REG - Central Asia Metals - Proposed acquisition of Lynx Resources Limited <Origin Href="QuoteRef">CAML.L</Origin> - Part 6
22/09/2017 07:08
- Part 6: For the preceding part double click ID:nRSV5104Re
(SRK in 2006, Wardell Armstrong in 2011 and MRA in 2015).
In addition, SASA Mine is required to undertake reporting of Reserves in accordance with the Macedonian State Reporting
System every four years. The State Reporting for the SASA Mine is prepared by a local design institute and was last
completed as at 01 April 2015. Classification and categorisation of State Reserves is defined by the Macedonian Law for
mineral raw materials and is prescriptive, with many similarities to other resource and reserve reporting systems developed
in Eastern Europe and the Former USSR. Silver grade estimates are not provided in the State Resources and Reserves.
Block model tonnages and grade estimates for the Svinja Reka and Golema Reka deposits have been classified in accordance
with the guidelines of the JORC Code (2012). In addition to the quality and quantity of exploration data supporting the
estimates, the confidence in the geological continuity of the mineralised structures and the confidence in the tonnage and
grade estimates is considered in assigning the Resource classification. Depletion due to mining has been accounted for in
the models.
The geological interpretation used to generate the Mineral Resource is generally considered to be robust; however, there
are areas of lower geological confidence which may be subject to further revision in the future.
At Svinja Reka, SRK considers that the quality and spatial distribution of the data used, the geological continuity of the
mineralisation and the quality of the estimated block model is sufficient for the reporting of Indicated and Inferred
Mineral Resources. At Golema Reka, Mineral Resources have been limited to the Inferred category due to the lower confidence
in the geological model and absence of any historical core or accessible mineralisation exposures. Areas of mineralisation
in Golema Reka that contain less than 2% Pb+Zn over a 3.5 m width, remain unclassified and are excluded from the Mineral
Resource.
To determine that the Mineral Resources have reasonable prospects for economic extraction by underground mining methods,
they have been evaluated based on a minimum Net Smelter Return ("NSR") cut off value based on Pb, Zn, and Ag credits, using
a Pb price of USD2,550/t, a Zn price of USD2,800/t and a silver price of USD25/oz. These prices are based on typical
long-term consensus forecasts with a 30% premium (to reflect the requirement for "reasonable prospects" for eventual
extraction) and a set of assumed technical and economic parameters, which were selected based on the current mining
operations. The Mineral Resources comprise volumes that are generally considered to be wider than the minimum mining width
(3.5 m).
SRK considers that the blocks with a NSR value greater than USD30/t at Svinja Reka and USD35/t at Golema Reka have
"reasonable prospects for eventual economic extraction" and can be reported as a Mineral Resource according to the
definitions of the JORC Code (2012).
Table ES 4: SRK Mineral Resource Statement for Combined Svinja Reka and Golema Reka Deposits, SASA Mine, as at 01 July
2017 reported at USD30/t and USD35/t NSR cut-off, respectively
Classification/ Deposit Density Tonnage Pb Zn Ag NSR Pb + Zn
(t/m3) (Mt) Grade (%) Metal (kt) Grade (%) Metal (kt) Grade (g/t) Metal (koz) (USD/t) Grade (%)
Indicated Mineral Resources
Svinja Reka 3.4 13.30 4.59 611 3.68 490 22.0 9,403 126 8.28
Golema Reka 0 - 0 0 0 0 0 0 0 0
Total Indicated 3.4 13.30 4.59 611 3.68 490 22.0 9,403 126 8.28
Inferred Mineral Resources
Svinja Reka 3.2 2.67 3.16 84 2.08 56 16.6 1,426 82 5.24
Golema Reka 2.9 7.4 3.69 273 1.52 112 18.6 4,424 94 5.21
Total Inferred 3.0 10.07 3.55 357 1.67 168 18.1 5,849 91 5.22
Total Indicated and Inferred Mineral Resources 3.2 23.37 4.14 968 2.81 658 20.3 15,252 111 6.96
In reporting the Mineral Resource Statements, SRK notes the following:
● Mineral Resources have an effective date of 1 July 2017. The Competent Person for the declaration of Mineral Resources
is Guy Dishaw, P.Geo., of SRK Consulting (UK) Ltd. The Mineral Resource estimate was prepared by a team of consultants from
SRK considering drilling data up to 01 October 2016 and has been depleted by excavation by volumes representing mining to 1
July 2017;
● Mineral Resources are reported within the Exploitation and Exploration Licences only;
● Mineral Resources are reported as undiluted. No mining recovery has been applied in the Statement; and
The Indicated Mineral Resources are inclusive of those Mineral Resources modified to produce Ore Reserves, i.e. they are
reported on an 'inclusive basis'.
SRK has made a number of recommendations to improve the quality of the Mineral Resource Estimates going forwards,
including:
● Routinely assay for Ag in future drilling programmes to improve confidence in the local-scale variability of the Ag
grades in block model which may, in places, be independent from Pb grade. There may be locally secondary controls on silver
mineralisation that are not currently realised due to the limitations of sampling.
● Regularly collecting additional density samples and increasing the size of the database to add confidence to the
modelled density values.
● Implementation of full assay QAQC procedures for sampling and assay (including blanks, duplicates and standards) for
all future drilling campaigns.
● An underground mapping programme by a structural geologist to investigate the potential for additional controls on
mineralisation, to better understand the distribution and exploration implications for the high grade lead-zinc-silver
mineralisation.
SRK is aware that SASA Mine has planned a campaign of surface, and possibly underground drillholes at the Golema Reka
deposit to confirm the current model, and add additional intersections to improve the confidence in the geological model.
