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True Gold's North Kao Deposit to Generate over US$118 Million in Free Cash Flow to Karma
Phase II Expansion Scenario Adds Average of Approx. 118,000 Ounces Gold per Year for 2.5 Years
VANCOUVER, BRITISH COLUMBIA--(Marketwired - Oct. 21, 2014) - True Gold Mining Inc. (TSX VENTURE:TGM) ("True Gold" or the "Company") is pleased to announce that the North Kao Deposit ("North Kao") will generate an additional US$118M in after-tax free cash flow to the Karma Gold Project ("Karma"). As a result of its high gold grades, low capital costs, and synergies to be realized by sharing future infrastructure, North Kao yields an after-tax IRR of over 200%.
True Gold has advanced North Kao from blind discovery to an independent Preliminary Economic Assessment ("PEA") in a little over a year. This demonstrates the tremendous prospective upside, and potential economic viability of the Karma mining district, and how True Gold could potentially phase new discoveries into a future mine plan. North Kao adds approximately US$70 million to Karma's after-tax net present value.
"The North Kao PEA provides us with a blueprint on how to expand our mine life and production profile at Karma as we look to the future of our district," stated Mark O'Dea, True Gold's Executive Chairman. "We have deployed a modest amount of capital in discovering and delineating these ounces and the return on our investment is exceptional. This PEA, together with the recent long-term cement contract, represents a significant increase in project value since September 2014."
PEA HIGHLIGHTS AND PROJECT PERFORMANCE:
Gold price: US$1,250/oz
Inferred Resources*: 9.9 Mt @ 0.98 g/t containing 312,000 oz Au
Production Rate: 118,000 oz Au/year on average over 2.5-year mine life
Initial CAPEX: US$17.7M (including contingency)
Cumulative After-tax Cash Flows: US$118.6M
NPV @ 5% (after tax): US$69.6M (discounted from 2022-2026)
IRR (after tax): 213%
Payback (after tax): ~5 months
All-in Sustaining Cash Costs1: $652/oz
Includes operating costs, refining and royalties, plus sustaining capital.
The economic highlights throughout this release represent True Gold's effective interest in the North Kao deposit, after allowing for the Burkina Faso Government's carried interest and all government and third-party royalties. It is presented on an unlevered basis. The PEA is preliminary in nature and is based on Inferred resources which are considered too speculative geologically to have economic considerations applied to them that would enable them to be categorized as mined reserves. There is no certainty the results of the PEA will be realized. *Refer to Inferred resources captured in PEA.
True Gold undertook a number of trade-off studies to ultimately arrive at the potential economic results reported in the PEA. True Gold considered alternatives such as ramping up throughput, supported by a stand-alone heap leach pad adjacent to the Kao / North Kao deposits, conveying mineralization from Kao / North Kao to the central processing facility at Goulagou, and an optimized mine plan that would see the higher grade North Kao mined as an extension of the Kao reserve pit. However, until the Inferred resources from North Kao have been upgraded to reserves, for which there is no certainty they will be converted, the only scenario the PEA could contemplate today is to conceptually mine North Kao at the end of the Feasibility mine plan, starting in year 9. The NPV results are thus discounted cash flows from the end of year 11 to September 2014. True Gold plans to carry out infill drilling to upgrade the Inferred resources at North Kao, which is the northern extension of the existing Kao deposit. Upon upgrading of the resource category, True Gold will be able to advance further mine schedule optimizations.
"Our Feasibility Study published in December 2013 did not include the leachable ounces from the recently discovered North Kao Deposit," said Dwayne Melrose, President and CEO, True Gold. "The North Kao PEA is our conceptual Phase II. It demonstrates the potential to build on the 8.5 year mine life outlined in the Feasibility Study to develop West Africa's next high margin gold district. North Kao represents just one of the six new discoveries made by our exploration team in 2013, and moving forward we see the potential for additional discoveries and resource growth."
The PEA supports a heap leach mine scenario from the defined North Kao open pit deposit containing 312,000 ounces of Inferred mineral resources. The centralized heap leach pad remaining from the Feasibility mine plan has the capacity to process oxide and transition mineralization from the North Kao Deposit, which would be delivered overland by haulage truck.
The proposed North Kao implementation schedule is over a period of six months and consists mostly of pre-stripping, the addition of an inter-lift heap leach pad liner, and community relocation. The project requires capital of US$17.7M (including contingency) to support the preparation of the mine and associated facilities with a process capacity of 4.0 Mtpa. The future North Kao mine would produce an average of 118,000 ounces of gold per year over 2.5 years, with direct cash operating costs of approximately US$577 per ounce.
