REG - SolGold PLC - Cascabel Pre-Feasibility Study
20/04/2022 07:00
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RNS Number : 6712I SolGold PLC 20 April 2022
20 April 2022
SolGold plc
("SolGold" or the "Company")
Pre-Feasibility Study supports long-life, high-value Cascabel project
The Board of Directors of SolGold (LSE & TSX: SOLG) is pleased to announce
the results of the Pre-Feasibility Study ("PFS") for the Cascabel project,
held by Exploraciones Novomining S.A. ("ENSA"), an 85% owned subsidiary of
SolGold.
The PFS confirms the Cascabel project's world class, Tier 1 potential to be a
large, low-cost, and long-life mining operation that is based on achievable,
proven, and tested mining and processing assumptions. Once constructed,
Cascabel is expected to be a top 20 1 South American copper & gold mine
benefiting from a high-grade core, advantageous infrastructure and an
increasingly investor friendly government. The mine is expected to produce a
clean copper-gold-silver concentrate, to be sold to Asian and European
smelters as part of a project construction financing package.
KEY HIGHLIGHTS
Ø Estimated US$5.2bn pre-tax Net Present Value ("NPV") and 25.3% Internal
Rate of Return ("IRR")
Ø Estimated US$2.9bn after-tax NPV, 19.3% IRR and 4.7 year payback period
from start of processing 2 (, 3 , 4 , 5 )
Ø After-tax NPV would be US$4.1bn (US$7.9bn pre-tax) and IRR 23.4% (30.5%
pre-tax) at current spot commodity prices 6
Ø Estimated average production 7 of 132ktpa of copper, 358kozpa of gold and
1Mozpa of silver - 212ktpa copper equivalent ("CuEq") 8 - with peak 9
copper production of 210ktpa (391ktpa CuEq(8))
Ø Initial project Life-of-Mine ("LOM") All-In-Sustaining Cost ("AISC") of
US$0.06/lb of copper, placing Cascabel well within the first decile of the
copper industry cost curve(1)
Ø On achieving nameplate capacity, average of approximately 190ktpa of
copper, 680kozpa of gold and 1.3Mozpa of silver (>330ktpa CuEq(8)) over
initial 5 years at an average negative AISC of US$(1.38)/lb
Ø Estimated pre-production capital expenditure of US$2.7bn for the initial
cave development, first process plant module and infrastructure
Ø Initial Mineral Reserve of 558Mt containing 3.3Mt Cu @ 0.58%, 9.4Moz Au @
0.52g/t and 30Moz Ag @ 1.65g/t over an initial 26-year mine life
Ø Potential mine life upside in excess of 50 years following initial LOM 10
Ø Annual after-tax free cash flow ("FCF") to average US$740m(5, 7), peaking
at over US$1.6bn(5, 9)
Ø Average annual EBITDA 11 of nearly US$1.2bn(5, 7), peaking at over
US$2.4bn(5, 9)
Ø Additional optimisations being progressed for a PFS Addendum planned for
completion in H2 CY22
Ø Cascabel project Definitive Feasibility Study ("DFS") planned for
completion in H2 CY23
Ø SolGold will host a PFS presentation on 20 April 2022 at 9:30am London
time. Please register at:
https://www.investormeetcompany.com/solgold-plc/register-investor
(https://www.investormeetcompany.com/solgold-plc/register-investor)
SolGold's MD & CEO, Darryl Cuzzubbo, commented on the PFS:
"I am extremely pleased to announce the results of the pre-feasibility study
for the proposed Cascabel mine in Ecuador. In essence, it supports what we
have believed all along - that this project is no ordinary mining asset.
Cascabel will be a significant, multi-decade and very low cost producer of
copper that can help enable Ecuador's emergence as the next copper frontier at
a time when the world needs copper the most as we transition to a net zero
carbon emissions future.
This project is economically attractive and based upon assumptions that we
believe can be delivered upon. There is further upside that will be explored
over the coming months and the next phase of the project as we seek the
necessary Government approvals to move into early works and execution.
Such a project will create over 6,000 indirect and direct jobs, not to mention
will bring significant royalty and tax revenue benefiting all Ecuadorians."
SolGold's Chair of the Cascabel Project Steering Committee, Keith Marshall,
commented on the PFS:
"I am very encouraged with the pre-feasibility study. It offers, what I
consider to be, a robust but flexible solution for the development of the
underground mine at Cascabel. The study focused on the "right sizing" of the
project, with the objective of reducing the technical and execution risk. It
also provides a straightforward approach to mining the deposit that optimises
selectivity, without compromising any of the resource and maintaining
optionality.
I am confident that the study lays the solid groundwork for the next steps in
the Cascabel project. I am particularly looking forward to progressing the
study work and being able to expand our operational activities in Ecuador."
