REG - Metminco Limited - Maiden Ore Reserve for Miraflores - Update <Origin Href="QuoteRef">MNC.AX</Origin> - Part 5
27/11/2017 07:05
- Part 5: For the preceding part double click ID:nRSa5605Xd
* US$1.00 = 3,000 COP (Colombian Pesos).
Transportation charges were derived from an international freight forwarder allocating individual equipment and fabricated
transport charges included overseas freight to port of Buenaventura where applicable and in country freight from port/
fabrication shop to site. Refining charges; from discussions with potential refiners and from previous studies by SRK;Gold
Payability - 99.6%Silver Payability - 99.0%Refining, transport and Insurance costs - US$4.50/ payable ounce. Miraflores will
determine quality prior to completing an offtake agreement. No deleterious elements are expected based on the metallurgical
testwork completed. The feasibility study delivered a total estimated Initial Capital cost of bringing the project into
production of US$71.8 million excluding all contingency. This cost is based upon an EPCM approach whereby Miraflores assumes
general risk. Contingencies of US$6.2 million was estimated for the project development. Contingencies have been estimated at
7.67% of initial capital. Sustaining capital requirements associated with the mine and owner cost of US$18.5 million were
included into the financial model. The Operating cost was based on a high productivity operation, this will demand a high
efficient environment for productivity and cost controls. No contingency was embedded into the operating cost. During the first
year of operation, allowances for the employment of experienced ex-patriate personnel were incorporated but it is expected that
this personnel will be replaced progressively by local workforce. The main consumables and labour wages were benchmarked
against other similar operations. The feasibility study delivered the following results for the operating costs:· Mining
cost of US$27.94 /processed t;· Processing cost of 20.54/processed t;· Tailing cost of US$0.62 /processed t; and·
G&A cost of US$4.36 / processed t. The total site operating cost is US$53.46 /processed t. Government Royalty of US$52.18 /
payable ounce andRefining charges, transport and insurance of US$4.50 / payable ounce. Total Cash Costs of US$599 / payable
ounce. The operating cost estimate did not include Corporate overheads and exploration activities. The Miraflores Feasibility
Study assumed that the salvage value of the remaining assets at the end of the operating mine life will off-set the closure and
remediation cost.
Revenue factors The derivation of, or assumptions made regarding revenue factors including head grade, The revenue estimate was conducted as per industry standards taking into consideration the annual metal production, commercial Metminco
metal or commodity price(s) exchange rates, transportation and treatment charges, penalties, terms and predicted metal prices. The revenue estimate utilised the following assumptions:* A gold and silver prices of
net smelter returns, etc. US$1,300/oz and US$18 /oz respectively (Within the range of industry expectations and Broker and Bank predictions. The gold
The derivation of assumptions made of metal or commodity price(s), for the principal metals, minerals and co-products. price used is close to the moving 5 year average gold price);
* The average processed head grade of 3.29 g/t and 2.56 g/t for gold and silver respectively (from the mine and processing
schedules);
* Metallurgical recoveries of 92 % and 60 % for gold and silver production respectively (determined from metallurgical
testwork);
* Metal payability factors of 96.6 % and 99.0 % for gold and silver respectively (from historical figures and discussions with
refiners);
* Refinery and transport and insurance charges of US$4.50/ payable ounce (based on previous study estimates); and
* Royalty of 4 % of the net smelter return (based on the Miraflores licence and Existing Aporte contract expiry (2019) prior to
commencement of production in late 2019 when the licence will revert to the normal system of concession contracts which are
subject to a 4% royalty only).
Market assessment The demand, supply and stock situation for the particular commodity, consumption trends Metminco has been actively monitoring the market trends for the gold industry. Modifying factors such as gold price, payable Metminco
and factors likely to affect supply and demand into the future. metal factors, and transport and refining costs are within the ranges predicted by the industry analysts. Gold and silver are
A customer and competitor analysis along with the identification of likely market windows readily traded around the world. These markets are considered mature and with reputable smelters and refiners located throughout
for the product. the world.