It is anticipated that the North Kao Deposit would extend the employment duration of approximately 300 personnel at Karma, and represents significant additional economic benefits in an area of Burkina Faso that has seen little foreign investment.
SENET Pty Ltd. ("SENET") led the North Kao PEA, which included input from leading consultants P&E Mining Consultants Inc.
North Kao Operating Highlights and Project Performance (US$1,250 per ounce gold)
Financial Analysis | |
IRR | 213% |
NPV@5% | $69.6M |
Payback | 4.7 months |
Initial Capital Costs | |
Pre-production (including contingency) | $17.7M |
Operating Costs (Average LOM) | |
Mining ($/t mined) | $1.81 |
Processing ($/t processed) | $8.09 |
General and admin ($/t processed) | $2.27 |
Unit Costs (Average LOM) | |
Direct Cash Operating Costs ($/oz) | $577 |
All-in Sustaining Cash Costs ($/oz) | $652 |
Production | |
Operating Plan | |
Pre-strip period (yrs) | 0.5 |
Operating life (yrs) | 2.5 |
Mining (days/yr) | 350 |
Process (days/yr) | 365 |
Mining | |
Average mining rate (tpd) | 41,000 |
Average annual mine production (Mt) | 14.4 |
Total material mined (LOM Mt) | 43.2 |
Overall average Strip ratio (W:O) | 3.4:1 |
Process | |
Process rate (Mtpa) | 4.0 |
Average annual gold production (oz) | 118,000 |
Total gold production (oz) | 295,000 |
Metallurgical recovery (Av LOM) | 94.6 |
Economic Sensitivities2
Gold price sensitivity (after-tax)
US$/oz | 1,050 | 1,125 | 1,250 | 1,375 | 1,450 |
NPV (5%; US$M) | 45.1 | 54.3 | 69.6 | 83.2 | 92.3 |
IRR (%) | 152.3 | 175.6 | 212.5 | 243.5 | 260.3 |
Recovery sensitivity (after-tax)
Recovery (%) | 86.6 | 88.6 | 90.6 | 92.6 | 94.6 |
NPV (5%; US$M) | 56.7 | 59.9 | 63.2 | 66.4 | 69.6 |
IRR (%) | 181.6 | 187.3 | 196.1 | 204.6 | 212.5 |
NPV after-tax (US$M)
% | -15 | -10 | 0 | +10 | +15 |
Capex | 72.3 | 71.5 | 69.6 | 67.6 | 66.5 |
Opex | 80.9 | 77.2 | 69.6 | 62.1 | 58.4 |
IRR after-tax (%)
% | -15 | -10 | 0 | +10 | +15 |
Capex | 276.9 | 252.9 | 212.5 | 180.1 | 166.2 |
Opex | 239.3 | 230.4 | 212.5 | 194.4 | 185.1 |
Highlighted indicate Base Case
MINING
Approximately 43.2 Mt of total material would be mined from the North Kao open pit over the course of the estimated project life. This will deliver approximately 9.9 Mt of feed to the process facility and 33.3 Mt of waste to the nearby storage facility. The overall strip ratio for the project is 3.4:1 with mining being conducted 350 days/year by an owner-operated fleet at total average material movement of 41,000 tpd.
The mining operation is planned to employ conventional truck and shovel methods. Two 300t hydraulic excavators configured in backhoe mode will load a fleet of ten 90t trucks for the transport of mineralization and waste to the primary crusher and respective near pit waste dumps. Four additional 90t trucks will be employed for overland haulage to deliver mineralization directly from the pit to the process facilities without the need for mineralization re-handling.
The material to be excavated has a bulk density of 1.77t/m3 for oxide and 1.95t/m3 for transition, with respective work indices of 6-8 kWh/t and 10 kWh/t, attesting to the soft, porous nature of this saprolitic material. As a result, the soft nature of the open pit mineralization and waste material allows 98% of the total material to be excavated to be "free-digging" (excavated without blasting). A small portion of the transition material will be drilled and blasted at low powder factors.