Former CEO and now Non-Executive Director and a direct and indirect
shareholder with 12.9% of SolGold Nick Mather said:
"The various upsides at Cascabel offered by additional mineralised porphyry
systems still being outlined and assessed, potential for additional production
and treatment plant capacity, refinements to the mine plan, continued low cost
of capital and what I see as the opportunity for long run higher copper prices
as the world electrifies, suggest that this project indeed has considerable
further upside to be evaluated.
More importantly, SolGold's comprehensive exploration footprint and ongoing
exploration success will, in my view, establish not just one project of
significance but a string of them throughout Ecuador, defining a globally
important copper province and the potential to have a significant impact on
Ecuador's economy. In a world of visionary enterprise looking to address
escalating metal demand to facilitate global electrification and limit global
warming to 2(o)C in an economically, socially and environmentally just manner,
SolGold's position is unique."
References to figures relate to the version visible in PDF format by clicking
the link below:
http://www.rns-pdf.londonstockexchange.com/rns/6712I_1-2022-4-19.pdf
(http://www.rns-pdf.londonstockexchange.com/rns/6712I_1-2022-4-19.pdf)
SUMMARY OF CASCABEL PFS RESULTS
Economic Evaluation
The PFS investigated multiple scenarios in order to identify an initial base
case to take forwards, with additional resources and upside to be
investigated, supporting the next phase optimisations, and confirming the
application of block cave mining to the Alpala underground resource.
Attractive initial cave project, potentially delivering:
Ø Initial 26-year operating life and 25Mtpa process plant throughput
Ø Total ore production of 558Mt, containing 3.3Mt Cu, 9.4Moz Au and 30Moz Ag
Ø Process plant producing 2.8Mt Cu, 7.6Moz Au and 21.7Moz Ag over the initial
26 year life of the project
Ø Average annual production in five years following initial cave ramp up of
190ktpa Cu, 680kozpa Au and 1.3Mozpa Ag
Ø Average annual production(7) for initial cave of 132ktpa Cu, 358kozpa Au
and 1.0Mozpa Ag
Ø All in sustaining cost of US$0.06 /lb Cu over the initial 26 year mine
project
Ø Estimated initial capital expenditure of US$2.7bn for the initial cave
development, first process plant module and infrastructure
Ø Payback of 4.7 years from start of operations
Ø After-tax NPV and IRR of US$2.9bn and 19.3%, respectively
An initial Mineral Reserve estimate for the Cascabel project of 558Mt, with
0.58% Cu, 0.52 g/t Au and 1.65 g/t Ag for 3.3Mt Cu, 9.4Moz Au and 30Moz Ag.
Exploration success and future potential with unexplored areas identified for
future drilling and extension of additional reported resources.
The PFS underpins the Mineral Reserve estimate and further optimisations of
the mine and process plant are expected to deliver additional value.
The availability of low-cost hydropower, on site water resources, the use of
targeted underground mining, process plant configuration, the potential use of
an electric mining fleet, concentrate transport via a pipeline are expected to
deliver a lower carbon footprint compared to projects which do not have these
benefits.
The Cascabel project DFS is planned for completion in H2 CY23, with additional
optimisations including:
Ø Further investigations into process plant feed rates, including additional
resources such as the Tandayama-Ameríca resource
Ø Capital cost reduction opportunities
Ø Alpala underground mine design optimisation, mine sequence and scheduling,
application of macro blocks
Ø Process plant design optimisation, following additional test work
Ø Hydropower project development
Key PFS outcomes Base Case AET - 2 12 Spot Prices (6)
(100% project basis)
Economic assumptions Copper (US$/lb) 3.60 4.20 4.74
Gold (US$/oz) 1,700 1,933 1,933
Silver (US$/oz) 19.9 24.5 24.5
Government royalty rate 3% (base & precious metals)
Ecuador tax rates 13 15% profit share / 25% corporate
Production Throughput 25 Mtpa
Initial project LOM 26 years
Total ore mined 558 Mt
Average copper grade / recovery 0.58% / 87.1%
Average gold grade / recovery 0.52 g/t / 72.1%
Average silver grade / recovery 1.65 g/t / 65.7%
Total CuEq produced(8) 4.5 Mt
Total copper produced 2.8 Mt
Total gold produced 7.6 Moz
Total silver produced 21.7 Moz
Annual CuEq production (peak/average)(7, 8, 9, 14 ) 391 kt / 212 kt
Annual copper production (peak/average)(7, 9, 14) 210 kt / 132 kt
Annual gold production (peak/average)(7, 9, 14) 829 koz / 358 koz
Annual silver production (peak/average)(7, 9, 14) 1.4 Moz / 1.0 Moz
Capital Pre-production US$2,746m
Post-production US$2,136m
Operating Average net cash cost (US$/lb Cu) (0.40) (0.66) (0.63)
Average AISC (US$/lb Cu) 0.06 (0.20) (0.17)
Financials Pre-tax NPV ((8%)) US$5,241m US$6,915m US$7,862m
Pre-tax IRR 25.3% 28.8% 30.5%
After-tax NPV ((8%)) US$2,907m US$3,781m US$4,083m
After-tax IRR 19.3% 22.2% 23.4%
Capital payback period 4.7 years 4.3 years 4.2 years
Total FCF generation US$14,413m US$16,080m US$16,278m
Average annual FCF US$740m US$856m US$863m
Average annual FCF (first 5yrs post ramp-up) US$1,345m US$1,575m US$1,699m
Total EBITDA US$24,003m US$29,178m US$32,249m
Average annual EBITDA US$1,156m US$1,396m US$1,540m
Average annual EBITDA (first 5yrs post ramp-up) US$2,040m US$2,419m US$2,622m
Table 1: Economic and operating summary
An accelerated energy transition ("AET") would increase copper demand growth
with a faster uptake of electric vehicles and renewable energy generation,
both industries having high copper intensities. The Cascabel project
concentrate is expected to be a clean high value concentrate, with low levels
of deleterious elements, sought after by smelters globally. Wood Mackenzie's
AET-2 long-term copper price forecast is US$4.20/lb and is based on
projections that conform to a 2-degree or lower global warming scenario. At
this price, and assuming current spot prices for gold and silver, SolGold
estimates an after-tax project NPV of US$3.8bn and 22% IRR.
