Chieftain Completes Tulsequah Chief Preliminary Economic Assessment with Robust Economics and Extended Mine Life

TORONTO, June 14, 2011 /CNW/ - Chieftain Metals Inc. ("Chieftain" or the "Company") (TSX: CFB) is pleased to announce that SRK Consulting (Canada) Inc. ("SRK") has completed an independent, NI 43-101 compliant Preliminary Economic Assessment ("PEA") on the Tulsequah Chief polymetallic deposit located in north-western British Columbia. The Consensus Pricing Case (Mid) of the PEA calculates a pre-tax NPV(8) and IRR of C$277 million and 25%, respectively, on initial capital of C$310.1 million demonstrating robust economics at analyst consensus metal prices1. The PEA outlines the potential for annualized production of 69,400 ounces of gold equivalent (Au oz equiv)2 at a total cash cost (net of base metal by-product credits) of negative US$365/oz Au equiv or 74 million lbs of zinc at a total cash cost of negative US$0.72/lb of zinc (net of by-product credits) based on 2,000 tonnes per day over a 9-year mine life. Highlights from the PEA Mid Case are in Table 1.

The PEA also identified improved value potential at the Tulsequah Chief Project through the addition of historical reserves, construction of hydropower facility in close proximity to the mine, improvements in metallurgical recovery and addition of the Big Bull satellite deposit which Chieftain intends to evaluate as part of the upcoming feasibility update. Chieftain will evaluate areas of improved value potential at the Tulsequah Chief Project:

  • Addition of historical reserves to current resources
  • Improved metallurgical recoveries over base case
  • Construction of a hydropower plant in close proximity to the project
  • Addition of Big Bull satellite deposit

Victor Wyprysky, President and CEO commented: "I am pleased that Chieftain has delivered a PEA which updates the economics of the existing project before targeted operational improvements. The NPV(8) of $277 million represents a pre-tax Net Asset Value of approximately $23 per share price based on the current outstanding shares and before financing. It establishes a base project with very robust economics that will enable Chieftain to commence project finance discussions. We will now proceed directly to full feasibility in which we intend to further add value by adding resources, improving recovery economics with current metallurgical test work, lowering energy costs with the addition of hydro power and establishing a time frame in which to add Big Bull into the project mine plan."

The preliminary economic assessment is preliminary in nature and it includes inferred mineral resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves, and there is no certainty that the preliminary economic assessment will be realized.

Table 1.  Highlights of the Tulsequah Chief PEA (Mid Case):

        Payable
Metals
Consensus Pricing2
Mineable Resource1






Au
Ag
Zn
Cu
Pb
6.28

2.39
88
5.94
1.29
1.13
mm tonnes

g/t
g/t
%
%
%


387,000 oz
12,546,000 oz
608.2mm lbs
151.5mm lbs
65.4mm lbs


$US 1,125/oz
$US 19.06/oz
$US 0.93/lbs
$US 2.47/lbs
$US 0.80/lbs
$US1.00 = C$1.08
Average NSR3
Mining rate
Mine life
Operating cost






Site
Off-site
Total
236
255
2,000
9
79.24
23.45
102.69
$US/t
$CAD/t
t/d
years
$CAD/t
$CAD/t
$CAD/t
 





 





Pre-Production Capital cost
NPV (8%) (Pre-tax)
IRR (pre-tax)
Payback period  
  310.2
277
25
3.5
$M CAD
$M CAD
%
years
   

This Study is based on:

1.   NI 43-101 Resource Statement published by SRK in November 2010.
2.   Metal Prices used are consensus as at May 30, 2011 provided by Wellington West Capital Markets (WWCM).
3.    The Average Net Smelter Return (NSR) was calculated from the payable metals revenues minus the smelter treatment and refining charges.

Permitting:

Chieftain has now received most of the permits, licenses and authorizations previously issued to Redfern Resources Ltd. and is consulting with the regulators and the Taku River Tlingit First Nation (TRTFN) prior to finalizing applications for the remaining permits required for future mine construction and operations. Chieftain has recently submitted applications for the necessary construction works and Water Discharge Permit required for the construction and operation of the interim water treatment plant. Chieftain anticipates receiving these permits on a timely basis to meet the anticipated construction schedule.

The overall permitting schedule is coordinated with Chieftain's goal of having the project site ready for a potential financed construction start in mid-2012.  To that end the remaining operations and construction permit applications are being prepared for submission in the late fall of this year to allow sufficient time for review and issuance prior to that date.