The drilling programme has been submitted for permitting and is expected to commence in late H2 2017 or early H1 2018.
25.6 Geotechnical
SRK has undertaken a geotechnical assessment of the SASA mine using empirical and preliminary two dimensional finite
element numerical modelling. The analysis has confirmed the appropriateness of the current mine design parameters being
used.
The assessment has also shown that the rock mass lies at the boundary of a caving and marginally caveable material and SRK
recommends that horizontal mining front is maintained across all orebodies in order to reduces the magnitude of mining
induced stresses down dip of the mining front.
In order to improve the geotechnical model, actual mine performance will need to be compared to results of the 2D modelling
and the input parameters and/or the mining sequence modified to better reflect the actual mine performance.
SRK has undertaken a review of rock support and geotechnical practices at SASA Mine. Whilst generally the support of
permanent development is being carried out to a satisfactory level, the stability of temporary ore drives could be further
improved. SRK has made a number of suggestions for improvement to ore drive stability. Improvements to the support methods
and materials used can be made to assist the mine to work towards international best practice standards and some progress
has already been made.
25.7 Mining
From a mining method perspective, the approach used at the SASA Mine has been successful in achieving in excess of the
planned production rate in the current LoM plan. Due to the low level spacing there are reasonable opportunities to achieve
the mining dilution and loss parameters used in the mine plan.
The defined stope shapes extend from the 1,054 mRL to a lowest elevation of 797 mRL on a level spacing of 7 m, over a
strike length of 835 m. The main lower access of the existing mine development is an exploration decline ramp some 24 m
below the 830 mRL (approximately 837 mRL in the vicinity of the orebody) which is only 20 m above the lower elevation of
the stope shapes considered in the mine design.
The mine benefits significantly from having access development to upper and lower levels of the planned stoping areas as
well as established materials handling systems. This existing development also allows for easy management of water ingress
into the mine, although water ingresses were not observed to be significant during the March 2017 site visit.
The sub-level caving method currently in use at the SASA Mine, utilises a top-down approach without the use of backfill
with development and production drilling being undertaken using single boom.
Whilst this method is one of the few underground mining methods that can be applied to this type of shallow dipping,
stacked, variable thickness lead-zinc-silver lens system, the cut and fill method (which was historically used on the
Golema Reka deposit) should be re-assessed in selected future mining areas to determine whether this is a more suitable
method for the mine from a dilution, recovery, safety, production rate, and economic perspective.
The mine development and production physicals have been reported on 3.5 m levels from the design and block model, with the
modifying factors applied prior to scheduling with the Deswik software. The LoMp relies predominantly on the Indicated
Resources at the Svinja Reka deposit (to support the declaration of Ore Reserves), but also includes Inferred Resources
from Svinja Reka and Golema Reka deposits. The LoMp schedule extends over a period of just under 22 years (H2 2017 to Q1
2038), commencing at an ore production rate of 770 ktpa (dry) in 2017, followed by 20 years (2018 to 2037) at 780 ktpa
(dry) and a small amount of production in 2038 (approximately one month). The historical production indicates that there is
typically an average moisture content of 3.6%.
The underground waste development (including rehabilitation) has been categorised and is scheduled annually over the mine
life. Development waste generated from mining activities is estimated to total 1,395 kt over the LoMp with maximum annual
tonnage of 83 kt (in 2017) and average annual tonnage of 65 kt (or 8.7% of total material mined annually). All development
waste generated underground is transported to the surface.
Since reopening in 2006, the SASA Mine has used a similar mining method approach as that proposed for the LoMp going
forward and the planned production rate of 780 ktpa (dry) is conservative, given that the mine production has averaged 797
ktpa over the last 8 years, with a peak of 860 ktpa in 2009. SRK notes that in the last 8 years the mine achieved less than
780 ktpa in two of those years (759 kt in 2009 and 753 kt in 2010); however, this is not considered a material difference
(less than 3%).
The sub-level cave mining method has been utilised for many years at the SASA Mine and, given the low level spacing (7 m),
there are reasonable opportunities to achieve the mining dilution and loss parameters used in the mine plan.
SRK recognises that the LoMp includes material from the Inferred category of Mineral Resources, both in the lower levels of
the Svinja Reka deposit and also the Golema Reka deposit, and that achievement of the LoMp is based on the conversion of
Inferred Resources to Indicated or Measured Resources. At Svinja Reka, given the continuation of the sub-level caving
method and the similar development profile, there do not appear to be any technical impediments to mining this material,
assuming that additional drilling and sampling and geological analysis improves the Resource category to at least
Indicated.
At the Golema Reka deposit, a cut and fill method will be adopted. This historically used method is geotechnically
acceptable and the existing backfill plant can be recommissioned. In addition, the cost of backfill has been considered in
the operating costs and subsequent NSR cut-off estimate for Golema Reka, therefore exploitation of the final years of the
LoMp at Golema Reka are considered to be technically feasible, again assuming that the Inferred Resources in this deposit
are converted to either Indicated or Measured category through additional geological investigations and analysis.
SRK considers it likely that the additional Inferred portions of the Svinja Reka and Golema Reka deposits will be converted
to Indicated during the LoM operations and that the full LoMp will be delivered, on the understanding that the appropriate
technical investigations and studies are undertaken in advance of proposed mining of these areas.
25.8 Mineral Processing
The process plant is conventional and the metallurgy for both lead and zinc, based on historical performance, is
straightforward and well understood.
Ore from Golema Reka has been processed historically and the metallurgy is known. As with any mine, if new ore zones are to
be mined and processed, metallurgical testwork should be performed to establish circuit operating parameters and to
ascertain specific metallurgical performance.