Project Description
Cascabel is located in northern Ecuador approximately three hours' drive north
of Quito, the capital city of Ecuador. Access is via sealed highways through
the closest major centre of Ibarra, located approximately 80 km south of the
property. Infrastructure in the region and throughout Ecuador is generally of
a high standard, with excellent road access, power, and water sources readily
available in the local area.
The PFS process commenced in 2020 with a revision to scope in 2021 to
investigate the 'right' capacity block cave for the Alpala underground, and
corresponding right sizing and expansion of the process plant to suit.
Extension opportunities, alternate mine access methods and tailings storage
facility options were also considered during the PFS.
The block cave will be mined with Load Haul and Dump equipment to one of two
primary crushing stations on the trucking level. Both diesel and battery
electric vehicles ("BEV") were assessed during the PFS, including the
potential benefits for mine ventilation requirements. For the PFS the block
cave design was based on diesel vehicles in all applications except BEV for
the production trucking loop. Further investigations for electrification are
proposed in the DFS.
Mineral Resource Estimate ("MRE") 15
The Alpala porphyry copper-gold-silver deposit, at a cut-off grade of 0.21%
CuEq, comprises 2,663 Mt at 0.53% CuEq 16 in the Measured plus Indicated
categories, which includes 1,192 Mt at 0.72% CuEq in the Measured category and
1,470 Mt at 0.37% CuEq in the Indicated category. The Inferred category
contains an additional 544 Mt at 0.31% CuEq.
The MRE comprises a contained metal content of 9.9 Mt Cu and 21.7 Moz Au in
the Measured plus Indicated categories, which includes 5.7 Mt Cu and 15.0 Moz
Au in the Measured category, and 4.2 Mt Cu and 6.6 Moz Au in the Indicated
category. The Inferred category contains an additional 1.3 Mt Cu and 1.9 Moz
Au.
Cut-off grade Mineral Resource category Mt Grade Contained metal
CuEq Cu Au Ag CuEq Cu Au Ag
(%) (%) (g/t) (g/t) (Mt) (Mt) (Moz) (Moz)
0.21% Measured 1,192 0.72 0.48 0.39 1.37 8.6 5.7 15.0 52.4
Indicated 1,470 0.37 0.28 0.14 0.84 5.5 4.2 6.6 39.8
Measured + Indicated 2,663 0.53 0.37 0.25 1.08 14.0 9.9 21.7 92.2
Inferred 544 0.31 0.24 0.11 0.61 1.7 1.3 1.9 10.6
Planned dilution 5 0.00 0.00 0.00 0.00 0.0 0.0 0.0 0.0
Table 2: Cascabel project Alpala underground mineral resource estimate
Notes:
1. Mrs. Cecilia Artica, SME Registered Member, Principal Geology
Consultant of Mining Plus, is responsible for this Mineral Resource statement
and is an "independent Qualified Person" as such term is defined in NI 43-101.
2. The Mineral Resource is reported using a cut-off grade of
0.21% CuEq calculated using [copper grade (%)] + [gold grade (g/t) x 0.613].
3. The Mineral Resource is considered to have reasonable
prospects for eventual economic extraction by underground mass mining such as
block caving.
4. Mineral Resources are not Mineral Reserves and do not have
demonstrated economic viability.
5. The statement uses the terminology, definitions and
guidelines given in the CIM Standards on Mineral Resources and Mineral
Reserves (May 2014) as required by NI 43-101.
6. MRE is reported on a 100 percent basis within an optimised
shape.
