TIDMSGZ
RNS Number : 1126V
Scotgold Resources Ltd
04 August 2015
SCOTGOLD RESOURCES LIMITED
CONONISH GOLD AND SILVER PROJECT BANKABLE FEASIBILITY STUDY
RESULTS AND FINANCE UPDATE
Scotgold Resources Limited ('Scotgold' or 'the Company') is
pleased to announce the results of the Bankable Feasibility Study
('BFS') for its wholly owned Cononish Gold and Silver Project
conducted by Bara Consulting Ltd of the UK. This study is based
upon the Mineral Resource Statement announced in January 2015 and
confirms the Ore Reserve Estimate announced in May 2015, both of
which were compiled using guidelines recommended in the JORC Code
(2012). The Cononish Gold and Silver Project is part of the
Company's gold portfolio located in Scotland.
SUMMARY OF BFS HIGHLIGHTS
PRODUCTION
----------------------------------------------------
Average Production 72,000 tonne per
annum
Average LoM Grade (Au 11.8 gram/tonne
Eq)
Average Metal Produced 23,370 ounce equivalent
gold* per annum
Life of Mine 8 years
-------------------------- ------------------------
FINANCIAL (at Gold US$1,100/oz & Silver
US$15/oz)
----------------------------------------------------
Peak Funding Requirement GBP18.5M
Unit Operating Costs GBP327/ ounce
equivalent gold
(US$523/ ounce
equivalent gold)
Net pre-tax cashflow GBP43M
NPV (10%) pre-tax GBP23M
IRR pre-tax 45%
Payback Period 19 months
-------------------------- ------------------------
* Ounces equivalent gold = ounces gold + ounces silver*15/1100 -
ratio calculated at base case prices of $1,100/ ounce gold and
$15.00/ ounce silver
PRE-TAX CASHFLOW SENSITIVITY TO
GOLD PRICE
----------- -------- ---------------------------------------------------------------------
Gold US$700/ US$900/ US$1,000/ US$1,100/ US$1,200/ US$1,300/ US$1,500/
Price ounce ounce ounce ounce ounce ounce ounce
----------- -------- --------- ---------- ---------- ---------- ---------- ----------
Pre Tax GBP1.5M GBP22.5M GBP32.9 GBP43.4M GBP53.9 GBP64.3M GBP85.3M
Cashflow
NPV (10%) (GBP4M) GBP9M 16.1 GBP23M 29.8 GBP37M GBP50M
IRR 0% 25% 35% 45% 54% 64% 82%
----------- -------- --------- ---------- ---------- ---------- ---------- ----------
-- Robust Project economics using a base case gold price of
US$1,100/ounce (GBP688/ ounce) with a EBITDA of GBP67.4M, a pre-tax
free cashflow of GBP43.4M, pre-tax NPV(10%) of GBP22.5M and a
pre-tax IRR of 45%.
-- Low operating cost with Life of Mine ('LoM') average of
GBP327/ ounce equivalent gold (US$523/ ounce equivalent gold)
(including Royalties) and Project breakeven (0% IRR) at US$689/
ounce equivalent gold
-- Peak Funding Requirement of GBP18.5M and all in LoM Capital
including contingencies, replacements etc. of GBP24.0M
-- Average annual gold production of 23,370 ounce equivalent
gold with peak production in Year 2 of 28,540 ounce equivalent
gold.
-- Average LoM grade of 11.8 grams equivalent gold /tonne and
peak grade of 15.4 grams equivalent gold / tonne in year 2.
-- Rapid Implementation schedule of 16 months post contract and
finance completion and short payback period of 19 months from full
production.
-- Based on the earlier PFS, the company has been offered
indicative terms by leading banks to provide debt finance for the
majority of the project's funding requirement.
-- Completion of this BFS facilitates the selection of the
preferred finance route and the signing of a mandate with the
selected institutions in near future
Richard Gray, Chief Executive of Scotgold, commented:
"The BFS illustrates the robustness of the Cononish Project with
the mine profitable down to US$700 per ounce and provides a very
solid base for our ongoing discussions with potential project
finance providers. Once concluded, we look forward to putting this
fully permitted project into development and pursuing its strong
upside potential, which includes a possible Mineral Resource
extension and the likely price premium for gold with proven
Scottish provenance."
Details of the material assumptions considered in the derivation
of the production target and forecast financial information above
are provided in Appendix 1.
The BFS Study Executive Summary is published on Scotgold's
website at www.scotgold.com. The criteria used in this release
under JORC Code, 2012 Edition can be found on the website under ASX
announcements together with a commentary.
Key Attributes of Cononish Gold and Silver Project
In summary, the key attributes of the project are:
ü Mineralization occurs in a narrow (average width of about 2 m)
near vertical quartz vein.
ü The project has a resource estimate in Measured, Indicated and
Inferred categories (see ASX release "Resource Estimate Update"
dated 22/01/2015) prepared by Mr M.Titley of CSA Global ( see
below) of 541,000 tonnes at a gold grade of 14.3 g/t and a silver
grade of 59.7 g/t. The average Bulk Density is 2.72 tonne/m(3)
.
ü After taking into account various modifying factors, the
proven and probable ore reserves (see ASX release "Cononish Gold
Project Study Update and Reserve Estimate" dated 26/05/2015),
prepared by Mr P Willis of Bara Consulting (see below) comprises
555,000 tonnes at a gold grade of 11.1 g/t and a silver grade of
47.7 g/t.
ü Proven and probable ore reserves represent 12% and 88% of the
reported production target respectively. No inferred resources are
considered in the BFS.
