Aya Gold & Silver Announces Robust Expansion Feasibility Study for Zgounder
1- AISC is a non-IFRS measure and is calculated in accordance with the standard adopted by the World Gold Council.
PRESS RELEASE
Aya Gold & Silver Announces Robust Expansion Feasibility Study for Zgounder
Pre-Tax IRR of 57%, Payback Period of 1.7 Years
Montreal, Quebec, February 22, 2022 - Aya Gold & Silver Inc. (TSX: AYA) (“Aya” or the “Corporation”) is
pleased to announce positive results from its Feasibility Study (“FS”) to expand the Zgounder Silver Mine
located in the Kingdom of Morocco from 700 tonnes per day (“tpd”) to 2,700 tpd capacity. All amounts
are in US dollars unless otherwise stated. All figures are on a 100% ownership basis.
Highlights of the 2,000 tpd Expansion Feasibility Study
➢ Robust project economics (base case at $22/oz silver):
• Before-tax 5% net present value (“NPV”): $471 million
• Before-tax internal rate of return (“IRR”): 57%
• After-tax 5% NPV: $373 million
• After-tax IRR: 48%
• Payback period: 1.7 years post expansion
• Initial life of mine (“LOM”) of 11 years
➢ 394% increase in annual production: Increased throughput expected to drive annual silver (“Ag”)
production to 7.9 million ounces (“oz”) by 2024
➢ 364% increase in revenue: Annual revenue expected to increase from $37M in 2021 to $172M by
2024
➢ Low quartile costs: LOM all-in sustaining cost (“AISC”)1 of $9.58/oz including sustaining capital
expenditures
➢ Initial proven and probable Mineral Reserves Estimate of 8.59 million tonnes (“t”) grading
257 g/t Ag for 71Moz of Ag, positions Zgounder among the highest-grade Ag projects globally
➢ Low initial capital expenditures: $139.4 million, including $16.6 million in contingency cost
➢ Short expansion timeframe: First Ag pour planned in Q1-2024
➢ Further optimisation opportunities:
• Exploration along strike and at depth
• Potential to optimise the flow sheet during the front-end engineering design (“FEED”) and the
mine plan as part of the underground expansion
➢ Enhanced ESG plan: Reduction in water consumption and carbon emissions intensity
“We are thrilled to deliver our Zgounder expansion feasibility study less than two years after taking over
as management, a testament to our team’s hard work. The feasibility study is supported by a high-grade
maiden reserve and is expected to quadruple production at industry-low costs while delivering superior
economic returns for all stakeholders ,” said Benoit La Salle, President and C EO. “With its low capital
outlay, low operating costs and quick payback, Zgounder ranks among the highest-return silver projects
globally.”
“While we see exceptional economics on the basis of reserves -based mining only, our long -term plan
incorporating a portion of the exploration upside and optimisation opportunities positions Zgounder as
a long-life cornerstone asset for Aya. Based on the success achieved to date, we believe there remains
significant upside to be gained through exploration.”
“With the mine development already underway, Zgounder will be a significant economic driver in the
region with this initial expansion providing more than 400 jobs during construction , 450 jobs during
operations and extending the mine life by at least 11 years. We will draw on our experience and expertise,
in addition to the transformative groundwork laid since 2020, as we expedite expansion of our unique
pure-play silver mine.”
Silver Price Sensitivity Analysis
The Zgounder sensitivity analysis was performed using a Ag price varying from $16 oz Ag to $36 oz
Ag as illustrated in the following table:
$16 oz Ag $19 oz Ag Base Case
$22 oz Ag
Spot
($23.5 oz Ag) $28 oz Ag $36 oz Ag
After-tax 5% NPV ($M) $132M $253M $373M $433M $612M $927M
After-tax IRR (%) 21% 34% 48% 54% 75% 117%
Undiscounted LOM free
cash flow ($M) $213M $368M $522M $599M $828M $1,232M
Payback period (years) 3.7 2.5 1.7 1.5 1.0 0.6
Project Milestones
➢ Environmental study impact assessment (“ESIA”) approval in Q1-2022
➢ Complete front-end engineering design in Q2-2022
➢ Construction start-up in Q3-2022
➢ New plant first Ag pour by Q1-2024
➢ Ongoing exploration with the aim of increasing reserves and resources and enhancing economics
Mineralization
The mineralization at Zgounder is hosted within a low sulphidation-Ag epithermal deposit contained in
complex lenses, clusters , and shear zones. The mineralization typically occurs in three styles:
millimetre-thick beds of crystallized, finely disseminated pyrite associated with quartz; native Ag
veinlets associated wit h proustite, argentite and filling micro -fractures in stockwork; and native Ag
dissemination in brecciated sandstone -shale layers and spotted by chlorite and / or carbonate and
quartz and other sulphides. The host lithology consists of Proterozoic volcano-sedimentary series. The
mineralization is predominately hosted at the contact, or near the contact, between a sedimentary
sequence and a volcanic package. Mineralization is dominated by mercuriferous native Ag (proustite),
with few Ag sulfosalts (acanthite, p earceite), arsenopyrite and base -metal sulfides (sphalerite and
chalcopyrite).