7. Figures may not compute due to rounding.
Mineral Reserve Estimate
The Mineral Reserves have been estimated for a block caving method and take
into account the effect of mixing of indicated material with dilution from low
grade or barren material originating from within the caved zone and the
overlying cave backs. The initial Mineral Reserve represents only 21% of
Measured and Indicated Resources tonnes and approximately 38% of contained
metal. 17
Mineral Reserve category Mt Grade Contained metal
Cu Au Ag Cu Au Ag
(%) (g/t) (g/t) (Mt) (Moz) (Moz)
Probable 558 0.58 0.52 1.65 3.26 9.37 30
Total 558 0.58 0.52 1.65 3.26 9.37 30
Table 3: Cascabel project Alpala underground mineral reserve estimate
Notes:
1. Effective date of the Mineral Reserves is 31 March 2022.
2. Only Measured and Indicated Mineral Resources were used to
report Probable Mineral Reserves.
3. Mineral Reserve reported above were not additive to the
Mineral Resource and are quoted on a 100% project basis.
4. The Mineral Reserve is based on the 18 March 2020 Mineral
Resource.
5. Totals may not match due to rounding.
6. The statement uses the terminology, definitions and
guidelines given in the CIM Standards on Mineral Resources and Mineral
Reserves (May 2014) as required by NI 43-101.
7. The Mineral Reserve Estimate as of 31 March 2022 for Alpala
was independently verified by Aaron Spong FAusIMM CP (Min) who is a full-time
employee of Mining Plus. Mr Spong fulfils the requirements to be a "Qualified
Person" for the purposes of NI 43-101 and is the Qualified Person under NI
43-101 for the Mineral Reserve.
Mining
Access to the Alpala underground mine is expected to be via twin declines
commencing from a boxcut located near the surface and the first lift near the
300mRL. Mining is planned to be a Block Caving mining method, whilst all
horizontal development will be undertaken utilising conventional drill and
blast practices. The vertical development for the main ventilation rises will
be excavated using blind sinking methods.
Mine production design for the block cave incorporated findings from detailed
geotechnical and hydrogeological assessments, to determine the height of draw
based on recommended draw bell spacing. Lower grade draw points on the west of
the footprint were included in preference to those in the east to generate a
smaller span option. Current geotechnical guidelines inform to commencing the
cave on the eastern side, expanding to the west, causing a small delay in
higher grade draw points in the centre.
Initial access to the footprint will be via an early access blind sunk shaft
to the southwest of the deposit. This will link to a twin decline mined from
the north of the deposit with a portal adjacent to the process plant. In the
longer term the decline will be the main access path.
The shaft is used to gain early access to the footprint, where it is used to
mine long lead time excavations on the footprint, primarily the crusher
chamber and access to the collection chamber under the crusher chamber.
The declines are accessed from two separate portals. The second portal
location is for the conveyor only, located in proximity to the process plant
location. The first portal is located further to the south to reduce the
critical path distance to the footprint. An overview concept of the lateral
and vertical accesses is shown in the figure below.
Figure 1: Isometric view of the lateral and vertical accesses in the Cascabel
project Alpala underground mine
The portals are located in a boxcut approximately 3,000m from the orebody.
They have been positioned in close proximity to major surface infrastructure
including the processing plant due to the nature of the surrounding terrain.
It allows a direct route for the ore to the processing plant without the
requirement to build surface haulage routes in mountainous terrain. This
eliminates material handling issues that would be apparent if the portals were
located elsewhere.
The mine design has been developed to enable all infrastructure including the
primary crushers to be off set from the cave abutment zone in accordance with
geotechnical recommendations. The infrastructure design in this PFS has
assumed loader tramming from drawpoint to ore pass, to loadout stations for a
truck haulage loop, terminating at the tip points for the crusher feed bin/s,
located outside the caving zone.
Figure 2: In footprint proposed truck haulage level
In addition to the initial access shaft and the access and conveyor declines,
the PFS design includes shafts for ventilation. Each of these shafts is
designed to suit the ventilation requirements for the steady-state operating
mine. The early access shaft will also become a source of fresh air intake
once all early access requirements are completed, and the decline development
reaches the footprint.
Sufficient refuge chambers will be located in disused stockpiles and cuddies
to accommodate the number of personnel working underground (expected to be
highest during the construction phase when mechanical/civil works are being
undertaken to install the materials handling system in addition to underground
miners).
The twin decline provides a second means of egress, with the early access
shaft another potential egress method. During the development of the
footprint, small boxholed escapeway rises may be required between the undercut
and extraction levels depending on the schedule.
Process Plant
The crushed ore from the underground primary crushers will be conveyed to the
surface and fed to the secondary crushing circuit. The product from the
secondary crushing area will be conveyed to the fine ore stockpile, and
subsequently reclaimed to the high-pressure grinding rolls ("HPGR") circuit.
The product from the HPGR circuit will report to a grinding circuit consisting
of ball mills, each operating in closed circuit with a hydrocyclone cluster.
