INNOVAT MINERAL PROCESS SOLUTIONS LIMITED. INN16CO-CS-001 July 21, INNOVAT Case Study 5M t/a Heap Leach Northern Canada Project

Transcription

1 760 Brant St., Suite 405C, Burlington ON, L7R 4B8, Canada Tel Fax INN16CO-CS-001 July 21, 2016 Document: Project: TECHNICAL MEMORANDUM INNOVAT Case Study 5M t/a Heap Leach Northern Canada Project This memorandum presents an economic comparison based on a 5M t/a heap leach Feasibility Study related to a Northern Canada project. All assumptions for the purposes of this comparison have been accepted from the Heap Leach base case and have not been adjusted except as required to implement a Continuous Vat Leaching (CVL) based process. INNOVAT has endeavoured to conservatively estimate the CVL cases and utilized the detailed estimates provided within the Feasibility study to account for adjustments as required to implement CVL in place of Heap Leaching. 1.0 INTRODUCTION Two economic analyses are presented in this memo, one of which have been prepared by INNOVAT, and one of which was presented as a heap leach by the owner. All costing where possible has been carried forward, or based on the base case. The models are as follows: Base case: 5M t/a Heap Leach Facility (unadjusted as published) Direct Comparison: 5M t/a Continuous Vat Leaching The following considerations were used when evaluating the alternate methods: Maintain design criteria of the original project plan Use direct cost from original Feasibility study where feasible Use comparable project cost where direct cost is not feasible A 3% increase in recovery is expected, with a residence time of 24 hours

2 NORTHERN CANADA PROJECT HEAP LEACH/CVL COMPARISON INN16CO BASIS OF COMPARISON 2.1 FEASIBILITY STUDY CONFIGURATION The feasibility study has been completed on the basis of a 5M t/a heap leach operating in Northern Canada, with unique provisions as required for the extreme cold temperatures. Mining is conducted year round, with haul trucks directly feeding the primary jaw crusher for 275 days per year. Mining outside of the 275 day period results in stacking of the ore in a 1.5Mt stockpile. The heap leach is constructed using the haul trucks following crushing to 50mm. The heap leach is constructed and operated during the 275 day warmest period. Outside of the 275 day period, provisions are included to prevent freezing of the heap. These include an insulating layer of ore overtop of the heap, raincoat liners on the sides of the heap, and heating of the process solution using both waste heat and dedicated heating circuits. The leach period is approximately 200 days, with rapid leaching having occurred in the early portion of the leach cycle. 2.2 REVISIONS TO ACCOMMODATE CVL FACILITY INNOVAT has attempted to capture an identical system in which the only changes are the removal of the heap leach facility, and the installation of a continuous vat leach plant. This change will affect the flow sheet, in that processing is expected to occur year round, and no high capacity stockpile is expected to be required. To the maximum extent possible, re-handle of material will be eliminated. Waste material is not required for the construction of the CVL (as it is for heap leach), and processing can begin immediately upon commissioning of the CVL facility. Despite this, no adjustment has been made to the mining schedule, or timing of Capital Expenditures. All mining previously carried out pre-production has remained preproduction, and in reality would be shifted to production years, for a net improvement in economics through elimination of one preproduction year.