Chieftain signed a Letter of Understanding with the TRTFN (see press release dated May 4, 2011) and is in dialogue on achieving an Impact Mitigation and Mutual Benefit Agreement including an agreement on access to the property.

Resources:

The PEA outlined a mineable resource of 6.28mm tonnes grading 2.39 g/t Au, 88 g/t Ag, 5.94%Zn, 1.29% Cu, 1.13% Pb from a mineral resource as published in a NI 43-101 report dated November 2010 by SRK Consulting:

Table 2. Tulsequah Chief Mineral Resources

Category M Tonnes Au (g/t) Ag (g/t) Zn (%) Cu (%) Pb (%)
Indicated 6.0 2.63 96.0 6.44 1.42 1.23
Inferred 1.1 1.63 72.0 5.02 0.94 0.93
  1. US$100 Equivalent cutoff used (SRK Consulting, November 2010)
  2. Based on metal price forecasts from SRK 2010 Technical Report of US$: $2.26/lb Cu, $0.90/lb Zn, $0.70/lb Pb, $1,020/oz Au, $15.47/oz Ag

In addition to the stated resource, a historic reserve calculated by Cominco in 1957 has not been included in the resources in Table 2, nor included in the mineable resources of 6.28mm tonnes.

A description of how the resource estimation was prepared can be referenced in the NI 43-101 Report, currently filed on SEDAR, entitled "Tulsequah Chief Deposit, Tulsequah Chief Property, Northern British Columbia" dated November 8, 2010 by Gilles Arseneau, PHD P.Geo of SRK, independent Qualified Person as defined in NI 43-101.

The Underground Mine:

The Project encompasses the construction of a new underground mine adjacent to and beneath old workings that were previously operated by Cominco Ltd. from 1951-57 then abandoned due to low metal prices.

The existing 5200 and 5400 Level adits will be used as the primary access to the mine for all personnel, mine services, equipment and supplies. The adits will be enlarged to accommodate modern diesel trackless equipment.

Access to the various mining levels will be provided by a spiral ramp located in the hangingwall of the deposit. This location was selected because of the predominantly non acid-generating (NAG) nature of the hangingwall stratigraphy, as compared to the potentially acid-generating (PAG) footwall. The new mine will operate as a ramp-entry truck haulage operation. Trucks will haul the ore up the ramp and dump into a bin located at the entrance to the mill.

Mining levels will be located at 30m vertical intervals. Each will be connected to an inclined ventilation raise to provide fresh air ventilation supply, vertical translation of services, and emergency egress to each level. Loading of trucks will be done on each mining level to minimize scoop-tram haulage distances. The deepest mining level will be located 750m below the 5200 Level.

Sub-level stoping will be the primary mining method employed in the mine. A minor amount of mechanized cut-and-fill stoping will be used in narrower portions of the ore body. Paste backfill and unconsolidated loose waste rock (NAG and PAG) will be used for replacement of mined voids for both methods. Where backfill walls will be exposed by future adjacent mining, additional cement will be added to the paste backfill for strength. Paste backfill will be generated in the processing plant and delivered to the mine through a pipe that will be installed in the 5200 Level and down the ventilation raise and bore holes.

Waste rock will be preferentially retained in the mine as loose unconsolidated rock fill in secondary stopes. Waste that is required to be removed from the mine will be hauled by truck to the NAG or PAG waste dump on surface. At all times, the two different waste products will be segregated for proper storage and reclamation.

The mine will employ 4.6 m³ scooptrams, 40 tonne trucks, two-boom jumbos, longhole drills, and rockbolting units. All equipment will be diesel-powered, and all drilling equipment will be electric-hydraulic. Cassette carriers and multiple task-specific cassettes will be used to service the mine.

Metallurgy:

The predicted metallurgical response was based on four main test-work programs between 1993 and 2006. These programs were used to predict metallurgical response as follows:

Table 3. Predicted Metallurgical Response (Wardrop, 2007)3

    Grade  Recovery
Product Avg
Tonnes/Yr
Au
(g/t)
Ag
(g/t)
Zn
(%)
Cu
(%)
Pb
(%)
Au
(g/t)
Ag
(g/t)
Zn
(%)
Cu
(%)
Pb
(%)
Feed 730,0000 2.60 93.70 6.33 1.40 1.20 100.00 100.00 100.00 100.00 100.00
Gold Gravity Conc. 80.7 6,552.0 5,000.0 10.50 2.60 35.00 28.00 0.59 0.02 0.02 0.32
Copper Conc. 40,210.1 22.40 1,197.80 7.86 22.50 9.67 47.68 70.42 6.84 88.53 44.29
Lead Conc. 7,339.3 16.20 551.10 14.99 3.06 53.00 6.29 5.91 2.38 2.20 44.29
Zinc Conc. 68,396.2 0.70 82.20 59.00 0.34 0.29 2.70 8.22 87.37 2.25 2.23
Pyrite Conc. 228,460.8 0.60 31.60 0.45 0.25 0.21 7.37 10.55 2.22 5.50 5.37
Tailings 385,512.9 0.40 7.60 0.14 0.04 0.08 7.96 4.31 1.17 1.51 3.51