The forecast plant throughput of 780 ktpa is conservative and is not a limiting factor in terms of mine output. The plant
has proved that it can process up to 850 ktpa.
The lead metallurgy recovery of 94% is close to the historical performance of the plant and considered by SRK to be above
the average typically achieved by similar operations.
The new zinc regrind mill should alleviate the issues with some overloading of the pumping systems in the zinc cleaner
circuit and should increase the overall zinc recovery to the projected 87.5%.
A silver recovery to lead concentrate of 80% is used in the assessment. This is in line with recent historical performance.
The calculated silver content of the lead concentrate is 287 to 320 g/t Ag and payable as part of the NSR. The silver grade
in lead concentrate is below that historically achieved and is dependent on the tonnage of lead concentrate produced.
The zinc concentrate grade has been set at 49.3% in the model. SRK considers this to be conservative as it is lower than
historical performance. A lower zinc grade in concentrate is likely to be beneficial for zinc recovery to zinc concentrate,
as would be expected with a typical grade-recovery relationship. The zinc recovery included in the model assumes the
installation of the new zinc regrind circuit during 2017 and includes an increased zinc recovery to zinc concentrate of 2%
from 85.5% up to 87.5%, supported by recent lock-cycle testwork. Based on the predicted head grade and typical losses of
zinc to the lead concentrate this zinc recovery would result in a final concentrator tailings of 0.3% Zn. This is lower
than historically achieved, average 0.4% Zn since 2010, but reflects the tailings that would have been achieved if an
additional recovery of 2% had been achieved. SRK considers that the higher recovery is reasonable, based on the testwork
performed. The zinc feed grade is predicted to fall from 2028 and SRK recommends a reduction in zinc recovery based on a
fixed tail calculation from this year to the end of the LoMp.
Historical performance would suggest that the lead grade in the zinc concentrate will not be an issue and should be less
than 2% Pb.
A silver recovery to zinc concentrate of 10% included. Historically, this has been around 11%. The silver content of the
zinc concentrate is typically around 40 g/t Ag and is not payable.
The operating costs included in the model for the process plant are based on actuals and are split in to fixed and variable
costs, for electricity, reagents and consumables, labour, maintenance materials and miscellaneous costs, and are considered
reasonable.
The new zinc SMD mill package has been included in the 2017 budget, with SMD mill capital of EUR597k out of the total 2017
plant budget of EUR1.4m (with EUR0.5m spent during H1 2017). It is estimated the SMD mill will be commissioned in Q4 2017.
From 2018 onwards, only sustaining capital has been provided for. This totals EUR12.9m over the remaining life of the mine
for the processing plant alone, of which EUR150,000 per year from 2019 onwards has been allocated as a contingency. SRK
considers the capital expenditure provided in the model to be appropriate.
25.9 Tailings Storage Facilities
The TSF complex has been operational since the 1960s, with the successive development of TSF 1, TSF 2, TSF 3.1 and TSF 3.2.
All the TSFs are located within the steep sided valley of the Kamenica River. The Kamenica River is carried below the TSF
within an engineered river diversion structure.
TSF 1, TSF 2, and TSF 3.1 are inactive and have been rehabilitated with soil cover and vegetation. TSF 3.2 is currently
active. Progressive development of the dam comprises downstream raising using cyclones, with coarse underflow to the dam
shell and finer grain-size slimes to the impoundment void. Waste rock is transported via the mine access road and deposited
at the downstream toe to form a buttress. Seepage water from TSF 3.1 and from the toe area of TSF 3.2 is captured in a
sedimentation pond located at the toe of the downstream dam slope. Surplus water in the TSF 3.1 overflows via an overflow
concrete collector pipe, which is used to manage the water level in the pond. An emergency spillway will be constructed
when the dam reaches its design height at closure. A specific slope stability assessment has been completed for the active
facility and in general terms, the methodologies, parameters and scenarios modelled are reasonable in the context of the
stated report requirements. Also, recent work undertaken by Golder Associates indicates there to be no credible risk of
overtopping in the critical storm-flow condition.
TSF 4 was designed to international standards by the Faculty of Engineering, Skopje, in March 2015. As with TSF 3.2 a
specific slope stability assessment has been completed for the proposed facility and the methodologies, parameters and
scenarios modelled are considered reasonable and thorough in the context of the stated report requirements. TSF 4 is
currently under construction and is designed to provide sufficient containment for requirements between October 2018 and
2026 (predicted lifetime at current processing rate), and will be located directly downstream of TSF 3.2. Construction of
the entire facility is planned to be completed by May 2018. TSF 4 will be developed adopting similar waste delivery,
placement and operational management methodologies to those that have been adopted for the active TSF 3.2; however, the
downstream slope will include a granular rock fill toe buttress that is progressively raised in line with tailings
progression.
TSF 4 requires an extension to the Kamenica River diversion structure as a tunnel in the western rock abutment of the dam,
which is partiality constructed as well as an open channel diversion of the Petrova stream along the eastern side of the
valley. A contractor (Strabag) is currently installing the concrete lining of the tunnel, which is on schedule for
completion in Q4 2017. Construction permits have been received for the diversion tunnel and the channel works, and
construction is in progress. The approval for the construction of the dam is in progress, including modifications to the
design for the lining.
As part of the EIA approval process, the Ministry of Environment and Physical Planning ("MEPP") recommended that the
Minister for Environment approve the EIA, subject to SASA modifying the design to include a liner. SASA Mine management
will install a liner to address this request.