Figure 3: Process plant proposed secondary and HPGR crushing system
The ground product will report to conventional rougher flotation. The rougher
concentrate will be reground using stirred mills and will be subsequently
upgraded within the cleaner flotation circuit to produce a saleable flotation
concentrate. Cleaner flotation tailings are further processed through
conventional flotation cells to recover gold and silver contained within
pyrite. Pyrite concentrate is thickened and subjected to a conventional
cyanide leach/carbon in pulp ("CIP") extraction followed by an Anglo American
Research Laboratory ("AARL") gold recovery circuit. Sludge electrowinning
cells recover gold and silver from eluate for smelting to doré bars in the
gold room.
The flotation concentrate will be thickened using a high-rate thickener and
then pumped via a pipeline to the Esmeraldas port facility. Two tailings
streams will be produced from the flotation circuit, namely the rougher
tailings and the cleaner scavenger (or pyrite) tailings, requiring disposal
within the tailings storage facility ("TSF"). These tailings streams will be
thickened separately using high-rate thickeners prior to independent pumping
to, and disposal to at the TSF. The TSF design is based on regulatory and best
practice standards and guidelines, including ANCOLD 2019 and the Global
Industry Standard on Tailings Management established by The International
Council on Mining and Metals ("ICMM"), the United Nations Environment
Programme ("UNEP") and the Principles for Responsible Investment ("PRI").
Figure 4: Simplified processing flowsheet for Cascabel project
The concentrate slurry will be received by an additional thickening stage at
the Port facility. The concentrate will then be dewatered using Larox
continuous cloth vertical tower filters. The resulting filter cake will be
stockpiled within a covered facility until reclaimed for seaborne
transportation.
Process water will be recycled from the thickener overflows and supplemented
with treated water from the underground mine. Additional make-up water to the
process water system will be provided from the raw water supply drawn from the
on-site catchment dam. Raw water will be also used for potable water
production, gland seal service for the slurry pumps, cooling water make-up,
reagent preparation, and fire water supply.
Indicative Production Profile
Following mining optimisation studies, the production profile for the Cascabel
project is based on a process plant nameplate capacity of 25Mtpa from the
underground block cave at the Alpala deposit. The project is expected to reach
nameplate capacity in the fourth year from the start of process plant
operations with first ore expected in mid-2029.
Initial process plant production totalling 2.8Mt of copper, 7.6Moz of gold and
21.7Moz of silver.
Figure 5: Production profile
The PFS mine plan targets the Alpala high grade core with copper grades
expected to average over 0.75% (~1.35% copper equivalent) over the first 10
years of production.
Figure 6: Feed grade profile
Metal recoveries to the copper gold flotation concentrate are based on
equations fitted to the locked cycle test work ("LCT") results and in general
indicate good to very good fits of the data.
Copper concentrate grade is based on mass recovery to concentrate and copper
recovery to concentrate.
Metal recoveries to doré are estimated based on limited test work results.
Whilst the pyrite concentrate is amenable to cyanidation, but further test
work is required to further define the metal recovery to the pyrite
concentrate and the metal recoveries to doré.
Capital Cost Estimate
The capital cost estimate meets the requirements for a pre-feasibility study
consistent with the Association for the Advancement of Cost Engineering ("AACE
International") cost estimating guidelines for a Class 4 estimate. The
estimate accuracy range of ±25% is defined by the level of project
definition, the time available to prepare the estimate and the amount of
project cost data available.
The total capital cost estimate for the Cascabel project is summarised in
Table 4.
Area Pre-Production Post-Production
US$M US$M
Mine 900 748
Process plant 465 219
Tailings storage facility 309 695
Port facility 39 15
Surface infrastructure 175 42
Indirect costs 467 113
Contingency 391 304
Total 2,746 2,136
Table 4: Cascabel project capital cost estimate
Pre-production capital totals US$2.7bn and includes all costs up to first ore
to the process plant. Post-production costs required to achieve production
ramp-up to design capacity and sustaining capital are estimated to total
US$2.1bn.
Operating Cost Estimate
The Cascabel block cave operation is estimated to have a low unit mining cost
(operating and sustaining) of US$6.51/t. Total average gross unit cash costs
inclusive of treatment charges and government royalties are US$1.72/lb of
payable copper. AISC costs inclusive of gold and silver by-product credits are
estimated at US$0.06/lb Cu over the 26-year mine life and averaging
US$(1.38)/lb in the first five years from achieving nameplate capacity,
positioning Cascabel well within the first decile of the global copper
industry cost curve. Net cash costs are estimated at US$(0.40)/lb Cu. Negative
cash costs reflect significant precious metals by-product contributions,
primarily gold, providing downside protection to lenders.
Figure 7: 2032 Copper industry cash cost curve 18
Cash flow generation
Cascabel's indicative production profile and low operating costs are expected
to support strong after-tax free cash flow generation totalling nearly
US$14.5bn over the 26-year initial mine life and averaging US$740m annually.