North Kao | Total | Year 8 (pre-strip) | Year 9 | Year 10 | Year 11 | |
Waste | kt | 33,275 | 5,980 | 11,674 | 11,622 | 3,999 |
Ore | kt | 9,925 | 96 | 4,003 | 4,001 | 1,825 |
Au Head Grade | g/t | 0.98 | 0.55 | 1.06 | 0.82 | 1.15 |
Au Contained | oz | 312,000 | 2,000 | 137,000 | 105,000 | 68,000 |
Strip Ratio | w:o | 3.35 | 62.6 | 2.9 | 2.9 | 2.2 |
Total Material | kt | 43,200 | 6,076 | 15,677 | 15,623 | 5,824 |
METALLURGY
The results of the preliminary metallurgical testwork conducted on the North Kao Deposit indicate strong metallurgical and recovery similarities with the Kao Main mineralization. These similarities in recovery and metallurgical properties permit the utilization of the Goulagou heap leach operation for the processing of the North Kao material after the Kao Main Deposit is mined without any modifications required to the Goulagou process plant, however, more heap pad area is required. The North Kao PEA is based on utilizing a third lift on the already filled Goulagou heap leach pad. An inter-lift liner is utilized to mitigate possible percolation restrictions.
Bulk leach extractable gold (BLEG) tests were conducted on over 200 samples extracted from eighteen reverse circulation (RC) drill holes. The BLEG tests are designed to subject the mineralized samples to conditions of excess cyanide, oxygen and optimal pH to allow maximum leach extractable gold to be leached out of the samples. The similarity of the material at North Kao to Kao Main permitted the same relationship between BLEG and Column Leach Tests established in the Karma Feasibility Study to be applied to the North Kao Deposit results.
PROCESS
The North Kao process design is based on the use of conventional heap leach technology with a production capacity of 4.0 Mtpa. Mined mineralization will be crushed, agglomerated, and conveyed to the leach pad where it will be stacked in a 10m lift and irrigated with dilute cyanide solution. Gold dissolved by the cyanide will then be adsorbed onto activated carbon in a carbon-in-column (CIC) circuit. The loaded carbon is then stripped of the gold using Zadra-type elution and the resulting product will be subjected to electrowinning and smelting to produce doré on site.
CAPITAL COSTS
The total pre-production capital cost (capex) is estimated at US$17.7 million, inclusive of a US$0.4 million contingency. Initial capital costs include mine pre-stripping, inter-lift heap leach pad liner installation, and relocation costs. The reclamation costs of US$0.5 million are recovered at the end of the mine life.
Based on the PEA results, True Gold plans to continue with the same owner-operator development model that is currently being implemented at the Karma Gold Project. The mining fleet has been ordered and is due to arrive on site by early 2015.
Initial Capital costs
Pre-strip | $M | 8.5 |
Leach pad | $M | 6.3 |
Relocation | $M | 2.0 |
Reclamation | $M | 0.5 |
Direct costs | $M | 17.3 |
Contingencies | $M | 0.4 |
Total capital costs | $M | 17.7 |
OPERATING COSTS
Area | Unit Cost | Units | LOM ($ M) |
Mining | 1.81 | $/t mined | 67.2 |
Process | 8.09 | $/t processed | 80.2 |
Administration | 2.27 | $/t processed | 22.5 |
RESOURCES
The North Kao Inferred mineral resource, detailed in the independent Technical Report titled, "Technical Report and Updated Resource Estimate on the Karma Project, Burkina Faso, West Africa," dated effective March 13, 2014 and filed on SEDAR April 28, 2014, includes 423,000 oz Au of in-pit leachable resources (oxide and transition).
In-Pit Constrained | Inferred | ||
Mt | Au g/t | Au koz | |
Oxide | 14.2 | 0.79 | 360 |
Transition | 2.2 | 0.89 | 63 |
Sulphide | 31.4 | 1.23 | 1,239 |
Total | 47.8 | 1.08 | 1,662 |
Notes:
Resource estimates were based on a gold price of US$1,557 per ounce, a 90%, 80% and 85% respective process recoveries for oxide, transition and sulphide; oxide mining costs of US$1.61/tonne, $US1.94 per tonne for transition and US$2.05 for sulphide; process costs of US$7.25/tonne for oxide and transition and US$19 per tonne for sulphide; and General & Administrative costs of US$1.35 per tonne were used to determine the respective 0.20, 0.22 and 0.50 oxide, transition and sulphide open pit cut-off grades.
Au grades were estimated in a 5m x 5m x 5m block model from capped 2.0m composites utilizing inverse distance cubed interpolation. Composites were capped up to 45 g/t depending on the individual mineralized domain.