The river diversion structure entrance portal is located at the northern end of TSF 1 at the plant site and the exit is
located immediately downstream of the TSF 3.2 dam slope toe. The tunnel has been extended progressively in advance of
tailings deposition development and comprises a concrete structure for about 40% of its length constructed under the
tailings (culvert section) and 60% constructed in the in situ rock (tunnel section). A new section of tunnel has been
constructed beyond the toe of TSF 3.2 to further divert the river around TSF 4. SRK considers that the TSF 4 extension
tunnel in its existing condition and the outlet portal area and have been constructed with appropriate support for a
long-term structure. Once concrete lined, the tunnel is expected to be very secure.
In 2003, whilst the mine was under State ownership and was not operational, failure of an ancillary structure that diverted
captured TSF 3.1 drainage water into the river diversion tunnel resulted in flow of tailings from TSF 3.1 into the
water-course and on into the downstream environment. The physical effects of the failure were successfully remediated; the
downstream environment was cleared; the culvert was cleared, the ancillary structure for drainage was remediated, and flow
of water re-established. Subsequently, a programme of regular visual inspection and maintenance of the diversion tunnel and
associated infrastructure has been followed and there have been no further issues since mine re-commissioning in 2006.
In March 2017, SASA Mine commissioned the Faculty of Engineering, Skopje to undertake a Tunnel Integrity Assessment for the
entire length of the diversion tunnel, to assess the current state of the tunnel, especially in its older sections and to
comment on any potential requirements for additional support/remediation. The study will include visual inspections, in
situ testing and sampling for laboratory material testing. Work is currently ongoing and results will be delivered in Q4
2017.
The SASA Mine LoMp extends to Q1 2038, with a planned constant throughput of ore at a rate of 780 ktpa until end-2037. This
results in a steady state production of tailings of around 175,000 m3 per year tailings for dam construction and 230,000 m3
per year fine tailings (plus sludge) for deposition in the impoundment (total 405,000 m3 per annum). TSF 4 has capacity for
8 years of deposition, which means that additional TSFs will be required to provide storage for the entire LoMp. SASA Mine
intends to construct two further TSFs downstream of TSF 4 to accommodate this additional material (TSF 5 and TSF 6). TSF 5
is planned to be constructed during 2025 and 2026 and is intended to be of a similar size to TSF 4 to provide an additional
8 years' storage. TSF 6 is planned to be constructed during 2033 and 2034 and is intended to be smaller than TSF 4 to
provide an additional four years' storage up to 2038. Whilst detailed designs have not yet been prepared for either TSF 5
or TSF 6, SASA Mine has provided capital in the Financial Model in the relevant years. The capital quantum for TSF 5
(EUR7.5m, USD8.2m, which includes EUR2m allowance for the liner) is the same as that for TSF 4, and for TSF 6 the allowance
is 50% of TSF 5 given the smaller storage requirement. There is also yearly sustaining capital of USD109k provided. Further
preliminary and detailed design work for TSF 5 and TSF 6 will need to be completed, but these TSFs will require similar
elements to TSF 4, including extension of the Kamenica River diversion tunnel through the bedrock of the western dam
abutment and extension of the Petrova River surface diversion channel along the eastern side of the Kamenica River valley.
SRK notes, however, that to support the Ore Reserves, there is only a requirement for TSF 5.
Lynx Resources intends to commence pre-feasibility study level designs for TSF 5 immediately upon completion of TSF 4, to
provide ample time for technical evaluations and permitting preparation.
The closure design for the active TSF 3.2 is detailed within the Waste Management Plan document which covers proposals for
both tailings and waste rock. This document is required in accordance with applicable Regulations and the site Permit. The
tailings closure design proposed in the Waste Management Plan is similar to that adopted for TSF 1 and comprises a layered
cover system including (from the bottom up): waste rock cover; restoration soil layer; and vegetation. A similar
arrangement is proposed for TSF 4.
One issue for the SASA Mine closure is the management of long-term water flows in the Kamenica River valley, currently and
in the future, via the river diversion tunnel/culvert and surface water diversion channels. For the diversion tunnel,
potential closure options are currently being evaluated by SASA Mine, in combination with the Faculty of Engineering,
Skopje and SRK. The potential options being evaluated include:
● long-term maintenance of the existing diversion tunnel/culvert;
● maintaining the existing diversion tunnel but engineering bypass sections to replace culverts and ensure long-term
flows are within the in-situ rock abutments; and
● relocating flow to surface, necessitating decommissioning (sealing) of the tunnel/culvert and engineering of an open
diversion channel at surface.
25.10 Water Management
The SASA Mine operations are situated within the Kamenica River watershed. The Kamenica River runs from northwest to
southeast. Two smaller drainages connect to the Kamenica River upstream of the current mine operations, the Svinja River
and the Kozje River. Both drainages contain legacy mine workings (and surface waste rock dumps), with adit discharges
partially captured in pipelines and partially discharged to the rivers. Seepage from the old dumps also enters the rivers.
The process water intake structure is situated upstream of the confluence with the Kozje River. Downstream of the
confluences of the Kozje and Svinja rivers, the Kamenica River is captured in a concrete diversion tunnel, which was
historically constructed beneath TSF 1, TSF 2 and TSF 3.1, and then extended through the western abutment of TSF 3.2. The
University of Skopje prepared a hydrologic and hydraulic analysis, the hydraulic model, prepared as part of the study,
states that the existing diversion tunnel for the Saska River is equipped to convey the 10,000-year flood. Additional
consideration may be required for the Probable Maximum Flood ("PMF") event, specifically during closure.
The hydrogeology of the area has not been characterised by means of site specific hydrogeological testwork. Groundwater,
other than the alluvial aquifer immediately below TSF 3.2, is not monitored. The existing water collection and pumping
infrastructure is considered sufficient for management of groundwater entering the underground workings. While maintenance
of existing infrastructure is required to effectively manage groundwater within the mine, SRK's opinion is that no
significant additional investment will be required.