3 NORTHERN CANADA PROJECT HEAP LEACH/CVL COMPARISON INN16CO 3 The crushing circuit will require modification as a result of the Continuous Vat Leaching process feed size requirement of -6mm. It has been assumed that one additional crusher is required to accommodate this change. The cost of this inclusion has been estimated on the basis of the current primary and secondary crushing circuit cost as captured in both the CAPEX and OPEX within the feasibility. The CVL facility has been assumed to fit in series with the existing material handling circuit, and not require significant modification to the material handling circuit, except to remove the 1.5 million tonne stockpile which is no longer required. 3.0 COMPARISON OF COSTS 3.1 PRE-PRODUCTION CAPITAL EXPENDITURE - PROCESS Capital cost categorized as process related are as follows: Leach Facility and Crushing facility. The cost changes considered by this comparison are detailed below. The leach facility was adjusted with the removal of all costs associated with the Heap Leach Facility, and replacement with the costs associated with a Continuous Vat Leach facility. Life of mine, the heap leach accounts for 63M expenditure. A CVL facility is expected to incur capital expense of 28M life of mine. The addition of a crushing stage increases the capital expenditure associated with the ore crushing and handling circuit. Utilizing the estimates provided within the feasibility study and referencing similar projects, the implication of an added stage of crushing is estimated at 5M, increasing the CAPEX of this category by 29%. 3.2 PRE-PRODUCTION CAPITAL EXPENDITURE MINING Mining costs have been reduced as a function of the elimination of the 1.5M tonne stockpile, and associated required re-handling. The impact of this has been conservatively estimated via the elimination of 2 haul trucks LOM, leaving 18 haul trucks required in the most demanding year. It is expected that this could be further reduced, as the haul trucks are used to build the heaps, which is not required in the CVL case. In the CVL case, the waste would be conveyed to the

4 NORTHERN CANADA PROJECT HEAP LEACH/CVL COMPARISON INN16CO 4 waste dump for placement. The LOM mining costs are expected to be reduced from 132M to 128M. 3.3 PRE-PRODUCTION CAPITAL EXPENDITURE - PROCESS All other capital costs have been accepted without modification. Savings may be available for other categories, specifically camps, and indirects, but are not quantified as they are not expected to be significant given the overall CAPEX. Camps could be reduced in size to accommodate the reduced worker requirement resulting from the low manpower requirement of the CVL facility, and the year round nature of production. This change has not been studied. Indirects could likely also be reduced as a function of the elimination of 1 year of preproduction activities. This change has not been made as the details of the indirects are not available for scrutiny. 3.4 OPERATING EXPENSE - MINING Mining costs were reduced as a function of the reduced haul requirements primarily as a result of the elimination of the 1.5Mt stockpile and associated re-handling, but also as a result of the use of haul trucks for construction of the heaps in the base case. The elimination of haul trucks and increase in hauling efficiency resulted in a savings of 0.147/t mined. 3.5 OPERATING EXPENSE - PROCESSING Processing costs have been assessed for a net savings of 0.37/t processed. This savings is a combination of reduced labour requirement, reduced power/fuel cost, and reduced maintenance and consumables. Labour requirements have been reduced as the elimination of the heap removes the need for 8 workers (10% of process labour) related to heap leach pad operations, drip line and pipe welders. This is offset by the need for labour monitoring the CVL facility, estimated at 4 workers for a net

5 NORTHERN CANADA PROJECT HEAP LEACH/CVL COMPARISON INN16CO 5 savings of 4 workers, with fully loaded salaries attributing 0.07/t processed to the operating cost of the facility. Power and fuel costs account for 0.85/t processed in the base case. Elimination of the requirement to heat the solutions and maintain heap temperature through the winter is estimated to provide a savings of 0.20/t, with the addition of a tertiary crushing stage offsetting this for a net power and fuel cost savings of 0.10/t. Maintenance and consumables has been adjusted for the elimination of the heap leach piles and addition of a CVL facility. The feasibility study assesses the cost of heap leach operating maintenance and consumable use as 0.26/t (attributed to HL Operations Piping, Drip emitters, and liners). The elimination of much of these costs and addition of CVL maintenance costs results in a net savings of 0.20/t. 3.6 MONITORING/RECLAMATION & CLOSURE The closure requirements are expected to be significantly reduced, as the discharge from the CVL facility is dewatered, detoxified and stackable. The LOM costs of the heap leach closure activities are estimated at 60M. The CVL closure costs are expected to be reduced by 20M, for a total LOM cost of 40M. This is a function of ongoing closure, with reclamation activities beginning year 1 (the process discharge is detoxified and ready for immediately reclamation as it is released from the CVL). 3.7 TAXES Taxes have not been considered in this comparison. All figures are presented on a pre-tax basis. 3.8 TRANSPORT, INSURANCE, REFINING, ROYALTIES The same formula for determining the total cost of this category has been used across all cases. Since the CVL installation has a higher total recovery, the total cost over the life of the project has increased, but remains the same on a per ounce basis.

