Azumah Resources Limited - Feasibility Study and Maiden Reserve Provide Solid Foundation for Development of Wa Gold Project
ASX / TSX & Media Release
ASX Code - AZM
TSX Code - AZR
430,000oz Proved and Probable Mineral Reserve
NI 43-101 and JORC Code reportable 1.02Moz Measured & Indicated and
0.66Moz Inferred Mineral Resource at Wa Gold Project, NW Ghana
100% of 3,100km2 licences hosting over 150km of prospective Birimian greenstone belt.
Less than 10% effectively explored
17% strategic investment in neighbour, Castle Minerals Limited
- Board and management team of successful explorers, mining and corporate professionals
333.7M ordinary shares
9.5M unlisted options
3.5M performance rights
Directors & Management:
Geoff M Jones
TORONTO, Aug. 27, 2012 /CNW/ -
430,000oz gold Mineral Reserve supports initial six year life at an
average feed grade of 2.0g/t gold with 2.5g/t gold in first year
Mineral Reserve upgrade targeting an additional two years mine life
planned early 2013
92,000oz produced in year 1 at average cash cost of $624 per oz
Production averages 74,000oz per annum for first four years at $782 per
oz. Life-of-Mine costs of $802 per oz
Total establishment capital cost of $144M
92.4% gold recovery from conventional gravity - CIL plant
Excellent access, infrastructure and operating environment
No communities to relocate
Study completion enables advance of Mining Lease and other key approvals
- $20M in cash and listed investments
"The Wa Gold Project Feasibility Study confirms the Project's technical and financial viability and enables Azumah to commence applications for key mining, environmental and other approvals required to initiate development," Azumah Managing Director, Mr Stephen Stone, said.
"The Study also allows us to advance discussions with our short-list of possible providers of various forms of project finance."
"We envisage making a development decision in early 2013 by which time the expected delivery of additional Mineral Reserves will have placed the Project on an even stronger footing."
"With $20 million in cash and listed investments, Azumah remains well positioned to continue delivering excellent exploration results in parallel to advancing its plans to establish the first commercial-scale gold mining operation in Ghana's emerging and very prospective northwest gold province."
NB: All amounts in US$ unless specifically stated and all financial analysis based on 100% project ownership. Rounding of numbers may result in minor inconsistencies in tables.
Gold explorer and developer Azumah Resources Limited (ASX: AZM; TSX:AZR) is pleased to announce the completion of a Feasibility Study (FS) and a maiden Mineral Reserve which represents an important first step in developing its 100%-owned Wa Gold Project in northwest Ghana (the 'Project') (Figure 1).
The FS has confirmed that the Project is technically and commercially viable with current Mineral Reserves of 430,000oz gold supporting an initial six years production from a planned nominal one million tonne per annum gravity / carbon-in-leach (CIL) plant.
The Mineral Reserves were estimated by independent engineers, Coffey Mining Limited, based on the Kunche, Bepkong and Julie gold deposits (Table 1).
Table 1: Mineral Reserve Summary
|Mineral Reserve Summary|
|(As of 21st Aug 2012)||Proved||Probable|
|Tonnes (Mt)||Grade (g/t Au)||Tonnes (Mt)||Grade (g/t Au)|
Importantly, the completion of the FS enables Azumah to commence applications for key mining, environmental and other approvals required to initiate development as well as formalise discussions with a short-list of possible providers of various forms of project finance.
Azumah expects that a development decision can be made in the first half of 2013 by which time the planned delivery of additional Mineral Reserves will have placed the Project on an even stronger footing.
Mineral Resource and Mineral Reserve Updates
Recent exploration and drilling provide clear evidence that Mineral Resources and consequently Mineral Reserves will continue to grow to extend mine life beyond the initial base now established to underpin a start-up operation.
Azumah anticipates providing an update of Mineral Resources in late 2012 / early 2013 that will benefit from the results of recently completed infill and extensional drilling at the Kunche, Bepkong and Julie deposits (refer releases dated 19th June 2012 and 19th July 2012)(Table 2).
