SPA
November 15, 2012
SPANISH MOUNTAIN ANNOUNCES POSITIVE
PRELIMINARY ECONOMIC ASSESSMENT ON SPANISH MOUNTAIN PROJECT
Spanish Mountain Gold Ltd. ("the Company") (SPA-TSXV) is pleased to announce the completion of a positive Preliminary Economic Assessment ("PEA") (National Instrument 43-101 compliant) for the wholly owned Spanish Mountain Gold Project (the "Project") in central British Columbia, Canada.
The results of the PEA demonstrate the potential technical and economic viability of establishing a new gold mine and mill complex on the Project.
Mr. Brian Groves, President of Spanish Mountain Gold commented, "This Preliminary Economic Assessment demonstrates robust economics for the Project. The higher grade production during the initial project years provides the potential for rapid capital payback. The PEA provides a solid base from which to advance the Project to full feasibility."
PROPOSED PROJECT HIGHLIGHTS
• A 15 year mine life producing an average of 197,000 ounces per year of gold for the first 14 years and a total life-of-mine (LOM) production of 2.8 million ounces of gold and one million ounces of silver.
• Average gold production over years one through three of 268,000 ounces per year.
• An average feed grade during the first three years of operation of 0.70 g/t Au with a life of mine average grade of 0.48 g/t.
• Cash costs averaging US$526 per ounce for the first three years of production and US$774 per ounce over the life of the mine.
• Financial Analysis - base case gold price assumption of $1462/oz being the Nov.1, 2012 - 36 month trailing average as per US Securities and Exchange Commission guidance.
• Initial Capital Cost (Q3 2012) of US$755.9 million.
• Life of mine average gold recovery of 88%.
• By-product silver production with a silver recovery of 25%.
• On-site operating cost of US$10.26 per tonne milled plus $0.42 per tonne off-site costs for a total of $10.68 per tonne for the life of mine.
• Production Summary:
CAPITAL COST
The estimated development capital is based on the third quarter of 2012 and includes a contingency of $86 million.
The initial capital cost estimate is summarized as follows:
The life-of-mine sustaining capital is estimated at $168.1 million.
OPERATING COST
Operating costs were estimated for each area of the project and life-of-mine average costs are summarized as follows:
The process testwork that forms the basis for the plant design was carried out by G&T Metallurgical Services Ltd and SGS Mineral Services, who are independent consultants.
ECONOMIC ANALYSIS
Alternative production rates were considered over the course of the study leading to the selection of 40,000 tonnes per day (tpd) as the chosen case. The pit design was developed using a gold price of US$1350/oz while the November 1, 2012 three year trailing gold price of $1462 and a silver price of $28/oz was used for the financial base case gold price. Payables for gold were 99.5%.
All prices quoted are in Q3 US dollars unless otherwise noted. A three year trailing exchange rate of C$0.99 to US$1.00 was used in the study.
The results of the Discounted Cash Flow (DCF) analysis for the 40,000 tpd case indicate that the project has a pre-tax NPV of US$454 million and an after tax NPV of $291 million at a discount rate of 5% with a pre-tax IRR of 15% and a post tax IRR of 12%. Payback on the project from the start of commercial production is 4.4 years. The NPV calculations are based on the beginning of the construction period, two years prior to the start of production.
RESOURCE ESTIMATE
An independent NI 43-101 resource estimate was prepared by Giroux Consultants Ltd in July 2012 as first disclosed by the Company in a news release dated July 24, 2012. The estimate at the 0.2 g/t Au cut-off grade established by the PEA is as follows:
The PEA includes Inferred mineral resources within a conceptual pit design 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 PEA based on these mineral resources will be realized. Mineral resources that are not mineral reserves do not have demonstrated economic viability.
In total, 670 diamond drill holes (154,368 m) from 2005 to 2012 inclusive have been used in the current resource estimate. A three dimensional geologic model was produced by Spanish Mountain Gold’s geologist E.A. Gow using Vulcan 3D mining software. The Main Zone mineralization was modelled into an Upper Argillite unit, an Altered Siltstone unit, a Tuff unit and a Lower Argillite unit. The North Zone Argillite was modelled as a separate unit.
Spanish Mountain Gold Ltd. has been drilling on the Property since 2005. Diamond drilling has identified gold mineralization at Spanish Mountain in an area that extends approximately 1,300 m by 800 m. From drill hole data, elevated gold assay results are observed to be laterally continuous along various stratigraphic sequences. The 2011 and 2012 drill programs in particular have expanded the known mineralization in the North Zone.
The sample security, sample preparation and analytical procedures during the exploration programs by Spanish Mountain Gold Ltd. followed accepted industry practice appropriate for the stage of mineral exploration undertaken in accordance with NI 43-101 requirements.
PROJECT DESCRIPTION
The Spanish Mountain gold project is located in the Cariboo region of central British Columbia, 6 kilometres (km) east of the village of Likely, and 66 km northeast of the City of Williams Lake. The Property is 100% owned by Spanish Mountain Gold Ltd., subject to four separate Net Smelter Return royalties on some of the mineral tenures.
The Property can be reached from Williams Lake via a paved secondary road that leaves Highway 97 at 150 Mile House, approximately 16 km south of Williams Lake, and continues for 87 km to the village of Likely. From Likely, the Property is accessed from the Spanish Mountain Forest Service Road 1300.