A high-level water balance has been performed by Strength GEC in March 2017, evaluating potential for recycling of mine
water in the process plant. The purpose of the water balance was to assess the potential for water recycling across the
site. SRK understands, based on discussions while on site, that this balance is an initial step as part of an on-going flow
monitoring programme to develop a more seasonally sensitive and refined understanding of water volumes across the site.
The balance suggests the TSF supernatant pond, as well as seepage collected at the TSF 3.2 dam toe and discharges from the
Adit 830, be utilized in the plant and for dust suppression on tailings and dams. Improvements to the water balance should
include a more detailed depiction of flows in the active and proposed TSF supernatant ponds, specifically examining
freeboard limits and the capacity of the decant structure during extreme flood events.
SRK observed opportunities for improvement in the sample collection, handling, analytical suite and data processing aspects
of the water quality monitoring. As part of the hydrogeological study outlined in the ESAP, SASA Mine is reviewing its
sampling protocols.
25.11 Environmental, Social and Permitting
Lynx Resources maintains a permit register and this indicates the mine is fully permitted for continuing its current
operations. Following completion of the requirements stipulated in its Permit for Alignment with the Operational Plan (an
interim step in the Integrated Pollution Prevention and Control (IPPC) permit process), SASA Mine received its IPPC permit
in October 2016. An Application for Changes to the IPPC permit was submitted in April 2017 (discussions currently in
progress) requesting amendments to the permit for minor changes to the operation since March 2014. This application also
included a formal request to amend the discharge limits in line with the Macedonian legislation for wastewater discharges,
highlighting that the existing limits were created with reference to the Decree for Classification of Waters No 18/1999,
which was applicable to in-stream surface water guidelines, and not for discharges of industrial wastewaters.
The mine has an environmental management system certified against ISO 14001:2015. There is also an environmental and social
action plan ("ESAP") developed with the aim of bringing the project into line with good international industry practice
over the next three years. A review of the cyanide management practices was undertaken in March 2017 to evaluate current
practices with the requirements laid out in the International Cyanide Management Code; procedural opportunities for
improvement were identified and are being considered by SASA Mine.
The project reportedly enjoys good relations with the community of Kamenica, which owes its existence to the presence of
the mine. It also appears that relationships with employees are good. Therefore, no material risks arising from the current
informal management of social issues have been identified. Following on from community complaints regarding dust from the
TSFs, additional sprinkler investments were made in 2016. Further plans are underway to increase the amount of sprinklers,
evaluate other dust suppression techniques and increase dust monitoring in 2017. The ESAP includes a commitment to develop
an air quality management plan to improve dust control at the site.
There is historical contamination arising from the historical mine workings and the associated mine residues (waste rock
and tailings), in addition to historical contamination arising from the tailings emission in 2003, generated when the mine
was under state ownership. According to the legal review, the current operators are not liable for any historical
contamination. SRK notes that separating the effects of contamination from the historical mine workings above the mine
site, and any new contamination generated by current operations, can be challenging. The ESAP recognises a potential
opportunity to work with the State to find rehabilitation solutions to address the historical mine workings and associated
mine residues upstream of the current mine as part of closure planning.
Improvements in water monitoring (both flow and quality) are currently being implemented as part of the ESAP. Options for
further recycling of various water streams are being investigated as part of this. The available monitoring of water
quality indicates:
● upstream of the mine, discharges from adits and seepage from waste rock dumps associated with the historical workings
(not SASA Mine's responsibility) are contributing to exceedances of the Macedonian Category III environmental water quality
standards;
● available data show the quality improves downstream indicating dilution and potentially natural buffering from the
surrounding catchments; however, zinc and manganese exceed the Macedonian Category III environmental water quality
standards as far as 5 km downstream of the site;
● there are occasional exceedances of the permitted discharge limit, though SRK notes these limits are currently subject
to discussion with the regulator; these non-compliances are dealt with via a minor annual permit fee to the MEPP, which
incorporates an annualised calculation for exceedances (fee has historically been approximately EUR5,000 per annum, and is
expected to be of the same magnitude for calendar 2017); and
● groundwater in the alluvial aquifer downgradient of the TSFs indicates that the water is generally in compliance with
drinking water quality standards and the Macedonian Category III environmental quality standards except for zinc.
With no pre-disturbance baseline water quality monitoring (because the mine is 50 years old) and no monitoring of reference
sites in unimpacted catchments, the natural background contribution of the deposit on water quality cannot be confirmed and
thus the impact of the mine over and above this natural contribution can also not be confirmed. SRK considers that the
outcomes of the currently planned hydrology and biodiversity studies, as well as the improved water quality monitoring
programme, are needed to confirm potential impacts. SRK also recognises this cannot be done in isolation, as significant
contributions are arising from the historical workings that are not the responsibility of SASA Mine. There is, however,
significant time in the LoMp before closure to improve the quality, type and quantity of input data, assess this with
respect to downstream water user requirements and use this in further evaluating the need for long term water treatment.
In June 2017, SRK prepared a conceptual closure plan ("CCP"), which included a closure cost estimate for the operations
with a ±50% level of accuracy. For the purposes of closure design, the CCP considered two potential methods for diversion
of surface water flows upstream and in the catchment of the TSFs. These are summarised below as follows:
● Option 1 - Use of the existing river diversion channel to pass a portion of the storm water flows from the upstream
catchment area only. In conjunction, a surface channel diversion will be constructed adjacent to the TSFs to divert
calculated flows from the adjacent catchments.