A Mineral Reserve upgrade, scheduled for early 2013, is planned to extend mine life with a commensurate positive impact on financial returns. This update will benefit from infill drilling designed to convert Mineral Resources to Mineral Reserves in the immediate vicinity of designed pits and from excellent recent drilling results from the Julie deposit and Aduane prospect (refer ASX releases 29th February 2012 and 19th July 2012).
The Collette Mineral Resource, currently 79,000 oz, was not considered a part of the FS but is being advanced to determine if it will also add to existing reserves, as are several other prospects.
More broadly, and a key asset of Azumah, is its commanding control position of over 3,100km2 of the prospective Wa-Lawra Birimian greenstone belt complemented by its 17% interest in neighbouring explorer, Castle Minerals Limited (ASX: CDT), which has more than 10,000km2 of additional tenure in the region (Figure 1).
With some $20 million in cash and listed investments, Azumah remains well positioned to maintain its focused exploration programmes, leveraging off its excellent site infrastructure that includes a fully serviced 50-man exploration headquarters at Kalsegra and a recently commissioned on-site sample preparation laboratory providing a much improved average 25 day sample-to-assay turnaround.
Table 2: Summary of Wa Gold Project Mineral Resources - 0.5g/t Au cut-off (CSA Global - March 2012)
0.5 g/t Au
|Measured||Indicated||Measured and Indicated||Inferred|
NB: The Mineral Resources shown in Table 2 are inclusive of the Ore Reserves that are stated in this release.
Mining Schedule and Key Outputs
The gold recovery plant will be located adjacent to Azumah's Kunche flagship deposit with initial ore sourced from the phased, contractor based, open-cut mining of the Kunche, Bepkong and Julie deposits providing a robust first year head grade of 2.5g/t Au and an average of 2.2g/t Au for the first four years of production (Table 3, Table 4 and Graph 1).
Table 3: Key Outputs
|Units||Year 1||Years 1 to 4||Life of Mine|
|Average Process Plant Throughput||Mtpa||1.23||1.12||1.13|
|Feed Grade Processed||g/t||2.5||2.2||2.0|
|Strip Ratio - Waste to Ore||4.1||5.1||4.9|
|Annual Gold Production||oz||92,000||74,000||66,000|
|Total Mining Cost||$/t mined||3.84||4.05||4.67|
|Process Plant Cost||$/t processed||14.24||16.26||16.00|
|Administration Cost||$/t processed||3.88||4.25||4.19|
|Site Cash Cost||$/oz||624||782||802|
Accelerated production of 92,000oz during the first year is achieved from the processing of higher grade, softer oxide ore. The first four years of open-cut mining produce an average 74,000oz gold per annum from the treatment of mill feed averaging 2.2g/t Au at a strip ratio of 5.1:1.
The final months of gold production are from the treatment of stockpiled material but it is expected that this material will be deferred and replaced with additional and higher grade Mineral Reserves as they are progressively defined.
Current mining schedules have the Julie ore being mined and transported 80km to the Kunche plant, after the completion of mining at Kunche and Bepkong, at a transport cost that equates to approximately 0.3g/t Au. Whilst Julie ore is relatively high grade, the transport costs impact on Mineral Reserves. Hence, Julie has been scheduled towards the end of the current mine life. This also gives the opportunity for a possible second stand-alone project to be established in the longer term, subject to exploration success.
Table 4: Summary by Deposit
|Ore Mined||Strip Ratio||Ore Grade||Contained Gold|
|Tonnes (million)||(g/t Au)||(Oz)|
Total site cash operating costs (C1) over the life of the maiden Mineral Reserve average $802 per oz (ex 5% government royalty), with a first year C1 cash cost of $624 per oz.
Rising operating costs, and in particular a 45% escalation in mining costs since the FS was commenced, have had a negative impact on Mineral Reserves and overall Project returns. However, Azumah holds the view that these costs may have now stabilised
Project oxide, transitional and primary ore types all have excellent metallurgical characteristics with overall gold recoveries averaging 92.4% over the present life-of-mine, whilst Julie ore types average 88%. Flowsheet design and modelling incorporated separate considerations of each ore type at each deposit. The ore requires a medium grind of 75 microns.