Figure 8: After-tax free cash flow profile
Environmental, Social and Governance ("ESG")
SolGold is committed to the social and environmental sustainability of its
projects and being a leader in this space within Ecuador. As SolGold advances
the Cascabel project, clearly defined criteria will be reported as studies
advance into development and operations.
As a minimum, SolGold considers the following criteria immediately applicable
not only from a corporate perspective but also to its activities within
countries where SolGold has interests:
· Environment: managing carbon footprint and use of renewable resources
· Social: encourages diversity and pays fair wages
· Governance: Committed to complying with UK Corporate Governance Code
from mid-2022
SolGold has built strong community partnerships over the last decade in the
country and has an extensive engagement process that will be continued through
the Environmental Impact Assessment ("EIA") stage.
Ecuadorian law requires that an EIA be conducted prior to authorisation of
construction and operations. In addition to Ecuadorian requirements, SolGold
will ensure that the EIA is compliant with appropriate international
standards. At minimum, these would include consideration to the applicable
Equator Principles, the International Finance Corporation ("IFC") Performance
Standards and Environmental, Health, and Safety Guidelines, as well as
Sustainable Development Goals ("SDG") which align with the development of the
Cascabel project and the effected regions.
In anticipation of advancing the permitting processes within Ecuador,
environmental baseline studies within the Cascabel tenement are well advanced.
SolGold will be evaluating several options as part of the DFS to manage and
minimise the project's overall carbon footprint. These include maximising
power from hydro generation sources, further investigations on
electrification, assessing process integration to optimise operational
efficiency, among other initiatives.
SolGold is continuing on its journey toward compliance with the UK Corporate
Governance Code and intends to be compliant with all aspects of the code from
mid-2022.
Sensitivity Analysis
A sensitivity analysis was performed on the base case after-tax NPV to examine
the sensitivity to commodity prices, capital costs and operating costs.
The Cascabel project is most sensitive to changes in the copper and gold
prices as well as capital costs; less sensitive to changes in operating costs,
and least sensitive to changes to silver prices. Figure 9 and Table 5 show the
results of the after-tax analysis.
Figure 9: After-tax sensitivity analysis (NPV(8%))
After-tax NPV Copper Price (base US$3.60/lb)
of project (US$M)
-30% -20% -10% 0% +10% +20% +30%
Discount Rate 5% 3,177 3,795 4,398 5,007 5,615 6,119 6,263
6% 2,597 3,134 3,659 4,189 4,718 5,168 5,336
7% 2,105 2,574 3,033 3,496 3,958 4,360 4,541
8% 1,687 2,098 2,501 2,907 3,312 3,672 3,857
9% 1,331 1,693 2,047 2,405 2,762 3,084 3,268
10% 1,028 1,347 1,660 1,976 2,291 2,581 2,760
Gold Price (base US$1,700/oz)
-30% -20% -10% 0% +10% +20% +30%
Discount Rate 5% 3,829 4,223 4,615 5,007 5,399 5,800 6,030
6% 3,148 3,497 3,843 4,189 4,534 4,888 5,111
7% 2,574 2,882 3,189 3,496 3,801 4,114 4,327
8% 2,088 2,362 2,634 2,907 3,178 3,456 3,657
9% 1,675 1,919 2,162 2,405 2,647 2,894 3,082
10% 1,324 1,543 1,760 1,976 2,193 2,413 2,587
Table 5: Metal price and discount rate sensitivity analysis
Outstanding Opportunities and Upside Options
The Cascabel project optimisations which will be progressed include:
Ø Further investigations into process plant feed rates, including additional
resources such as the Tandayama-Ameríca resource
Ø Capital cost reduction opportunities
Ø Alpala underground mine design optimisation, mine sequence and scheduling,
application of macro blocks
Ø Process plant design optimisation, following additional test work
Ø Hydropower project development
Next Steps
The Cascabel project DFS is planned for completion in H2 CY23. SolGold plc is
currently progressing additional optimisations in preparation for the DFS that
will be included in a PFS Addendum planned for completion in H2 CY22.
SolGold plans to engage with the relevant government departments from Q2 CY22
to commence fiscal discussions and the permitting process.
SolGold intends to release a National Instrument 43-101 ("NI 43-101")
technical report on Cascabel within 45 days of this release (the "Technical
Report").
Qualified Persons
The Qualified Persons for the "Cascabel Project, Ecuador, NI43-101 Technical
Report on Pre-Feasibility Study", that has an effective date of 31 March 2022,
are detailed in the table below.