● Option 2 - Construction of an entirely new network of surface water channels designed to pass the cumulative flow from
all catchments. All surface water diversions, will be constructed on the surface and the river diversion channel will be
decommissioned at closure.
Option 1 requires additional engineering work to prove that use of the existing underground river diversion is feasible.
Option 2 represents the lowest risk option to the project at closure and relies upon a series of surface diversion channels
to convey flows at closure. The conceptual costs estimated for both options is presented in Table ES 5.
Table ES 5: SASA Mine Closure Cost Summary
Closure Item Option 1 Cost (EURm) Option 2 Cost (EURm)
Plant and Surface Infrastructure Demolition 1.71 1.71
Tailings Cover Installation 2.03 2.03
Surface Water Diversion Features 6.92 19.84
Closure of Mine Portal 0.26 0.26
Adit and Tunnel Plugging and Grouting 0.19 0.29
WRD XVIa Removal and Rehabilitation 0.52 0.52
Passive Water Treatment Pond System 0.98 0.98
Post Closure Monitoring 1.15 1.15
Total Base Case Closure Cost 13.77 26.79
25.12 Occupational Health & Safety
Since Lynx Resources took management of the SASA Mine, they committed to continually reduce the number and severity of
injuries and harm to health. The historical safety performance was poor under the previous management however, in 2014 they
commissioned a safety management initiative and the safety performance has improved significantly. The mine continues to
implement the safety initiative programme under the new management with a goal to further improve the safety performance
and culture at the operations.
An integrated health, safety and environment system at the mine, based on OHSAS 18001:2007, ISO 9001:2015, ISO 14001:2015,
is audited annually by external parties; accreditation is maintained. Table ES 6 lists the number of Fatal and Lost Time
Injuries incurred at SASA Mine since 2013.
Table ES 6: SASA Mine Fatal and Lost Time Injuries per year
Year Fatal Injuries Lost Time Injuries
2013 2 27
2014 0 11
2015 0 3
2016 0 6
H1 2017 0 0
25.13 Capital and Operating Costs
The Capital and Operating cost estimates for the SASA Mine have been determined by Lynx Resources based on recent
historical performance and the current 2017 budget for the mine, a summary of which is presented in Table ES 7.
Whilst capital expenditures are relatively stable, the cost of TSFs are more project based as new TSFs and associated
infrastructure are constructed, notably historically during 2016 and H1 2017, and going forward during H2 2017 and 2018
(TSF 4), then assumed in 2025/2026 (TSF 5) and finally in 2033/2034 (TSF 6).
SRK has reviewed the operating and capital cost forecasts, and finds that these are sufficient to support the LoMp. No
contingencies have been added to either forecast due to the nature of steady state production. Option 1 for site closure
has been incorporated in the financial assessment.
Table ES 7: LoMp Forecast Capital and Operating Costs
H2 2017 2018 2019 2020 2021 2022 2023-2027 2028-2037 2038 LoMp
Capital Expenditure (EURm)
Capitalised Development 1.5 2.6 2.6 2.6 2.6 2.6 12.8 19.0 46.0
Mining Equipment 1.3 2.7 2.1 3.2 2.0 1.7 11.3 21.6 45.8
Flotation 0.9 1.0 0.7 0.8 0.8 0.7 3.3 5.5 13.9
Tailings 1.0 2.1 0.1 0.1 0.1 0.1 7.8 4.5 15.8
Other 0.6 0.7 0.7 0.7 0.7 0.7 3.5 6.6 14.2
Total 5.3 9.1 6.1 7.3 6.2 5.8 38.7 57.2 135.7
Operating Costs (EURm)
Mining 5.9 11.9 11.9 11.9 11.9 11.9 59.4 134.3 - 258.9
Milling 3.5 7.2 7.2 7.2 7.2 7.2 36.0 70.7 - 144.8
G&A 1.8 3.6 3.6 3.6 3.6 3.6 17.9 36.9 - 75.7
Mine Closure - - - - - - - - 13.8 13.8
Total 11.2 22.6 22.6 22.6 22.6 22.6 113.2 241.9 13.8 493.2
Unit Operating Costs (EUR/t RoM)
Mining 15.5 15.2 15.2 15.2 15.2 15.2 15.2 17.2 - 16.2
Milling 9.1 9.2 9.2 9.2 9.2 9.2 9.2 9.1 - 9.1
G&A 4.9 4.6 4.6 4.6 4.6 4.6 4.6 4.7 - 4.7
Mine Closure - - - - - - - - - 0.9
Total 29.5 29.0 29.0 29.0 29.0 29.0 29.0 31.0 - 30.9
25.14 Project Economics
25.14.1 Overview
SRK has prepared a financial model to evaluate the economics of:
● the Ore Reserves and
● the LoMp (including Inferred material).
Reporting at the mine is in EUR; however, the economic assessment has been carried out in USD. A constant exchange rate of
1.09 USD/EUR has been applied over the LoM. The financial model has been prepared in Microsoft Excel, in USD, in nominal
money terms assuming a 2% annual inflation for both the Euro ("EUR") and USD denominated costs.
A discounted cash flow has been prepared, on a post-tax basis. No financing terms are modelled except for the silver
streaming agreement, which forms the basis of the reduced silver price included in the financial model. Lynx Resources'
payment terms have been taken into account in the model.
SRK has applied consensus market forecast prices for lead and zinc, sourced from Bloomberg as at 19 July 2017. The prices
applied are the median of the forecasts of a range of analysts as compiled by Bloomberg. The silver price actually used in
the financial model is as per the long-term streaming agreement, for the LoM. The streaming agreement included a price of
USD5.0/oz of refined silver for the period up to 31 December 2016. In respect of each subsequent calendar year of the
agreement, the fixed silver price in respect of the immediately preceding calendar year increased by a percentage equal to
the lesser of inflation over the previous calendar year measured by the CPI Index and 3%. The financial model assumes a
slightly more conservative approach, with the silver price only increasing after 2021 by the flat inflation of 2% per
annum. The consensus market forecast silver price is only used to calculate the concession fee. The commodity prices are
presented in Table ES 8.