6 NORTHERN CANADA PROJECT HEAP LEACH/CVL COMPARISON INN16CO ONGOING CAPITAL EXPENDITURE Sustaining capital expenditure was largely unchanged with the exception of the closure costs (as previously noted), and the costs associated with the heap leach. The heap leach underwent expansions during LOM contributing 34 M in total expenditure to the sustaining cost. The elimination of the heap removes all of this cost, leaving only the tailings impound facility, which is fed dewatered, detoxified, stackable tails. The cost of this facility has been estimated at 6 M, for a net savings of 28 M. 4.0 SUMMARY OF COMPARISON A summary of the key financial parameters is shown in Table 2. Here you can see that the 5M t/a CVL case offers superior economics in comparison to the base case across all metrics. In evaluating the source of the improved economics, the following items are cited as the primary reasons: CAPEX Savings (Both pre-production and Sustaining) OPEX Savings Recovery Improvement Recovery Speed (Time value of money) In assessing the relative importance of the above factors, the primary contributor to the economic improvement is the Recovery speed (Time value of money). The gains attributed to recovery speed alone account for 66.7% of the total improvement. This is followed by the recovery improvement at 17.6%, and finally by CAPEX and OPEX savings each accounting for ~2% of the gain. This data has been presented in Table 1.

7 NORTHERN CANADA PROJECT HEAP LEACH/CVL COMPARISON INN16CO 7 Table 1 - Source of IRR Improvement Relative Contribution to IRR Improvement Recovery within 24 hours (Time value of money) 66.7% Improvement in Recovery (+3%) 17.6% CAPEX Savings 2.2% OPEX Savings 1.8% Table 2 - Key Financial Parameters Base Case Heap (5M t/a) CVL Case (5M t/a) Mine Life 10 year 10 year CAPEX (Pre-Production) M 314 M CAPEX (Sustaining/Closure) 157 M 108 M Pre-Tax IRR 50.4% 73.7% Operating Years to Payback (5%) Pre-Tax NPV At 0% Discount Rate M M At 5% Discount Rate 762 M 942 M At 10% Discount Rate 528 M 683 M Average cash cost per oz Cost per oz (including Capital) The significant improvement as a result of increased recovery speed (200 days for Heap Leach, and 24 hours for CVL) was an initial surprise, and was subsequently verified through scrutiny of the underlying data and confirmed correct. In addition, this improvement does not take into

8 NORTHERN CANADA PROJECT HEAP LEACH/CVL COMPARISON INN16CO 8 account the savings potential at mine closure related to all costs associated with operating the heap for the final 200 day cycle once the mine has been exhausted. The CVL facility would require operation for Mine Life + one 24 hour leach cycle as well as the duration required to process the final solutions and tailings; whereas the heap leach would require operation for mine life days processing + a washing and detoxification program. The savings associated with the additional year of labour requirement is significant, and has not been accounted for in the CVL case. 5.0 APPENDIX