Category Name Company
Mineral Resource Estimate Cecilia Artica, BSc MSc RMSME (formerly) Mining Plus
Mineral Reserve Estimate Aaron Spong, BEng FAusIMM CP (Min) Mining Plus
Environment, Social, Tailings & Water Tim Rowles, BSc MSc FAusIMM CP RPEQ Knight Piésold Pty Ltd
Metallurgy Peter Gron, BSc FAusIMM Wood plc
Process Plant & Infrastructure Steve Klose, BEng MSc FAusIMM Wood plc
Financial Evaluation Kirk Hanson, MBA PE Wood plc
Marketing Christopher Heath, BSc Hons PhD FAusIMM Wood Mackenzie
By order of the Board
Dennis Wilkins
Company Secretary
Certain information contained in this announcement would have been deemed
inside information.
CONTACTS
Dennis Wilkins
SolGold Plc (Company Secretary) Tel: +61 (0) 417 945 049
dwilkins@solgold.com.au (mailto:dwilkins@solgold.com.au)
Ingo Hofmaier
SolGold Plc (Acting CFO) Tel: +44 (0) 20 3823 2130
ihofmaier@solgold.com.au (mailto:ihofmaier@solgold.com.au)
Fawzi Hanano / Lia Abady
SolGold Plc (Investors / Communication) Tel: +44 (0) 20 3823 2130
fhanano@solgold.com.au (mailto:fhanano@solgold.com.au) / labady@solgold.com.au
(mailto:labady@solgold.com.au)
Tavistock (Media)
Jos Simson / Gareth Tredway Tel: +44 (0) 20 7920 3150
See www.solgold.com.au (http://www.solgold.com.au) for more information.
Follow us on twitter @SolGold plc
CAUTIONARY NOTICE
News releases, presentations and public commentary made by SolGold plc (the
"Company") and its Officers may contain certain statements and expressions of
belief, expectation or opinion which are forward looking statements, and which
relate, inter alia, to interpretations of exploration results to date and the
Company's proposed strategy, plans and objectives or to the expectations or
intentions of the Company's Directors, including the plan for developing the
Project currently being studied as well as the expectations of the Company as
to the forward price of copper. Such forward-looking and interpretative
statements involve known and unknown risks, uncertainties and other important
factors beyond the control of the Company that could cause the actual
performance or achievements of the Company to be materially different from
such interpretations and forward-looking statements.
Accordingly, the reader should not rely on any interpretations or
forward-looking statements; and save as required by the exchange rules of the
TSX and LSE or by applicable laws, the Company does not accept any obligation
to disseminate any updates or revisions to such interpretations or
forward-looking statements. The Company may reinterpret results to date as
the status of its assets and projects changes with time expenditure, metals
prices and other affecting circumstances.
This release may contain "forward‑looking information" within the meaning of
applicable Canadian securities legislation. Forward‑looking information
includes, but is not limited to, statements regarding the Company's plans for
developing its properties. Generally, forward‑looking information can be
identified by the use of forward-looking terminology such as "plans",
"expects" or "does not expect", "is expected", "budget", "scheduled",
"estimates", "forecasts", "intends", "anticipates" or "does not anticipate",
or "believes", or variations of such words and phrases or state that certain
actions, events or results "may", "could", "would", "might" or "will be
taken", "occur" or "be achieved".
Forward‑looking information is subject to known and unknown risks,
uncertainties and other factors that may cause the actual results, level of
activity, performance or achievements of the Company to be materially
different from those expressed or implied by such forward‑looking
information, including but not limited to: transaction risks; general
business, economic, competitive, political and social uncertainties; future
prices of mineral prices; accidents, labour disputes and shortages and other
risks of the mining industry. Although the Company has attempted to identify
important factors that could cause actual results to differ materially from
those contained in forward-looking information, there may be other factors
that cause results not to be as anticipated, estimated or intended. There
can be no assurance that such information will prove to be accurate, as actual
results and future events could differ materially from those anticipated in
such statements. Factors that could cause actual results to differ
materially from such forward-looking information include, but are not
limited to, risks relating to the ability of exploration activities (including
assay results) to accurately predict mineralisation; errors in management's
geological modelling and/or mine development plan; capital and operating costs
varying significantly from estimates; the preliminary nature of visual
assessments; delays in obtaining or failures to obtain required governmental,
environmental or other required approvals; uncertainties relating to the
availability and costs of financing needed in the future; changes in equity
markets; inflation; the global economic climate; fluctuations in commodity
prices; the ability of the Company to complete further exploration activities,
including drilling; delays in the development of projects; environmental
risks; community and non-governmental actions; other risks involved in the
mineral exploration and development industry; the ability of the Company to
retain its key management employees and skilled and experienced personnel; and
those risks set out in the Company's public documents filed on SEDAR at
www.sedar.com (http://www.sedar.com) . Accordingly, readers should not place
undue reliance on forward‑looking information. The Company does not
undertake to update any forward-looking information, except in accordance with
applicable securities laws.
The Company and its officers do not endorse, or reject or otherwise comment on
the conclusions, interpretations or views expressed in press articles or
third-party analysis, and where possible aims to circulate all available
material on its website.