ü Access will be from the existing exploration adit and footwall
ramps will provide access to ore drives at a 15 m vertical
interval. A rock pass system has been included to improve ore
handling and the transfer of waste.
ü The mining method will be a retreat top down Long Hole Open
Stoping (LHOS) method using conventional trackless equipment.
Shrinkage stoping was investigated but was only economically viable
in the very narrowest (<1.4 m) areas of the mine and was
therefore not considered further.
ü Full production will be at 72,000 tonnes per annum. The life
of mine at full production based on the current reserves in the
Proven and Probable categories is approximately 8 years. The mining
production schedule adequately takes into account the constraints
mentioned below. Average gold and silver production will be
approximately 22,208 ounces gold and 85,081 ounces silver per annum
respectively or 23,370 ounce equivalent gold.
A graph showing the expected mine annual mine production can be
found on Scogold's website at www.scotgold.com
ü Mining permission has been granted but with certain conditions
which have been accommodated within the mine plan. Approximately
129,000 tonnes of tailings (after taking into account the mass
pull) is scheduled to be stored in old stopes towards the end of
the mine's life, enabling the full capacity of the Tailings
Management Facility ('TMF') to be restricted to 400,000 tonnes and
minimising surface impact.
ü Waste is only trucked to surface when required for the
building of the TMF and various screening berms (73,000 tonnes).
All other waste will be stored in old stopes (163,000 tonnes).
ü Based on extensive testwork by Lakefield, Gekko and AMMTEC,
the plant is designed as a conventional gravity and flotation
plant. 25% of the gold is estimated to be recovered on site into a
doré bar with the balance being produced as concentrate to be
treated off site. Overall estimated recovery is 93% for gold and
90% for silver The doré and concentrate will be sold "at the gate"
to third party processors.
ü The process plant will be housed in a single multi-use
building which will also contain a workshop and office area. This
is designed to have minimal visual and noise impact on the
surrounding area.
Cononish Gold and Silver Project Study Results
ü The following costs have been estimated at an accuracy of
between -5% and +15% and include appropriate contingencies:
o Peak funding requirement (pre production expenditure): GBP18.5
million.
o Total LoM Capital Expenditure: GBP24 million.
o Average operating cost: GBP110 per tonne treated (including
marketing, interest and royalty charges). It should be noted that
transport, smelting and refining charges where reflected as cost of
sales in the PFS. These costs have been included as part of
operating costs in the BFS.
o Average operating cost: GBP 327 (US$ 523) per ounce equivalent
gold (on the same basis as above
o All in cost including capital GBP455 (US$ 729) per ounce
equivalent gold
ü The following financial results were estimated using a gold
price of US$ 1,100/ounce, a silver price of US$ 15/ounce and a
US$/GBP exchange rate of 1.6:
o Pre-tax NPV@10% GBP22.9 million
o Pre-tax IRR 45%
o Post-tax NPV@10% GBP18.5 million*
o Post-tax IRR 41%*
o Average profit margin 53%
o Payback 19 months
* Note post-tax calculations are based on a hypothetical all
equity funding scenario and as such are illustrative only.
Scotgold Resources Limited Westhouse Securities Limited
Richard Gray Martin Davison
Chief Executive Officer
Tel: +44 (0)7905 884 021 Tel: +44 (0)20 7601 6100
Capital Markets Consultants Vicarage Capital Limited
Simon Rothschild Rupert Williams
Tel +44 (0)7703 167 065 Tel: +44 (0)20 3651 2911
Forward Looking Statements
This announcement contains certain statements that may
constitute "forward looking statements". Such statements are only
predictions and are subject to inherent risks and uncertainties,
which could cause actual values, results, performance achievements
to differ materially from those expressed, implied or projected in
any forward looking statements.
Competent Persons Statement
The information in this report that relates to the 2015 Ore
Reserves for Cononish Gold Project (refer ASX announcement dated
25/05/2015) is based on information compiled by Pat Willis, a
Competent Person who is registered as a Professional Engineer
(Pr.Eng.) with the Engineering Council for South Africa (ECSA) and
a Fellow in good standing and Past President of the Southern Africa
Institute of Mining and Metallurgy (FSAIMM).. Mr Willis is employed
by Bara Consulting Limited, an independent consulting company. Mr
Willis has sufficient experience which is relevant to the style of
mineralisation and type of deposit under consideration and to the
activity which he is undertaking to qualify as a Competent Person
as defined in the 2012 Edition of the 'Australasian Code for
Reporting of Exploration Results, Mineral Resources and Ore
Reserves'. Mr Willis consents to the inclusion in the report of the
matters based on his information in the form and context in which
it appears.
The information in this report that relates to the 2015 Mineral
Resources Estimate for Cononish Gold Project (refer ASX
announcement dated 22/01/2015) is based on information compiled by
Malcolm Titley, a Competent Person who is a Member of The
Australasian Institute of Mining and Metallurgy. Mr Titley is
employed by CSA Global (UK) Limited, an independent consulting
company. Mr Titley has sufficient experience which is relevant to
the style of mineralisation and type of deposit under consideration
and to the activity which he is undertaking to qualify as a
Competent Person as defined in the 2012 Edition of the
'Australasian Code for Reporting of Exploration Results, Mineral
Resources and Ore Reserves'. Mr Titley consents to the inclusion in
the report of the matters based on his information in the form and
context in which it appears.
Further, the Company confirms it is not aware of any new
information or data that materially affects the information
contained in the original announcements and that all material
assumptions and technical parameters underpinning the estimate of
Resources and Reserves continue to apply and have not materially
changed.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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