Price and volume forecasts and the basis for these forecasts.
For industrial minerals the customer specification, testing and acceptance requirements prior to a supply contract.
Economic The inputs to the economic analysis to produce the net present value (NPV) in the study, the source and confidence of these economic inputs including estimated inflation, discount rate, etc. Metminco developed a comprehensive financial model for the economic evaluation of the Miraflores Gold Project. The financial Metminco
NPV ranges and sensitivity to variations in the significant assumptions and inputs. model incorporates the modifying factors delivered by the Miraflores Feasibility Study. The key assumptions utilised in the
financial model are listed as follows:* Gold and silver prices of US$1,300 /oz and US$18 /oz respectively;
* Net smelter return as per the Revenue estimate;
* Operating and capital costs as per industry standards;
* Working capital and inventory management as per industry standards;
* Debt and financing activities are excluded from the net present cost estimate;
* All cash flows were treated in real terms, therefore, no inflation or escalation factors were applied;
* Discount Rate of 8%;
* Site operating cost of US$ 53.46 /processed t; and
* Income tax of 33%.
The Miraflores Feasibility Study delivered a Net Present Value of US$72.3 million after tax and an Internal Rate of Return of
25%.
Social The status of agreements with key stakeholders and matters leading to social licence to operate. The Miraflores Gold Project is located in the municipality of Quinchía. The municipality obtained its name from the fortresses PORTEX
in Guadua that were called "Quinchos". In 1966, Quinchía became part of the Risaralda Department. The basic economy of the
region can be divided in two activities: agricultural and mining activities. Quinchía is characterised by being a municipality
with an agricultural vocation, with small land divisions and with mining potential. However, there is a lack of attention to
land uses and environmental regulations within the agricultural sector. For the primary information, the results of the surveys
undertaken in 2013 were used. This information will be updated when the new social baseline study is completed at the end of
2017. For the study undertaken in 2013, the direct influence area of the project included the villages of Miraflores, Guerrero,
Aguas Claras, Veracruz, Agua Salada, La Esmeralda and Los Medios. According to the social base line information for the project
carried out in 2013, there were 289 families in the direct influence area, with a total population of 1,152 inhabitants. The
village that has the largest number of inhabitants was Miraflores with 410 inhabitants. Community base line studies, social
impact assessments and community development plans will be complete by the end of 2017.
Other To the extent relevant, the impact of the following on the project and/or on the estimation The main risks for the development of the Miraflores Gold Project identified by the feasibility study are described as Metminco CPs
and classification of the Ore Reserves: follows:* Social disruptions or community unacceptance of the project;
Any identified material naturally occurring risks. * Gold price;
The status of material legal agreements and marketing arrangements. The status of governmental agreements and approvals critical to the viability of the project, * Increase of the predicted capital or operating cost;
such as mineral tenement status, and government and statutory approvals. There must be reasonable grounds to expect that all necessary Government approvals will be received within the timeframes anticipated in the Pre-Feasibility or Feasibility study. Highlight and discuss the materiality of any unresolved matter that is dependent on a third party on which extraction of the reserve is contingent. * Not achieving the target production because of mining or processing issues. E.g. reduced ore grade, not achieving the design
processing throughput or gold recovery, etc;
* Existing Miraflores licence contract is not renewed or the licence does not revert to the normal system of concession
contracts which are subject to a 4% royalty only);
* Geotechnical instability; and
* Unpredicted water levels in the underground mine.
Other than the Aporte contract for the Miraflores licence no other material agreement is in effect at this time. The Miraflores
Project Environmental Impact Assessment Study (2013) did not previously have an official Terms of Reference (ToR), instead, the
baseline data collection and impact assessment development was progressed under a generic ToR for open pit mining. This generic
ToR was issued by National Authority of Environmental Licenses (ANLA) in 2012. In July 2016, a new ToR was issued by ANLA. The
Project submitted a request to CARDER for an official ToR for the new underground Project concept. The new ToR was obtained in
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