Mineral resources which are not mineral reserves do not have demonstrated economic viability. The estimate of mineral resources may be materially affected by environmental, permitting, legal, title, taxation, sociopolitical, marketing, or other relevant issues.
The quantity and grade of reported Inferred resources in this estimation are uncertain in nature and there has been insufficient exploration to define these Inferred resources as an Indicated or Measured mineral resource and it is uncertain if further exploration will result in upgrading them to an Indicated or Measured mineral resource category.
The mineral resources in this press release were estimated using the Canadian Institute of Mining, Metallurgy and Petroleum (CIM) Standards on Mineral Resources and Reserves, Definitions and Guidelines prepared by the CIM Standing Committee on Reserve Definitions and adopted by CIM Council.
Material within optimized pit shells have engineering mining aspects applied.
INFERRED RESOURCES CAPTURED IN PEA
North Kao Inferred resources captured in the PEA were derived from the leachable portion (above the cut-offs listed below) of the Inferred mineral resource as this represents the lowest cost mineralized material in the Karma deposits, and has the highest value available for extraction. Inferred resources in the PEA were developed using a Lerches-Grossman pit optimization process, which includes appropriate operating costs, recoveries, pit slopes, mining losses, dilution and a gold price of US$1,300/oz.
Oxide | Transition | Total | ||||||
Mt | Au g/t | Au | Mt | Au | Au | Mt | Au | Au |
9.2 | 0.95 | 281 | 0.7 | 1.28 | 31 | 9.9 | 0.98 | 312 |
Cut-off grades varied by material type (0.27 g/t Au for Oxide and 0.30 g/t Au for Transition).
SOCIAL MANAGEMENT AND PERMITTING
The development of North Kao will require the completion of an Environmental and Social Impact Assessment (ESIA), as was the case for other Karma Project deposits. The ESIA & Relocation Action Plan for 400 people from Boulonga, a village comprised of three settlements located between the Kao Main and North Kao pits, has been approved. The ESIA and Relocation Action Plan for Kao Main provides True Gold with a template for developing North Kao and relocating the remaining 400 people in the area.
Exploitation permits for the Karma Gold Project are in place. Upon approval of the North Kao ESIA, a separate exploitation permit application will be submitted to develop North Kao as an extension to the Karma Gold Project.
DEVELOPMENT SCHEDULE
The proposed development schedule allows for 12 months of pre-production development which includes community relocation, mining pre-strip, and inter-lift heap leach pad liner installation. Assuming the execution starts at the end of the Karma Definitive Feasibility Study ("DFS") Plan in 2022, the first full year of gold production from North Kao would be expected in 2024, year 9 of the DFS mine plan.
Key execution schedule milestones include the following:
12 months prior: start community relocation
6 months prior: start mining pre-strip
3 months prior: install heap leach pad inter-liner at Goulagou
Start mine production
OPPORTUNITIES AND NEXT STEPS
The PEA confirms that North Kao has the potential to be economically viable. While the PEA is based on slightly more than 300,000 oz of oxide and transition resources, True Gold's exploration successes in recent discoveries demonstrates the potential to add additional open-pit leachable material at the Karma Project for potential mine life extensions or potential incremental throughput expansions. If the North Kao Inferred resources are converted to a higher resource definition, the Company will optimize the Feasibility Study mine plan so that North Kao may be mined concurrently with the Kao deposit, however there is no certainty the resources will be converted to reserves.
QUALIFIED PERSONS
The scientific and technical information contained in this news release pertaining to the Karma Project has been reviewed and approved by the following independent Qualified Persons as defined under National Instrument 43-101 Standards for Disclosure for Mineral Projects ("NI 43-101"). All have consented to the disclosure of such information, and of their names in this release:
Neil Senior, Senet (Pty) Ltd., (PEA lead)
Eugene Puritch, P.Eng., P&E Mining Consultants Inc., (mining studies and resource estimation)
Peter C. Carter, P.Eng., Chief Operating Officer and Vice President Engineering of the True Gold, is the Company's designated Qualified Person, within the meaning of NI 43-101, for the technical information (other than technical information related to resources) contained in this news release and has reviewed and verified that such information is accurate, and approves of the written disclosure of same.
Scott Heffernan, P.Geo., Vice President Exploration of True Gold and is the Company's designated Qualified Person, within the meaning of NI 43-101, for resource estimation information contained in this news release. He has reviewed and verified that such information is accurate and approves of the written disclosure of same.