9 APPENDIX NORTHERN CANADA PROJECT HEAP LEACH/CVL COMPARISON INN16CO A LOM Kaminak - Coffee Creek FS Economic Model Discount Period Metal Price Au US /oz 1,150 1,150 1,150 1,150 1,150 1,150 1,150 1,150 1,150 1,150 1,150 1,150 1,150 1,150 1,150 1,150 1,150 1,150 1,150 1,150 1,150 1,150 1,150 1,150 Exchange Rate CAD:USD MINE SCHEDULE 5M t/a Heap Leach (Base Case) Supremo Oxide Ore M tonnes Oxide Grade g/t Upper Transition Ore M tonnes Upper Transition Grade g/t Middle Transition Ore M tonnes Middle Transition Grade g/t Lower Transition Ore M tonnes Lower Transition Grade g/t Total Ore M tonnes Waste M tonnes Strip Ratio w:o Total Supremo Mined M tonnes Latte Oxide Ore M tonnes Oxide Grade g/t Upper Transition Ore M tonnes Upper Transition Grade g/t Middle Transition Ore M tonnes Middle Transition Grade g/t Lower Transition Ore M tonnes Lower Transition Grade g/t Total Ore M tonnes Waste M tonnes Strip Ratio w:o Total Latte Mined M tonnes Double Double Oxide Ore M tonnes Oxide Grade g/t Upper Transition Ore M tonnes Upper Transition Grade g/t Middle Transition Ore M tonnes Middle Transition Grade g/t Lower Transition Ore M tonnes Lower Transition Grade g/t Total Ore M tonnes Waste M tonnes Strip Ratio w:o Total Double Double Mined M tonnes Kona Oxide Ore M tonnes Oxide Grade g/t Upper Transition Ore M tonnes Upper Transition Grade g/t Middle Transition Ore M tonnes Middle Transition Grade g/t Lower Transition Ore M tonnes Lower Transition Grade g/t Total Ore M tonnes Waste M tonnes Strip Ratio w:o Total Kona Mined M tonnes TOTAL - All Zones Oxide Ore M tonnes Oxide Grade g/t Upper Transition Ore M tonnes Upper Transition Grade g/t Middle Transition Ore M tonnes Middle Transition Grade g/t Lower Transition Ore M tonnes Lower Transition Grade g/t Total Ore M tonnes Waste M tonnes Strip Ratio w:o Throughput Rate tpd Total Grade g/t Total Mined M tonnes Total Au to Heap koz ,157 Total Recoverable Au to Heap koz ,862 Au Recovery % 0% 0.0% 86.5% 82.0% 81.3% 86.1% 86.2% 86.8% 87.7% 89.6% 89.0% 91.6% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 86.3% Au Recovered koz ,862 PAYABLE METALS Total Recovered Au koz ,862 % 99.8% 99.8% 99.8% 99.8% 99.8% 99.8% 99.8% 99.8% 99.8% 99.8% 99.8% 99.8% 99.8% 99.8% 99.8% 99.8% 99.8% 99.8% 99.8% 99.8% 99.8% 99.8% oz ,858 Payable Au USM ,137 C M ,739 US/payable oz Refining Costs C M Royalties C M C M Net Smelter Return (NSR) after Royalties C M ,708 OPEX C /tonne mined Mining C M C /tonne ore Processing C M C /tonne ore Surface and Infrastructure C M C /tonne ore G&A C M C M ,094 Total Opex C /payable oz C/t ore Net Operating Cashflow C M ,614 CAPEX Mining C M On-Site Development C M Ore Crushing and Handling C M Heap Leach C M Process Plant C M On-Site Infrastructure C M Off-Site Infrastructure C M Indirects C M EPCM C M Owner Costs C M Closure C M Subtotal C M Contingency C M CAPEX incl. Contingency C M Pre-Production C M Sustaining & Closure C M Working Capital C M Net Pre-Tax Cashflow C M (32) (78) (109) (5) (5) (4) (10) (5) (3) (2) (2) (4) (4) 1,113 Cumulative Net Cashflow C M (32) (110) (219) (61) ,130 1,157 1,152 1,147 1,143 1,133 1,128 1,125 1,123 1,120 1,117 1,113 Pre-Tax Payback Period Years 3.5 Pre-Tax IRR % % Pre-Tax NPV 5% C M (32) (75) (99) (3) (2) (2) (5) (2) (1) (1) (1) (1) (1) 762 Income Taxes & Yukon Quartz Tax C M (2) (1) Net After Tax Cash Flow C M Cumulative After-Tax Cash Flow C M After-Tax Payback Period Years 4.0 After-Tax IRR % 36.8% After-Tax NPV 5% C M (32) (75) (110) (2) (2) (2) (5) (2) (1) (1) (1) (1) (1) 455