   

The following table shows the production of the various payable metals over the currently estimated life of mine, as calculated from the Mineable Resource of the PEA:

Table 4. Production of Payable Metals by Year, Life of Mine ("LOM")

  Operating Year  
Payable
Metal
1 2 3 4 5 6 7 8 9 LOM
Total
Au (koz) 40.9 51.6 40.9 41.0 42.3 43.6 47.0 44.2 35.6 387.1
Ag (koz) 1,230 1,599 1,392 1,412 1,416 1,564 1,477 1,418 1,037 12,545
Zn mm lbs 43.5 63.0 74.1 73.7 74.0 77.1 69.9 74.2 58.7 608.2
Cu mm lbs 9.2 13.8 16.3 16.1 20.1 22.0 23.4 17.7 12.9 151.5
Pb mm lbs 5.9 7.9 7.7 7.7 7.4 8.2 7.3 7.2 6.1 65.4
Au Eq (koz) 61.7 78.7 64.5 64.9 66.3 70.0 69.0 71.3 53.2 599.6

The Wardrop 2007 feasibility design of the plant and metallurgical recoveries were the basis for the PEA.  The two-stage grinding circuit is to produce 80% passing 65 micron particles.  Mineralogical studies completed by Chieftain (see press release dated May 17, 2011) have indicated the potential to improve liberation and therefore recoveries over this base case.  This test work is currently underway and expected to be completed in Q3, 2011.  Results of the test work will be included in the feasibility study to be conducted during the remainder of the year.

The process plant will operate at 2,000 tonnes per day (730,000 t/yr) with an availability of 92%.

Four products will be removed from the circuit in the following order:

  • Gold concentrate will be separated using a gravity circuit. An on-site refinery will be used to produce gold bullion;

  • Bulk copper-lead flotation concentrate will then be produced, which will then be separated into separate copper and lead concentrates;

  • Zinc concentrate will then be separated; and

  • Tailings will be separated by a final stage of floatation, removing the pyrite to reduce the sulphide content. The pyrite will be mixed with inert tailings and cement then pumped underground as paste backfill. Neutral tailings, which are not pumped underground, will be mixed with limestone and sent to the tailings pond.

Concentrates will be dewatered by pressure filtration to achieve a moisture content of 8% prior to shipping. Limestone will be added to the tailings in sufficient quantities to ensure there is no potential for acid generation. The limestone will be quarried, crushed and milled on site.

Concentrate will be loaded into 40 tonne capacity sea containers for transportation by road.

Access and Transportation:

The PEA is based on access to the site being accomplished year-round by road from Atlin, BC. Chieftain acknowledges TRTFN's significant and unresolved issues with the proposed road access to the Property, and the long history of conflict around this issue. As announced in the press release dated May 4, 2011, the TRTFN and Chieftain are in cooperative discussions to come to agreement on access and as such, Chieftain has put on hold the transfer of the Special Use Permit of the existing permitted road route.

It is assumed that metal concentrates will be transported by truck to Skagway, Alaska using existing commercial services. These will then be bulked into the existing Alaska Industrial Development & Export Authority terminal for loading onto bulk concentrate ships for ocean shipment to Asian smelters.

Supplies will be transported to the mine by road utilizing the backhaul portion of the trip in the mineral concentrate containers. Workers will be flown to site on charter planes or bussed to site by road.

Infrastructure:

All surface buildings will be located in close proximity to the mine, including the following:

  • The mineral process building;

  • The maintenance facility for surface equipment, which will be combined with the warehouse;

  • A 200 man camp;

  • A two-story administration building, which will include the canteen and kitchen;

  • A 12.8 MW diesel-generated power plant;

  • A two-story technical services building, which will include the mine dry and wicket area; and the assay office.

The camp installed for construction will be the final operating camp. The assay office will be installed as a sleeper unit, allowing additional beds during the construction period then it will be converted to its final configuration to suit operations.

The mine will operate on a rotating schedule of four weeks in and two weeks out for all personnel. A 1,050m long (1,200m on completion) airstrip has been constructed approximately 2km north of the mine near Shazah Creek.