Table ES 8: Bloomberg Consensus Commodity Prices (nominal)
Units Spot (19 July 2017) 2017 2018 2019 2020 2021
Zinc (USD/t) 2,747 2,665 2,622 2,450 2,398 2,508
Lead (USD/t) 2,217 2,205 2,150 2,200 2,250 2,300
Silver (CMF) (USD/oz) 16.3 17.4 18.2 19.3 20.0 20.0
Silver (streaming agreement) (USD/oz) 5.00 5.00 5.00 5.00 5.00
25.14.2 Cash Flow Model
The economic assessment presents a solid economic case, with a low risk of any production being cash flow negative. Net
present values ("NPVs") are presented for different discount rates. The NPVs are a measure of economic viability of the
operations. They do not constitute a project valuation. SRK notes that the LoMp case includes a proportion of Inferred
Mineral Resources, to be mined from 2028 onwards. Table ES 9 presents the overall inputs and outputs of the financial model
for the two cases modelled. At the base discount rate of 10%, the LoMp case reports an NPV of USD461m and the Ore Reserve
reports an NPV of USD413m.
Table ES 9: Summary of the Cash Flow Model Assessment
Economic Output
Revenue (USDm) 2,056 1,467
Operating Costs (USDm) 724 466
EBITDA (USDm) 1,333 1,001
Capital Costs (USDm) 180 127
Non-cash items (due to Ag streaming) (USDm) 20 20
Working Capital (USDm) 5 5
Corporate Income Tax (USDm) 114 85
Net Free Cash (undiscounted) (USDm) 1,024 773
NPV, discount rate:
6.0% (USDm) 610 518
8.0% (USDm) 527 461
10.0% (USDm) 461 413
12.0% (USDm) 408 372
14.0% (USDm) 364 337
16.0% (USDm) 327 308
Net Smelter Return (Revenue)
Pb Concentrate (USDm) 1,418 937
Zn Concentrate (USDm) 748 596
Treatment Charges
Pb Concentrate (USDm) 95 63
Zn Concentrate (USDm) 87 69
Mining
Tonnage (kt) 15,979 10,927
Pb Grade (%) 2.65% 3.08%
Zn Grade (%) 3.73% 3.85%
Processing
Tonnage (kt) 15,979 10,927
Pb Grade (%) 2.65% 3.08%
Zn Grade (%) 3.73% 3.85%
Recovery
Pb (%) 94.0% 94.0%
Zn (%) 84.5% 87.4%
Concentrate
Pb Concentrate (kt conc) 767 542
Pb Content (kt metal) 560 395
Zn Concentrate (kt conc) 725 598
Zn Content (kt metal) 357 295
Operating Costs
Mining (USDm) 352 214
Processing (USDm) 195 126
G&A (USDm) 102 68
Mine Closure (USDm) 23 21
Concession (USDm) 53 38
Total (USDm) 724 466
Capital Costs
Capitalised Development (USDm) 61 46
Mining Equipment (USDm) 61 42
Flotation (USDm) 18 13
Tailings (USDm) 21 12
Other (USDm) 19 13
Total (USDm) 180 127
Total
(USDm)
180
127
25.14.3 Sensitivity Analysis
SRK has considered the potential areas of risk to the project and has accordingly run sensitivities on the NPV. For this
purpose, SRK has assumed a discount rate of 10% for the runs. SRK has tested the NPV sensitivity to operating, capital
costs, and commodity prices. This is illustrated in Table ES 10 for the Ore Reserve case, and in Table ES 11 for the LoMp
case.
Table ES 10: Sensitivity Tables, Ore Reserve Case (NPV 10% discount rate, nominal)
Capital Cost
Sensitivity -5% 0% 5% 10% 15% 20% 25%
NPV (USDm) 416 413 410 407 403 400 397
Operating Cost
Sensitivity -5% 0% 5% 10% 15% 20% 25%
NPV (USDm) 422 413 403 394 385 376 367
Commodity Prices
Sensitivity -15% -10% -5% 0% 5% 10% 15%
NPV (USDm) 305 341 377 413 449 485 521
Table ES 11: Sensitivity Tables, LoMp Case (NPV 10% discount rate, nominal)
Capital Cost
Sensitivity -5% 0% 5% 10% 15% 20% 25%
NPV (USDm) 465 461 458 454 451 447 444
Operating Cost
Sensitivity -5% 0% 5% 10% 15% 20% 25%
NPV (USDm) 472 461 450 439 428 417 405
Commodity Prices
Sensitivity -15% -10% -5% 0% 5% 10% 15%
NPV (USDm) 338 379 420 461 503 544 585
25.14.4 Mineral Resource and Ore Reserve Statement
The Ore Reserve estimate for the SASA Mine has been undertaken in accordance with the JORC Code (2012) guidelines and is
stated in Table ES 12 as at 01 July 2017. The Ore Reserves are classified as Probable based on the current Mineral Resource
classification of Indicated.
In line with reporting an Ore Reserve under the JORC Code (2012), SRK has prepared a financial model to test the economic
viability of the Ore Reserve case, taking into account the various technical, operating cost, capital expenditure and
corporate income tax parameters (excluding any debt of financing structures). The assessment demonstrates that the Ore
Reserve is economically viable, with robust economics that remain positive when tested against appropriate increases in
operating and capital costs, and changes in commodity prices.