10 APPENDIX NORTHERN CANADA PROJECT HEAP LEACH/CVL COMPARISON INN16CO B Coffee Creek Cash Flow - Continuous Vat Leaching: *(5Mtpa)* Year -3 Year -2 Year -1 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 Year 16 Year 17 Year 18 Year 19 Year 20 LOM Au US /oz 1, Exchange Rate CAD:USD Supremo Oxide Ore tonnes Oxide Grade g/t Upper Transition Ore tonnes Upper Transition Grade g/t Middle Transition Ore tonnes Middle Transition Grade g/t Lower Transition Ore tonnes Lower Transition Grade g/t Total Ore tonnes Waste tonnes Strip Ratio w:o Total Supremo Mined tonnes Latte Oxide Ore tonnes Oxide Grade g/t Upper Transition Ore tonnes Upper Transition Grade g/t Middle Transition Ore tonnes Middle Transition Grade g/t Lower Transition Ore tonnes Lower Transition Grade g/t Total Ore tonnes Waste tonnes Strip Ratio w:o Total Latte Mined tonnes Double Double Oxide Ore tonnes Oxide Grade g/t Upper Transition Ore tonnes Upper Transition Grade g/t Middle Transition Ore tonnes Middle Transition Grade g/t Lower Transition Ore tonnes Lower Transition Grade g/t Total Ore tonnes Waste tonnes Strip Ratio w:o Total Double Double Mined tonnes Kona Oxide Ore tonnes Oxide Grade g/t Upper Transition Ore tonnes Upper Transition Grade g/t Middle Transition Ore tonnes Middle Transition Grade g/t Lower Transition Ore tonnes Lower Transition Grade g/t Total Ore tonnes Waste tonnes Strip Ratio w:o Total Kona Mined tonnes Total - All Zones Oxide Ore tonnes Oxide Grade g/t Upper Transition Ore tonnes Upper Transition Grade g/t Middle Transition Ore tonnes Middle Transition Grade g/t Lower Transition Ore tonnes Lower Transition Grade g/t Total Ore tonnes Waste tonnes Strip Ratio w:o Throughput Rate tpd Total Grade g/t Total Mined tonnes Total Au to CVL koz ,153 Total Recoverable Au koz ,919 Au Recovery % % Au Recovered oz ,919 Payable Metals Total Recovered Au koz ,919 Payable Au % 99.8% 99.8% 99.8% 99.8% 99.8% 99.8% 99.8% 99.8% 99.8% 99.8% 99.8% 99.8% 99.8% 99.8% 99.8% 99.8% 99.8% 99.8% 99.8% 99.8% 99.8% 99.8% 99.8% 23 koz USM ,202 CM ,823 Refining Costs US/payable oz CM Royalties CM CM 2 Net Smelter Return (NSR) after Royalties CM ,790 OPEX Mining C/tonne mined CM Processing C/tonne ore CM Surface and Infrastructure C/tonne ore CM G&A C/tonne ore CM Total OPEX CM ,023 C/payable oz C/tonne ore Net Operating Cashflow CM ,768 CAPEX Mining CM On-Site Development CM Ore Crushing and Handling CM CVL CM Process Plant CM On-Site Infrastructure CM Off-Site Infrastructure CM 24 4 Indirects CM EPCM CM Owner Costs CM Closure CM - 40 Subtotal CM Contingency CM CAPEX incl. Contingency CM Pre-Production CM Sustaining & Closure CM Working Capital CM Net Cashflow ,323 Cumulative Cashflow ,074 1,305 1,345 1,343 1,341 1,339 1,337 1,335 1,333 1,331 1,329 1,327 1,325 1,323 Pretax Payback Period 2.7 Pretax IRR 73.67% Pretax NPV 5% % % 503