A 2.8 million tonne capacity tailings facility is designed and will be constructed approximately three km north of the mine in the valley of Shazah Creek. Tailings will be transported in the form of a dense slurry by pipe.

Operating Costs:

Total operating costs have been estimated from first principles for the Project as follows:

Table 5. Operating Costs ($CAD/tonne) Low and Mid-Cases:   

Onsite  
Mining 31.99
Processing 17.95
Power 20.01
G&A   9.29
Total 79.24
Offsite 23.45
TOTAL 102.69

This cost represents the Life of Mine Cash Cost of the Project, from years 1 - 9 inclusive.

For the High Case of the PEA operating costs have been adjusted upwards to a LOM average total of C$110.34 to reflect expected increases in consumable costs at a time of higher commodity pricing.

Capital Costs:

The initial capital requirement for the Project has been estimated at C$310.10M, as detailed below:

Table. 6 Pre-production Capital Costs

Items CAD$M
Site Infrastructure 26.9
Mill and process 57.1
Mine 32.1
Tailings facility 3.8
Facilities 26.6
Services 6.6
Road 65.0
Indirects 37.7
Owner's costs 4.0
Contingency (15%) 37.0
Working Capital  13.3
Total Pre-Production Capital 310.1

The Project has a total sustaining capital requirement of C$55.2M, inclusive of working capital recovery and 10% contingency allowance. Sustaining capital is required for extension of the main ramp to depth, mobile equipment rebuilds and replacements, and capital improvements.

Financial Analysis:

Table 7. Summary results for Low, Mid and High Case Scenarios

Study Component Low
(SRK)
Mid
(Consensus)
High
(Forward Curve)
LOM Tonnes 6.28 6.28 6.28
LOM Grade      
Gold (g/t) 2.39 2.39 2.39
Silver (g/t) 88.17 88.17 88.17
Zinc (%) 5.94 5.94 5.94
Copper (%) 1.29 1.29 1.29
Lead (%) 1.13 1.13 1.13
LOM Payable Metals      
Gold (k/oz) 387 387 387
Silver (mm/oz) 12.5 12.5 12.5
Zinc (mm/lb) 608 608 608
Copper (mm/lb) 151 151 151
Lead (mm/lb) 65 65 65
Metal Prices SRK Resource Consensus Forward Curve
(Table 8)
Gold Price (US$/oz) 1,000 1,125 1,745
Silver Price (US$/oz) 15.00 19.06 37.16
Zinc Price (US$/lb) 0.90 0.93 1.04
Copper (US$/lb) 2.35 2.47 3.90
Lead Price (US$/lb) 0.85 0.80 1.1
Exchange Rate $CAD/$USD 1.10 1.08 1.08
Capital Costs ($M) 310.2 310.2 310.2
Operating Costs ($/t) 102.69 102.69 110.34
Total Cash Cost ($US / Au oz eq.) -342 -365 -734
Total Cash Cost ($US/lb Zn) -0.55 -0.72 -1.79
Pre-tax Net Cash Flow (CAD$M) 475 591 1,371
Pre-tax IRR (%) 21 25 48
Pre-tax NPV 8% (CAD$M) 202.7 277.2 774.1

Table 8. PEA Study Commodity Forward-Curve Projections (WWCM, 2011)

Used for High Case Only
Year Au ($/oz) Ag ($/oz) Zn ($/lb) Cu ($/lb) Pb ($/lb)
2014 1,616 37.50 1.07 4.06 1.11
2015 1,671 37.16 1.06 3.96 1.11
2016 1,745 37.16 1.04 3.9 1.11
2017 1,745 37.16 1.04 3.9 1.11
2018 1,745 37.16 1.04 3.6 1.11
2019 1,745 37.16 1.04 3.9 1.11
2020 1,745 37.16 1.04 3.9 1.11
2021 1,745 37.16 1.04 3.9 1.11
2022 1,745 37.16 1.04 3.9 1.11

Project Schedule:

The Project is currently anticipated to launch in the spring of 2012 subject to results of future feasibility study results and project financing. The Project assumes the following key dates for its various phases:

Table 9. Project Milestones

Feasibility Study Completion Q1, 2012
Order long lead deliver items Q4, 2011
Begin Mobilizing via Barge Q2, 2012
Construction Infrastructure Q3, 2012
Site earthworks Q3, 2012
Concrete foundations Q4, 2012
Enclose all buildings Q3, 2013
Power Plant Q1, 2014
Completion of Mill construction Q2, 2014
Tailings Facility Q2, 2014
Access Road Q2, 2014

Qualified Persons:

The technical content of this release was reviewed by Keith Boyle, P. Eng, Chief Operating Officer and Terence Chandler, P. Geo., Executive Vice-President, both of Chieftain Metals Inc, and qualified persons under NI 43-101.