The Company recognises that the term World Class is subjective and for the
purpose of the Company's projects the Company considers the drilling results
at the Alpala porphyry copper-gold deposit at its Cascabel project to
represent intersections of a World Class deposit on the basis of comparisons
with other drilling intersections from World Class deposits, some of which
have become, or are becoming, producing mines and on the basis of available
independent opinions which may be referenced to define the term "World Class"
(or "Tier 1").
The Company considers that World Class deposits are rare, very large, long
life, low cost, and are responsible for approximately half of total global
metals production. World Class deposits are generally accepted as deposits of
a size and quality that create multiple expansion opportunities and have or
are likely to demonstrate robust economics that ensure development
irrespective of position within the global commodity cycles, or whether or not
the deposit has been fully drilled out, or a feasibility study completed.
Standards drawn from industry experts (1Singer and Menzie, 2010; 2Schodde,
2006; 3Schodde and Hronsky, 2006; 4Singer, 1995; 5Laznicka, 2010) have
characterised World Class deposits at prevailing commodity prices. The
relevant criteria for World Class deposits, adjusted to current long run
commodity prices, are considered to be those holding or likely to hold more
than 5 million tonnes of copper and/or more than 6 million ounces of gold with
a modelled net present value of greater than US$1billion.
The Company cautions that the Cascabel project remains an early-stage project
at this time and there is inherent uncertainty relating to any project at
prior to the determination of pre-feasibility study and/or defined feasibility
study.
On this basis, reference to the Cascabel project as "World Class" (or "Tier
1") is considered to be appropriate.
1 Wood Mackenzie Q4 2021 Outlook, 2032 forecast
2 The PFS is subject to an accuracy range of ±25% in accordance with AACE
class 4 estimates. The findings in the PFS and the implementation of the
Cascabel project are subject to all the necessary approvals, permits, internal
and regulatory requirements and further works. The estimates are indicative
only and are subject to market and operating conditions. They should not be
interpreted as guidance. The information contained herein is a summary only
and is qualified in its entirety by reference to the Technical Report (as
defined below).
3 100% project basis.
4 Based on a discount rate of 8% (real).
5 Based on long-term commodity price assumptions of US$3.60 /lb for copper,
US$1,700 /oz for gold and US$19.9 /oz for silver
6 Spot prices on 4 April 2022 of US$4.74 /lb for copper, US$1,933 /oz for
gold and US$24.5 /oz for silver
7 Average based on years 4 - 22 at full nameplate capacity
8 Assumptions for copper equivalent calculations as provided in Table 1 for
commodity prices, grades and recoveries. Copper equivalent production
(by-product basis) = Recovered Cu tonnes + (Au Price US$/oz) / (Cu Price
US$/t) x (Recovered + doré gold ounces) + (Ag Price US$/oz) / (Cu Price
US$/t) x (Recovered + doré silver ounces).
9 Peak production, free cash flow and EBITDA in year 5 from start of
production
10 As the Mineral Reserve represents only 21% of the M&I Resource tonnes
the Company believes there is potential further mine life upside in excess of
50 years.
11 EBITDA is a Non IFRS Financial Measure and refers to Earnings Before
Interest, Tax, Depreciation and Amortisation.
12 Wood Mackenzie Accelerated Energy Transition (2 degrees) long-term
copper price forecast of US$4.20/lb. Assuming spot price for gold and silver.
13 Profit share: 12% to state, 3% to employees. Corporate tax applied to
EBT (Earnings Before Tax) after deduction of profit share.
14 Peak production in year 5 from start of production.
15 See "Cascabel Property NI 43-101 Technical Report, Alpala Porphyry
Copper-Gold-Silver Deposit - Mineral Resource Estimation, January 2021" with
an Effective date: 18 March 2020 and Amended Date: 15 January 2021 (the
"Amended Technical Report"), filed at www.Sedar.com on January 29, 2021.
16 Alpala MRE was reported at a cut-off grade of 0.21% copper equivalent
(CuEq) using a copper equivalency factor of 0 613 (whereby CuEq = Cu + Au x
0.613). Cut-off grades and copper equivalency used for reporting were based on
third party metal price research, forecasting of Cu and Au prices, and a cost
structure from mining studies data available at the time. Costs include
mining, processing and general and administration (G&A). Net Smelter
Return (NSR) includes metallurgical recoveries and off-site realisation (TCRC)
including royalties and utilising metal prices of Cu at US$3.40/lb and Au at
US$1,400/oz.
17 As the Mineral Reserve represents only 21% of the Measured and Indicated
Resource tonnes the Company believes there is potential further mine life
upside in excess of 50 years. Mineral Reserve contained metal estimated at
base case long-term prices of US$3.60 /lb for copper, US$1,700 /oz for gold
and US$19.9 /oz for silver.
18 Wood Mackenzie, 2032 Total Cash Cost including by-product contribution
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