilling and pre-stope development scheduling is envisaged to achieve a full production rate of 600 tonnes per day, or 210,000 tonnes per year based on 350 operating days per year.
During this 23 month period, the following mineralized material will have been delivered to a custom milling facility for processing, and Clavos JV will have produced the gold as detailed below:
Year 1
3rd Quarter 3,500 tonnes 801.3 oz (Au)
4th Quarter 14,000 tonnes 2,428.0 oz (Au)
Year 2
1st Quarter 21,875 tonnes 3,629.9 oz (Au)
2nd Quarter 26,250 tonnes 3,616.0 oz (Au)
3rd Quarter 30,625 tonnes 4,091.5 oz (Au)
4th Quarter 35,000 tonnes 5,147.0 oz (Au)
Year 3
1st Quarter 39,375 tonnes 5,556.3 oz (Au)
2nd Quarter 43,750 tonnes 5,862.5 oz (Au)
3rd Quarter 48,125 tonnes 6,240.8 oz (Au)
TOTAL 262,500 tonnes 37,373.4 oz (Au)
Previous metallurgical test work results were reviewed and it was concluded that whole mineralized material cyanidation with recovery of soluble gold by a CIP process is the preferred method for processing. Optimum retention times were found to be 24 hours at a grind size of 60% passing 74 microns (200 mesh), and expected average leach recovery of 90.6%.
Metallurgical processing data studied from the 2005 to 2007 milling campaign confirmed that during the last quarter of St Andrews Goldfields Ltd (SAS) operations in 2007 a gold recovery of 89.0% was achieved.
The mining methods selected for the Clavos JV project are cut & fill stoping and bulk long hole stoping with random pillars, for the most part, located in waste material. These stoping methods are considered to be inherently safe methods of mineralized material extraction.
The operating costs for stoping are provided below:
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Stope
Dia. Drill Prep. Stoping Milling
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Fill Back
Excavation Prep. Fill
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$/t $ /t $ /t $ /t
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CUT & FILL
STOPING
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$3.75 $ 12.50 $ 45.06 $ 7.39 $ 5.77 $ 30.00
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LONG HOLE
STOPING
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$2.75 $ 8.75 $ 13.25 n/a n/a $ 30.00
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Unit Unit
Dia. Drill Trucking Cost G & A Services Cost
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Labour Operating
$/t $ /t $ /t $ /t $ /t $ /t $ /t
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CUT & FILL
STOPING
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$3.75 $ 4.00 $108.47 $ 10.50 $ 10.57 $ 5.70 $135.24
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LONG HOLE
STOPING
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$2.75 $ 4.00 $ 58.75 $ 10.50 $ 10.57 $ 5.70 $ 85.52
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There are a number of milling facilities within the general area which, subject to favourable commercial arrangements, are considered to be suitable for processing the Clavos JV mineralized material.
Social and Environmental Setting
All environmental permits required for the Clavos JV project to produce a maximum of 700 tonnes per day have been received. The Closure Plan and financial assurance have been filed by the Director of the Ministry of Northern Development and Mines.
Future Upside
Continued underground mineral exploration and stope definition/delineation diamond drilling is an important part of the mining operation as detailed mine planning and layouts are dependent upon the availability of information on the grade and configuration of the mineralized structures encountered.
Underground exploration diamond drilling will commence as soon as the 250m level east heading has advanced 75 metres with intermediate diamond drill stations established and equipped each 60 metre interval stoping block definition/delineation diamond drilling will commence once the mine has been dewatered and rehabilitated sufficiently to commence with diamond drilling on 30m centers and 10m centers for detailed stope planning.
There has been limited drilling down plunge and down dip of the Existing Clavos deposit. The following historical drill holes yielded high grade intersections 300-400 metres down dip of underground workings:
CL KC99-155W - 60 g/t - between 653.3 - 654.0 metres down hole
- 9.39g/t between 510-511 metres down hole
CL KC99- 149W - 16.52 g/t between 526.17 and 527.37 metres down hole
- 8.82g/ between 529.52 and 529.92 metres down hole
CL KC99-154W - 17.4 g/t between 562.4 and 563.85 metres down hole
Sage completed a number of drill holes down plunge of the eastern end of the underground workings and one hole down dip of the centre portion of the Clavos deposit. Results were detailed in a press release on August 25, 2011. Sage has also drilled the 960, Sediment and Contact zones 600 metres east of the Existing Clavos deposit. Refer to press releases of April 26, 2011, Dec 14, 2011 and Sept 20, 2012.
The down dip, down plunge, 960, Sediment and Contact drilling indicate that there are potential economic intersections east, down dip and down plunge of the Existing Clavos deposit. This study has not considered the potential economic impact of these new mineralized zones except to plan for exploration drilling and primary development costs to support the development of additional new resources.
A PEA is not to be interpreted as either a Preliminary Feasibility or a Feasibility Study. This PEA type of study can also be referenced as a Scoping Study and thus may contain results of an economic analysis that includes and is based upon inferred mineral resources.
The PEA will be filed on SEDAR within 45 days after being released and will also be available on the corporate website at www.sagegoldinc.com.
Qualified Persons / Quality Control
R. Ritchie P.Eng, an Independent Qualified Person, visited the Clavos JV deposit property on several occasions between October, 2011 and January, 2012 providing overall responsibility for the technical content of this Press Release which includes the mining study CAPEX and OPEX cost estimates and conceptual economics. Mr Ritchie has read and accepts the technical content of this press release.
Peter Hubacheck P.Geo, an Independent Qualified Person, visited the Clavos JV property on two occasions between early February, 2012 through early March, 2012 to log core and supervise QA/QC protocols for the 960 Zone; prepare a detailed surface and underground exploration diamond drill program; prepare samples for metallurgical test work and provide guidelines and geoscientific contributions on behalf of Clavos JV and for the RPA Mineral Resource Estimate (2012).
The drill database and the associated QA/QC has been reviewed and validated by Roscoe Postle Associates (see NI43-101 Technical Report for Clavos Deposit October 2012).
This release was prepared by management of the Company who takes full responsibility for its contents.
This news release contains certain "Forward-Looking Statements" within the meaning of Section 21E of the United States Securities Exchange Act of 1934, as amended and "Forward Looking Information" within the meaning of applicable Canadian securities legislation. Some forward looking statements and forward looking information contained in this release are forward-looking and, therefore, involve uncertainties or risks that could cause actual results to differ materially. Such forward-looking statements include comments regarding mining and milling operations, mineral resource statements and exploration program performance. Factors that could cause actual results to differ materially include metal price volatility, economic and
political events affecting metal supply and demand, fluctuations in mineralization grade, geological, technical, mining or processing problems, exploration programs and future results of exploration programs, future profitability and production. The Company disclaims any obligation to update forward-looking statements.
Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
Contacts:
Sage Gold
Nigel Lees
President and C.E.O.
416-204-3170
416-260-2243 (FAX)
Sage Gold
Mike O'Brien
Communications Manager/Investor Relations
416-204-3170
416-260-2243 (FAX)