The PEA, to be filed on Sedar within 45 days of this release, has been prepared in accordance with the Standards of Disclosure for Mineral Projects as defined by National Instrument 43-101 (NI 43-101). The following Independent Qualified Persons have assumed authorship of this report:

Gordon Doerksen  
Louri Lakovlev  
Daniel H. Sepulveda  
Gilles Arseneau  
Bruce Murphy   
Rob Marsland   
P. Eng, Principle Consultant, Mining, SRK Consulting (Canada) Inc.
P. Eng, Senior Mining, Consultant SRK Consulting (Canada) Inc.
P. Eng, Associate Consultant, SRK Consulting (Canada) Inc.
Ph.D., P. Geo. Associate Consultant, SRK Consulting (Canada) Inc.
FSAIMM, Principal Consultant - Geotech, SRK Consulting (Canada) Inc
P. Eng., Senior Environmental Engineer, Marsland Environmental Associates

Quality Control and Data Verification:

The mineral resource estimate contained in the technical report entitled "Tulsequah Chief Deposit, Tulsequah Chief Property, Northern British Columbia" dated November 8, 2010 was prepared by independent Qualified Person Gilles Arseneau, PhD. P.Geo of SRK Consulting.  That report describes the data verification methodology employed and results of the data verification assessment for the data relied upon for the NI 43-101 mineral resource estimate.  The independent Qualified Persons responsible for the PEA reviewed the extensive data  available for the project, the information from the prior Wardrop Feasibility Study Report of March 2007 and other reports to verify the data relied upon for the PEA.

About Chieftain Metals Inc:

Chieftain Metals Inc.'s principal business is the acquisition, exploration and development of mineral properties. Since incorporation, the Company's business has focused entirely on the acquisition, and thereafter the development, of the Tulsequah Polymetallic Project, in north-western British Columbia, Canada. The Tulsequah Project consists of 38 mineral claims and Crown-grants covering approximately 14,220 hectares and covers two previously producing mines. For more information on the Tulsequah Project, please refer to the Company's NI 43-101 compliant technical reports, "Tulsequah Chief Deposit, Tulsequah Chief Property, Northern British Columbia" and "Big Bull Project, Tulsequah Chief Property, Technical Report, Northern British Columbia", each dated as of November 8, 2010 and available under the Company's profile on SEDAR href="http://file://///Chieftain-DC01/Shares$/Mining/Investor%20Relations/(www.sedar.com).">(www.sedar.com).

Forward-Looking Information:

This press release includes certain "forward-looking statements" within the meaning of the Ontario Securities Act or other laws or regulations. All statements, other than statements of historical fact, included herein, including without limitation, statements regarding potential mineralization, mineral resources or reserves, exploration results and future plans and objectives of Chieftain Metals Inc. are forward-looking statements that involve risks and uncertainties. There can be no assurance that such statements will prove to be accurate and actual results and future events could differ materially from those anticipated in such statements.

__________________________

1 Consensus price projection. The prices selected for the various commodities were supplied by Wellington West Capital Markets ("WWCM") as follows: $0.93/lb zinc; $1,125/oz gold; $2.47/lb copper; $19.06/oz silver; $0.80/lb lead; FX 1.08 CAD/USD

2 Au-equivalent ounces is the total of payable gold plus silver converted to gold ounces.  The payable silver production is converted  into gold ounces at the ratio of the consensus gold to silver prices listed above. The base metals in the deposit are not used in calculating the Au-equivalent ounces.

3 In March 2007, Redcorp Ventures Ltd, the former owner of the Tulsequah Project, disclosed the results of a Feasibility Study Technical Report conformable to the NI-43-101 standards of disclosure, prepared by Wardrop Engineering Inc. and available on the SEDAR page of Redcorp Ventures Ltd.

 

 

 

 

 

SOURCE Chieftain Metals Inc.

For further information:

Victor Wyprysky
President & CEO
Tel: (416) 644-6000 ext 650.
Email: vw@chieftainmetals.com
  Keith Boyle
Chief Operating Officer
Tel: (416) 644-6000 ext. 500
Email: kb@chieftainmetals.com
  Jamie Frawley
Director, Corporate Communications
Tel: (416) 644-6000 ext. 360
Email: jf@chieftainmetals.com

Profil de l'entreprise

Chieftain Metals Inc.

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