Table ES 12: Statement of Mineral Resources and Ore Reserves for the SASA Mine at 01 July 2017
Category Gross Net Attributable Operator
Tonnage Grade Content Tonnage Grade Content
(Mt) Pb (%) Zn (%) Ag (g/t) Pb (kt) Zn (kt) Ag (koz) (Mt) Pb (%) Zn (%) Ag (g/t) Pb (kt) Zn (kt) Ag (koz)
Ore Reserves
Proved
Svinja Reka - - - - - - - - - - - - - -
Golema Reka - - - - - - - - - - - - - -
Subtotal Proved - - - - - - - - - - - - - -
Probable
Svinja Reka 10.9 3.85 3.08 18.4 421 337 6,447 10.9 3.85 3.08 18.4 421 337 6,447
Golema Reka - - - - - - - - - - - - - -
Subtotal Probable 10.9 3.85 3.08 18.4 421 337 6,447 10.9 3.85 3.08 18.4 421 337 6,447
Total Reserves 10.9 3.85 3.08 18.4 421 337 6,447 10.9 3.85 3.08 18.4 421 337 6,447 Rudnik "SASA" DOOEL
Mineral Resources
Measured
Svinja Reka - - - - - - - - - - - - - -
Golema Reka - - - - - - - - - - - - - -
Subtotal Measured - - - - - - - - - - - - - -
Indicated
Svinja Reka 13.3 4.59 3.68 22.0 611 490 9,403 13.3 4.59 3.68 22.0 611 490 9,403
Golema Reka - - - - - - - - - - - - - -
Subtotal Indicated 13.3 4.59 3.68 22.0 611 490 9,403 13.3 4.59 3.68 22.0 611 490 9,403
Inferred
Svinja Reka 2.7 3.16 2.08 16.6 84 56 1,426 2.7 3.16 2.08 16.6 84 56 1,426
Golema Reka 7.4 3.69 1.52 18.6 273 112 4,424 7.4 3.69 1.52 18.6 273 112 4,424
Subtotal Inferred 10.1 3.55 1.67 18.1 357 168 5,849 10.1 3.55 1.67 18.1 357 168 5,849
Total Resources 23.4 4.14 2.81 20.3 968 658 15,252 23.4 4.14 2.81 20.3 968 658 15,252 Rudnik "SASA" DOOEL
Source: CP Mineral Resources - Guy Dishaw, CP Ore Reserves - Chris Bray
26. Lynx Group Historical Financial Information
This section 26 contains the historical financial information on the Lynx Group.
The historical financial information of the Lynx Group presented in this announcement reflects the historic ownership of
the SASA Mine.
For the period from 1 January 2014 to 3 November 2015, SASA was owned and controlled by Solway Industries Ltd and Solway
Industries Eesti AS.
On 3 November 2015, Lynx Europe acquired the entire issued share capital of SASA. Lynx Europe is a wholly owned subsidiary
of Lynx Resources, the entity that is being acquired by CAML in connection the Acquisition. Lynx Resources was incorporated
on 19 June 2015.
The financial information has been prepared under IFRS as adopted by the European Union. The financial information of SASA
for 2015 and 2014 has been translated from SASA's functional currency of MKD into USD for comparability.
The financial information of the Lynx Group has been impacted by related party transactions with entities that do not form
part of the Lynx Group. In particular, the Lynx Group had contractual arrangements with Lynx Metals, a related party that
is not part of the Lynx Group, including with respect to marketing services and silver streaming that have impacted on the
Lynx Group financial information. Certain of these arrangements, including the marketing services provided by Lynx Metals,
will not continue following completion of the Acquisition. Therefore the historic financial performance of the Lynx Group
may not be wholly consistent with its financial performance as part of the Enlarged Group.
The following historical financial information of the Lynx Group is presented in this announcement:
• Section A: Unaudited Historical financial information of Rudnik SASA DOOEL for the financial years ended 31
December 2014 and 31 December 2015
• Section B: Unaudited Historical financial information of Lynx Resources for the financial period from 19 June
2015 to 31 December 2015 and the financial year ended 31 December 2016
• Section C: Unaudited Interim financial information of Lynx Resources for the six months ended 30 June 2017
SECTION A: UNAUDITED HISTORICAL FINANCIAL INFORMATION OF RUDNIK SASA DOOEL FOR THE FINANCIAL YEARS ENDED 31 DECEMBER 2014
AND 31 DECEMBER 2015
Rudnik SASA dooel-Makedonska Kamenica
IFRS Financial information for the two years ended 31 December 2015
(all amounts are in USD unless otherwise stated)
Statement of comprehensive income
Year ended 31 December
Note 2015 2014
Gross revenue ...................................................... 5 70,491,829 82,837,582
Transportation expenses..................................... (35,930) (10,830)
Revenue ................................................................. 70,455,899 82,826,752
Inventory movement ........................................... (2,577) 54,777
Consumed raw materials ..................................... 7 (13,110,079) (15,520,032)
Salaries/payroll expenses ................................... 8 (7,614,271) (8,678,947)
Cost value of tools and consumable goods .... (43,444) (38,370)
Concession expenses
- More to follow, for following part double click ID:nRSV5104RgRecent news on Central Asia Metals
See all newsREG - Central Asia Metals - Total Voting Rights
AnnouncementREG - Central Asia Metals - Results of Extraordinary General Meeting
AnnouncementREG - Central Asia Metals Morgan Stanley - TR-1: Notification of major holdings
AnnouncementREG - Central Asia Metals - 2025 Full-Year Results
AnnouncementREG - Central Asia Metals Morgan Stanley - TR-1: Notification of major holdings
Announcement