An independent NI 43-101 Technical Report for the PEA and updated Feasibility Study Report will be filed on SEDAR within 45 days of the date of this news release.
About True Gold
True Gold Mining Inc. is where gold comes to life. We are committed to growing a successful gold exploration, development and production company by focusing on projects with low costs, low technical risks and solid economics. The Company's board, management, and technical teams have proven track records in gold exploration, development, operations and production worldwide.
Additional information about the Company and its activities may be found on the Company's website at www.truegoldmining.com and under the Company's profile at www.sedar.com.
ON BEHALF OF THE BOARD
Dwayne Melrose, President and CEO
Neither the 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.
Certain statements made and information contained in this news release constitute "forward-looking information" within the meaning of Canadian securities legislation. Forward-looking statements relate to future events or future performance and reflect current estimates, predictions, expectations or beliefs regarding future events and include, but are not limited to, statements with respect to: (i) the amount of mineral reserves and mineral resources; (ii) the amount of future production over any period; (iii) net present value and internal rates of return of the proposed mining operation; (iv) capital costs, including start-up, sustaining capital and reclamation/closure costs; (v) operating and working capital costs; (vi) strip ratios and mining rates; (vii) the proposed implementation schedule, (viii) mine life, metal price assumptions, cash flow forecasts, projected capital and operating costs, metal or mineral recoveries, mine life and production rates, (ix) the negotiation of a Mining Convention and other assumptions used in the feasibility study. 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", "anticipates", "plans", "projects", "estimates", "envisages", "assumes", "intends", "strategy", "goals", "objectives" or variations thereof or stating that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved, or the negative of any of these terms and similar expressions) are not statements of historical fact and may be forward-looking statements.
Although the Company believes the expectations expressed in such forward-looking statements are based on reasonable assumptions, such statements are not guarantees of future performance and actual results or developments may differ materially from those in the forward-looking statements. Material risk factors that could cause actual results to differ materially from those reflected in the forward-looking statements include unsuccessful exploration results, accidents or equipment breakdowns, the risk of undiscovered title defects or problems with surface access, labour disputes or inability to attract the necessary work force, the potential for delays in exploration and permitting activities, potential delays in negotiation of a Mining Convention, the potential for unexpected costs and expenses, commodity price fluctuations, currency fluctuations, political risk, unanticipated changes in key management personnel and general economic, market or business conditions, and those risks described in the Company's most recent annual information form and management discussion and analysis filed on SEDAR at www.sedar.com. This list is not exhaustive of the factors that may affect any of the Company's forward-looking statements. Forward-looking statements are based on current beliefs as well as various assumptions including, without limitation, the expectations and beliefs of management regarding the assumed long-term price of gold, the presence of and continuity of metals at the Karma project at modeled grades, the capacities of various machinery and equipment, the availability of personnel, machinery and equipment at estimated prices, exchange rates, metals sales prices, appropriate discount rates; tax rates, and royalty rates applicable to the proposed mining operation; financing structure and costs; anticipated mining losses and dilution; metal recovery rates, reasonable contingency requirements; the negotiation of satisfactory terms with impacted third parties including resettlement of local communities, successful negotiation of a Mining Convention, access to financing, appropriate equipment and sufficient labour, and that the political environment within Burkina Faso will continue to support the development of environmentally safe mining projects.
Although management considers these assumptions to be reasonable based on information currently available, such assumptions may prove to be incorrect. Many forward-looking statements are made assuming the correctness of other forward-looking statements, such as statements of net present value and internal rate of return, which are based on most of the other forward-looking statements and assumptions herein. The cost information is also prepared using current values, but the time for incurring the costs will be in the future and it is assumed costs will remain stable over the relevant period.
This news release may use the terms "measured", "indicated" and "inferred" as these terms are defined under Canada's National Instrument 43-101. U.S. Investors are advised that, while such terms are recognized and required by Canadian regulations, they are not recognized by the United States Securities and Exchange Commission ("SEC") and may not be comparable to similar information for United States mining or exploration companies. As such, certain information contained on this news release concerning descriptions of mineralization and resources under Canadian standards is not comparable to similar information made public by United States companies subject to the reporting and disclosure requirements of the SEC. U.S. investors are cautioned not to assume that any part or all of the mineral deposits described in these categories will ever be converted into proven or probable reserves, as defined in the SEC's Industry Guide No. 7.