The Spanish Mountain gold deposit is a bulk-tonnage, gold system of finely disseminated gold. The largest zone carrying significant gold mineralization is called the Main Zone, which has been traced by drilling over a length of approximately 900 metres (m) north-south and a width of 800 metres.
Gold mineralization occurs predominately as disseminated within the black, graphitic argillite. Gold grain size is typically less than 30 microns, and is often, but not always, associated with pyrite. Gold mineralization also occurs within quartz veins as free, fine to coarse (visible) gold. Although the highest grades have come from coarse gold within quartz veins, disseminated gold within the argillite units is the most economically important type of mineralization. The area of gold enrichment has been traced for over 2 km, occurring in multiple stratigraphic horizons.
The Spanish Mountain gold deposit is classified as sediment-hosted vein (“SHV”) deposit, as it has many of the features common to these deposits, including some of the structural characteristics, regional extent of alteration, alteration mineralogy, mineralization style and gold grade.
The mine is planned to be a conventional truck and shovel open pit operation at 40,000 tonnes per day of mill feed. The life of mine strip ratio is 2.3.
INFRASTRUCTURE CONSIDERATIONS
The project is located in an active mining region of the province with the Mt Polley copper mine and QR gold mine being visible from the project site. An existing highway provides access to within a few kilometres of the project and a Forest Service Road leads from this highway through the area of the project.
Studies are ongoing with BC Hydro for the construction of a 230kV powerline from the main lines in the area of the McLeese Lake Capacitor Station to the project site.
Several alternative locations were considered for the tailings storage facility on the basis of cost and risk analysis. The preferred location upon which the project economic model is based envisages a dam construction approximately 2 km in length in the area just below Nina Lake where seepage control is readily achieved. The man-made structure that created Nina Lake has been proposed for decommissioning by the British Columbia Provincial government due to stability concerns and the storage facility could occupy this area.
CONTINUED DEVELOPMENT
Spanish Mountain Gold is preparing for an additional infill drilling program in order to reclassify Inferred Mineral Resources within the PEA pit to at least an Indicated classification. This infill program will be completed over the winter so that these resources can be incorporated in further economic studies leading to feasibility.
FIRST NATIONS CONSULTATION
Spanish Mountain Gold has entered into Memoranda of Understanding (MOU) with three First Nations in the region. These First Nations are Williams Lake Indian Band, Xatśūll First Nation and Lhtako Dene Nation. The Project is located within the traditional territories of these First Nations.
PROJECT STUDIES
The PEA is based on an open pit mine development that provides 40,000 tpd of mill feed for a period of 14 years followed by stockpile treatment during year 15. This development includes Inferred Mineral Resources that lie within the open pit and the reader is referred to the cautionary notes at the end of this document. The process plant is conventional in design with crushing and grinding followed by gravity concentration and flotation to produce concentrates that are enriched in gold. The gold is recovered from
the concentrates with a combination of fine grinding and cyanidation. The overall estimated gold recovery over the life of the project is 88%.
The PEA includes Inferred mineral resources within the pit 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 PEA based on these mineral resources will be realized. Mineral resources that are not mineral reserves do not have demonstrated economic viability.
The independent PEA was completed by Tetra Tech, an internationally recognized engineering firm. The PEA was prepared under the supervision of the following independent consultants:
Project Infrastructure – Hassan Ghaffari, P. Eng of Tetra Tech WEI. Inc.
Project Execution – Hassan Ghaffari, P.Eng. of Tetra Tech WEI. Inc.
Capital Cost – Hassan Ghaffari, P. Eng. of Tetra Tech WEI. Inc.
Mineral Processing – Andre de Ruijter, P.Eng. of Tetra Tech WEI. Inc.
Operating Cost – Andre de Ruijter, P. Eng. of Tetra Tech WEI. Inc.
Economic Analysis – Sabry AbdelHafez, P. Eng. of Tetra Tech WEI. Inc.
Resource Estimates – Gary Giroux, P. Eng. of Giroux Consultants Ltd.
Mine Planning – Bob Fong, P Eng. of Moose Mountain Technical Services
Geotechnical – Warren Newcomen, P. Eng. of BGC Engineering Inc.
Environmental – Ken Brouwer, P. Eng. of Knight Piésold Ltd.
Tailings Facility – Les Galbraith, P. Eng. of Knight Piésold Ltd.
Power Supply – Ibro Hadzismajlovic, P. Eng. of Stantec Consulting Ltd.
Tax Model – PricewaterhouseCoopers LLP
A NI 43-101 PEA Technical Report is currently being prepared by Tetra Tech and will be filed on SEDAR within 45 days of this news release.
About Spanish Mountain Gold
Spanish Mountain Gold Ltd. is focused on the responsible development of its flagship Spanish Mountain gold project in southern central British Columbia, Canada. The Company has a strong cash position with no debt and owns 100% of four gold properties located in British Columbia. Additional information about the Company is available on its website:
www.spanishmountaingold.com
On Behalf of the Board,
SPANISH MOUNTAIN GOLD LTD.
Brian Groves, President and CEO
Contact:
Colin Clancy
Andreas Curkovic,
Proconsul Capital Ltd.
(604) 601-3651
(416) 577-9927
info@spanishmountaingold.com
www.spanishmountaingold.com
http://www.spanishmountaingold.com/i/pdf/NR-12-17.pdf
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