Positive Preliminary Economic Assessment For La Fortuna Gold Project
TORONTO - Minera Alamos Inc. reported the positive results of an independent Preliminary Economic Assessment ("PEA") for its La Fortuna Project in Durango, Mexico. The PEA was prepared in accordance with National Instrument 43-101 Standards of Disclosure for Mineral Projects (NI 43-101) by CSA Global Geosciences Canada Ltd of Toronto, Canada.
Base case prices for gold, silver and copper were assessed at values approximately 2%-7% below the three-year trailing average prices for each of the metals and below the majority of the publicly available forward looking estimates available as of July 2018
"With an after-tax Internal Rate of Return in excess of 90%, today's excellent PEA results confirm that the La Fortuna Project provides a robust base for the next phase of gold production in the Company's growth pipeline," commented Darren Koningen, Chief Executive Officer. "The simplified gold recovery process outlined in the study represents a conservative starting point that is well suited to the initial project resource which, to date, has been based exclusively on previously drilled mineralization. As our engineering work progresses we continue to find opportunities to reduce the initial project capital requirements and improve overall project economics. Coupled with our strategic partnership with Osisko Gold Royalties that includes an option to provide a significant portion of the project capital requirements in return for a Project royalty, these additional optimizations will greatly reduce the upfront funding requirements of this already low capital cost operation."
"This PEA represents a key milestone for the Company as we begin to deliver to the market's attention the underlying project economics of our development pipeline that focuses on cost-efficient and targeted production that can incrementally build a significant production profile over time," commented Doug Ramshaw, President. "With the recently submitted commercial permit applications at the Santana project and ongoing work at the Company's Guadalupe de los Reyes project we are aggressively expanding our activities on multiple fronts. We continue to envision a plan whereby targeted production from the development of the Santana project will support the modest capital requirements of the La Fortuna operation."
The mineralization at the Project extends close to surface and is amenable to conventional open pit mining methods utilizing front-end loaders and trucks. Using a preliminary Whittle pit shell for the deposit ($1,250/oz gold, $2.50/t mining, $30.00/t processing, 95% recovery, 45-degree pit slopes) as a guide a full open pit mine plan was completed. LOM mineralized material was separated in grade baskets (+0.8, 1.2, 1.6, 2.0 g/t Au) so that a more complete engineering cost evaluation could be completed and used as the basis of a final five-year production plan for the project. Mineralized material was grouped as Direct Milling (>1.6 g/t Au) and Mid-Grade (0.8 – 1.6 g/t Au) which is to be stockpiled and upgraded via ore sorting prior to milling (starting Year 3). No inferred resources were utilized in the PEA mine planning and further optimization efforts aimed at cut-off grades and the smoothing of waste mining activities may provide additional economic upside for the project.
Total mined material values include all production from open pit mine (mineralization + waste) for noted intervals.
Pit bench heights were selected at 5m intervals in order to provide good ore/waste selectivity although use of larger bench heights in zones of primarily waste should be considered as part of future optimization studies. Overall average pit slopes with the benches/ramps in place are approximately 43 degrees for three sides and 41 degrees overall for the north wall. Rock competency is reasonable and higher pit slopes may be considered once the appropriate geotechnical information is available. Mineralized and waste materials are hauled using 25t trucks approximately 500m (maximum) to the waste dumps/mineral stockpile locations near the mine. Crushed stockpile material is then transported to the plant processing facilities located at a distance less than 1.5km.
All drilling/mining/crushing operations at the Project will be accomplished via an open pit mining contractor. Mining costs were developed for the project from first principals utilizing recent Mexican cost information. Contractor availability in northern Mexico is currently high and rates are competitive. An appropriate profit factor was applied to the calculated owner operator rates and the values were benchmarked against recent operational experience by Minera Alamos mining personnel. An additional factor was applied to account for the fact that the project is located a few hours from a major population base. Mine planning and supervision activities will be performed by Minera Alamos personnel and these costs are excluded from contractor rates.
Processing
A simplified base case process was utilized for the La Fortuna plant site. Mineralized material from the mine is stockpiled and crushed to a size of <3/4" prior to being transported to the process plant. The overall processing facilities consist of a primary coarse grind to 80% passing 250-300 microns followed by a bulk sulphide concentrate flotation. Bulk concentrate is reground (80 microns) prior to a final flotation producing a copper concentrate. Centrifugal gravity gold recovery circuits are included in both the primary and concentrate reground circuits to extract free gold as a concentrate. Tailings from the flotation circuit are dewatered via filtration and dry-stacked in the tailings containment area adjacent to the processing plant.