Establishment Capital Costs
Total project establishment capital of $144M is consistent with earlier guidance levels and is inclusive of all plant, infrastructure, owner's costs, contingency, EPCM, first-fill of reagents and pre-production mining works. Import duties on equipment have been included in capital cost estimates but no estimates have been made for VAT and withholding tax payments (Table 5).
Table 5: Establishment Capital Costs
|Establishment Capital Costs||
|Treatment Plant Costs||35|
|Reagents and Plant Service||8|
The pre-tax Project Net Cash Flow, NPV and IRR are $148M, $82M and 31% respectively (8% per annum discount rate, $1,600 per oz gold realisation price) and is based on 100% equity financing i.e. no interest cost. Pits were optimised using a gold price of $1,300 per oz.
After taking into account a 5% gross government royalty, 35% company income tax and accumulated tax losses, the post-tax Net Cash Flow, NPV and IRR are $81M, $34M and 18% respectively with payback of less than three years (Table 6).
Table 6: Financial Summary
|Net Cash Flow||NPV @ 8%||
|Site Project Return - Pre Royalties & Income Tax||148||82||31||2.4|
|Project Return - Post Royalties and Income Tax||81||34||18||2.9|
Sensitivity analysis has shown that increasing Mineral Reserves by the equivalent of another Bepkong deposit (117,000oz at 1.9g/t Au) would increase post-tax Net Cash Flow by 65% to $134M and the NPV and IRR to $63M and 23% respectively as well as provide pit design, scheduling and other operational benefits.
Excellent Operating Environment
The Project benefits from excellent road and air access, plus continually improving local and regional infrastructure, including grid power which the Ghana power infrastructure utility, Gridco, has commenced upgrading to the Project's requirements.
Ghana's Upper West region is only moderately populated, has no major industry and generally relies on subsistence farming. The Project is likely to bring many benefits to the area.
Importantly, there are no communities in the vicinity of the planned mining area that require relocation. The process of land and crop surveying as a prelude to the formal farm compensation process, as required under the Ghana Minerals and Mining Act, has commenced and is now under the auspices of Azumah's newly appointed General Manager - Community. Several community and other stakeholder consultation meetings have already been held.
Azumah's Draft Environmental and Social Impact Study has also been submitted to the Ghana Environmental Protection Authority.
Ghana has a long tradition of gold mining and is now Africa's second largest gold producer with several World-class gold mines in operation and four new mines established in the past year. These are supported by a myriad of mining services and facilities available in-country and a well-trained and educated workforce. It has a strong economy and is ranked as one of the World's top ten fastest growing economies. Ghana has a long history of stable government and peaceful transitions to new democratically elected governments.
Timetable and Implementation
Subject to the timing of the receipt of key permits and the financing of the Project, the Project construction programme of 17 months could see it be in production by late 2014.
GR Engineering Services Ltd has completed a review of the Feasibility Study and the overall Project, with no issues identified. It is now on stand-by to commence the front-end engineering and design ('FEED') phase.
Updated NI 43-101 Technical Report and Compliance Information
All FS work undertaken in preparation for the confirmation of a maiden Mineral Reserve has been completed with final documentation expected in a few weeks.
In compliance with its obligations arising through its listing on the main board of the TSX, Azumah will within 45 days of the date of this ASX / TSX release, file the FS in the form of a National Instrument 43-101 Technical Report prepared and containing independent reports by Coffey Mining Limited and several other independent consultants all of whom have very recent experience in project work in West Africa and in particular in Ghana. It should be noted that:
The gold cut-off grades used for the Mineral Reserve determination range
from 0.6g/t to 0.8g/t for Bepkong, 0.6g/t to 0.9g/t for Kunche and
1.1g/t to 1.4g/t for Julie, depending on material type.
The Mineral Reserves were determined as part of the mine planning work
that Coffey Mining undertook for Azumah for its FS.
The mine planning work was undertaken utilising only the Measured and
- Reserves were predicated on the Whittle Four-X pit optimisation result that was based only on the Measured and Indicated Resources.
Source 'Modifying Factors', defined to include mining, metallurgical, economic, marketing, legal, environmental, social and governmental considerations are summarised in Table 7.