Overall gold recovery for the PEA study has been conservatively estimated at 90%. No final gold refining facilities are to be constructed at the Fortuna site although this decision can be revisited in the future should site production rates increase. Approximately half of the gold is extracted as a gravity concentrate which will be cyanide leached at site and loaded onto activated carbon for shipping outside of Mexico for final dore production. The other half of the recovered gold reports to the copper flotation concentrate (along with the majority of the copper and silver) which is filtered and transported to the port facilities at Guaymas (approximately 500 km) for final sale.
The Company has purchased a used 2000 tpd processing facility (grinding/flotation/filtration) that has been used as the basis for the Fortuna project processing facilities. The size of the major equipment items allows for plant throughput to be increased from the currently assumed 1100 tpd rate as the size of the project resource increases.
DEXTR (x-ray) ore sorting has been included in the overall project plans as a method to upgrade mid-grade (0.8-2.0 g/t Au) mineralized material from the mine (and future potential project resources). Test work has demonstrated that sorting of this material at normal project crush sizes can recover +80% of the contained gold into a sorted concentrate with gold contents similar to the high grade (3.5 – 4.0 g/t Au) direct milling material from the mine. It is conservatively assumed that an ore sorting machine will be purchased and installed in Year 3 of mining operations to upgrade this material. In the current operations plan only 20% of the LOM contained gold ounces sent to the processing plant have been upgraded in this manner.
Table 7 - Summary of La Fortuna Metallurgical Results
The closest small villages to the Project site (El Barco and San Fernando) have less than 100 inhabitants and are currently not serviced via the national power grid. Grid power is being extended along the state highway from Culiacan as it is widened and paved (currently within 30km of the project) but it is unknown when it will ultimately be available and what load capacity would exist.
It is assumed for the foreseeable future that all power required for the Project will be generated at site via diesel generators. The total operating plant power load is estimated at approximately 2MW which will be supplied via multiple generator units (operating + standby) to build in redundancy for maintenance, etc. Primary generators are to be located within close proximity to the processing plant area so site power line requirements will be negligible. Wherever possible, large power consumers not associated with the processing plant (i.e. portable crushers) are self-contained with local diesel hydraulic/electric generation. Small auxiliary generators will be utilized as necessary for minor requirements (i.e. plant camp/offices).
At current fuel prices in Mexico power generation via diesel equipment is equivalent to an electric power cost of $0.25-0.30/kWh which has been used for budgeting. Should grid power eventually arrive at the project area, power costs for the project would be reduced by 50% or more.
The Humaya river flows roughly northwest-southeast approximately 500m from the planned La Fortuna processing plant area. This river has a year-round supply of flowing surface water and discussions with the relevant permitting authorities have indicated that the project would be permitted to extract river water directly for process uses. In addition, a seasonal creek bed that runs east-west and connects with the Humaya river is located a few hundred meters south of the plant site. Hydrogeological studies are underway to establish optimal sources of groundwater that would also be suitable for the project's requirements.
Based on local observations, it is expected that river/ground water levels occur at the 250-300m elevation (above sea level). Water would be pumped from this elevation the short distance to the plant site which is located just above 500m (above sea level). Process water removed from the plant filtered tailings will be recycled as much as possible in order to minimize fresh process water make-up requirements.
The Environmental Impact Assessment (EIA) for mining projects in Mexico starts with an application for the following primary permitting documents: MIA - Manifestación de Impacto Ambiental (Environmental Impact Statement) and ETJ - Estudio Tecnico Justificativo (Technical Justification Study) that includes the ER - Estudio de Riesgo (Risk Study) and PPA - Programa de Prevención de Accidentes (Accident Prevention Program).
Following the completion of the EIA process a number of other registrations and local/state permits are required before the start of commercial production. Important among these are water rights through the Comisión de Agua (National Water Commission or CONAGUA), permits for the storage and use of explosives as well as construction permits from the local municipality.
The MIA-ETJ permit applications were submitted by Minera Alamos for the La Fortuna project in 2018 and are pending. The submitted permitting documents included an expanded scope of processing facilities that included additional stages not required for the current start-up plan (i.e. concentrate cyanidation and detoxification). This provides the company with added flexibility in the future to modify the existing operation in order to accommodate new potential regional sources of mineralization.
The Company does not currently own any surface rights in the La Fortuna area. The surface rights over the area are held jointly by the residents of the Tabahueto ejido (a Mexican agricultural cooperative). In 2016 the Company started the discussions with the local ejido regarding the necessary surface rights for the development of the La Fortuna project. On February 16th, 2017 at a general meeting the community voted unanimously to enter into a 25-year agreement to rent 235 Ha of surface area required by the Company (agreement signed formally in June 2017).