Table 7: Source Modifying Factors
|Source Modifying Factors used for Ore Reserve Determination|
|Mining cost||Mining cost submissions obtained from mining contractors|
|Metallurgical aspects||GR Engineering Services and Lycopodium Minerals Pty Ltd|
|Commodity price||Azumah Resources Limited|
|Processing cost||GR Engineering Services|
|General and administration cost||GR Engineering Services|
|Social and Environmental||SAL Consult|
|Government||Azumah Resources Limited|
|Legal and tenure||Reindorf Chambers|
|Geotechnical||George, Orr and associates|
|Mining dilution and recovery||Coffey Mining|
|Discount rate||Azumah Resources Limited|
Competent Person's Statement
The information in this report that relates to Exploration Results is based on information compiled by Mr Nick Franey, who a full-time employee (General Manager Geology) of Azumah Resources Ltd. Mr Franey is a Member of the Australian Institute of Geoscientists and 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 2004 Edition of the 'Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves' and to qualify as a "Qualified Person" as defined in National Instrument 43 -101 - Standards of Disclosure for Mineral Projects ("NI 43-101") of the Canadian Securities Administrators. Mr Franey has approved the disclosure of all scientific or technical information contained in this report.
For a description of Azumah's standard data verification processes, quality assurance and quality control measures, and details of the key assumptions, parameters and methods used to estimate the Mineral Resources set out in this report and the extent to which the estimate of previously declared Mineral Resources set out herein may be materially affected by any known environmental, permitting, legal, title, taxation, socio-political, marketing or relevant issues, readers are directed to the technical report entitled "NI 43-101 Azumah Resources Limited Wa Gold Project, North West Ghana", dated and effective as of 3rd May, 2012.
The reported Mineral Reserves have been compiled by Mr Harry Warries. Mr Warries is a Fellow of the Australasian Institute of Mining and Metallurgy and an employee of Coffey Mining Pty Ltd. He has sufficient experience, relevant to the style of mineralisation and type of deposit under consideration and to the activity he is undertaking, to qualify as a Qualified Person as defined in the Canadian Institute of Mining, Metallurgy and Petroleum (CIM) Definition Standards of November 2010, as well as a Competent Person as defined in the 'Australasian Code for Reporting of Mineral Resources and Ore Reserves' of December 2004 ("JORC Code") as prepared by the Joint Ore Reserves Committee of the Australasian Institute of Mining and Metallurgy, the Australian Institute of Geoscientists and the Minerals Council of Australia. Mr Warries gives Azumah Resources Limited consent to use this reserve estimate in reports
This release contains forward-looking information. Such forward-looking information is often, but not always, identified by the use of words such as "seek", "anticipate", "believe", "plan", "estimate", "expect" and "intend", and statements that an event or result "may", "will", "should", "could", or "might" occur or be achieved, and other similar expressions. In providing the forward-looking information in this news release, the Company has made numerous assumptions regarding: (i) the accuracy of exploration results received to date; (ii) anticipated costs and expenses; (iii) that the results of the feasibility study continue to be positive; and (iv) that future exploration results are as anticipated.
Management believes that these assumptions are reasonable. Forward-looking information is subject to known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from those contained in the forward-looking information. Some of these risks, uncertainties and other factors are described under the heading "Risks Factors" in the Company's annual information form available on www.sedar.com. Forward-looking information is based on estimates and opinions of management at the date the statements are made. Except as required by law, Azumah does not undertake any obligation to update forward-looking information even if circumstances or management's estimates or opinions should change. Readers should not place reliance on forward-looking information and readers are advised to consider such forward-looking statements in light of the risks set forth in the Company's continuous disclosure filings as found at the (Canadian) SEDAR website.
Image with caption: "Graph 1: Production Source and Grade (CNW Group/Azumah Resources Inc)". Image available at: http://photos.newswire.ca/images/download/20120827_C9637_PHOTO_EN_17229.jpg
Image with caption: "Figure 1: Wa Gold Project - Key Deposits and Prospects (CNW Group/Azumah Resources Inc)". Image available at: http://photos.newswire.ca/images/download/20120827_C9637_PHOTO_EN_17230.jpg
SOURCE: Azumah Resources Inc
For further information:
Tel: +61 (0)418 804 564
Nathan Ryan - Australia
+61 (0) 420 582 887
Joanna Longo - North America
+1 416 238 1414