Exploration Potential at Zgounder
Prior to the arrival of management in 2020, the Zgounder Project had seen limited near-mine drilling
and no regional exploration. Since assuming control, the Aya team has conducted over 75,000 meters
(“m”) of diamond drill hole (“DDH”) programs with the view of updating the resources estimate and
delivering a reserve estimate in support of the FS. Regional fieldwork commenced in 2021, and a
regional drill program will be initiated in Q2-2022 on targets generated by fieldwork and an airborne
geophysical survey.
Significant upside potential exists within and surrounding the Zgounder mineralized system, which
remains open at depth to the granite. Aya’s overall objective is to expand resources and reserves to
enhance project economics and expand the mine life. In the short term, the Corporation aims to expand
resources at depth and along strike in addition to discovering regional resources within trucking
distance of the mine.
An initial budget of $6.4 million has been assigned to the 2022 exploration program on Zgounder, which
will consist of 22,500m of DDH proximal to the mine and 7,500m of regional DDH and RC drilling.
Results will be released on an ongoing basis.
Mineral Resources and Mineral Reserves Estimates
The FS is based on the updated 2021 Mineral Resource Estimate (“MRE”) published on December 14,
2021, which outlined a 116% increase over the resource published in March 2021.
The FS includes an inaugural Mineral Reserves Estimate (see below) that has been completed by DRA
Global Limited (“DRA”) in accordance with the CIM Definition Standards for National Instrument 43-101
reporting.
The Mineral Reserves have been derived from the Resource Estimate completed by P&E Mining
Consultants Inc, and include all drilling data obtained until September 10 , 2021, and with an effective
date of December 13, 2021. The Inferred material within the pit design was treated as waste.
Using the Mineral Resources dated December 13, 2021 as the basis, the total proven and probable
reserves for the Zgounder deposit were as follows:
On a 100% basis. M&I resources shown
inclusive of reserves.
Tonnes
(k)
Grade
(Ag g/t)
Content
(Ag k oz)
Proven reserves 3,100 288 28,748
Probable reserves 5,490 239 42,128
P&P reserves 8,590 257 70,876
Measured resources (incl. reserves) 3,511 347 39,183
Indicated resources (incl. reserves) 6,254 283 56,874
M&I resources (incl. reserves) 9,765 306 96,057
Inferred resources 196 367 6,400
The mineral reserves were estimated based on a Ag price of $20 per oz and a corresponding cut-off
grade of 47 g/t for Open Pit Reserves, 85 g/t for Underground Reserves and 44 g/t for historical tailings.
For further details, see the reserves and resources in Tables 1 and 2, respectively, in the appendix.
Mining Operations, Processing and Metallurgy
Mining Operations
The Zgounder Mine expansion outlines a combined open pit and underground mining operation over
the 11-year projected LOM. Ore will be sourced from the open pit to build a stockpile prior to the
commissioning of the new processing plant and to supplement production in the first full year of
production.
Approximately 2.5 million tonnes (“Mt”) of material or 29% of current res erves will be mined from the
open pit during the LOM (including the historical tailings storage facility (“TSF”)) and 23.5Mt of waste
material will come from the open pit (10.6:1 stripping ratio).
Underground mining methods will account for about 71% of the total reserves, with a mix of long-hole
mining (LH) and overhand cut and fill (C&F) – the split between LH and C&F being respectively 60% -
40%.
This will deliver a total of 8.6Mt of ore to the milling facility with an average head grade of 257 g/t Ag.
Process grades for the LOM average 257 g/t Ag for an average annual production of more than
6,800,000 oz of Ag (once in full production) at low total cash and AISC1 (see table below).
Work on the development and construction of the new underground infrastructures commenced in
January 2022 and is being carried out by a Moroccan mining contractor. In parallel to the construction
of the new process plant, over 11,000m of underground development will be completed to support the
increased mining rate.
Processing and Metallurgy
The new Zgounder process plant is designed to process 2, 000 tpd. Combined with the two existing
processing facilities (the existing cyanidation and flotation plant s), the treatment capacity will total
approximately 961,000t of ore per year.
The process plant will be based on a conventional comminution circuit, with the crushing circuit
composed of a primary jaw crusher and secondary cone crusher. Crushed ore will be conveyed to the
grinding circuit using a ball mill in closed circuit with primary cyclones. The target grind is planned at
100 microns in order to achieve optimal Ag recovery. Following grinding, the ore will be fed to a flotation
circuit. The resulting flotation concentrate will be leached in a counter current decantation (“CCD”)
circuit, while the flotation tailings will be thickened and sent to a leaching and carbon-in-pulp (“CIP”)
circuit.
Pregnant solution from the CCD circuit and from the adsorption-desorption-recovery circuit will be fed
into the Merrill-Crowe circuit for Ag precipitation The resulting and cement will be directed to a refinery
for production of Ag ingots.
LOM head grades for the process plant are expected to average 257 g/t with a Ag recovery of 91.3%.
The main reagents used in the plant are hydrated lime, cyanide, flotation collector , and hydrogen
peroxide.
Electricity will be supplied from the grid, and construction of a 90km, 60kV power line and substation
upgrades have been included as part of the project. Aya expects to power its operations with 100%
renewable energy.
1- AISC is a non-IFRS measure and is calculated in accordance with the standard adopted by the World Gold Council.
LOM Production Plan
The first Ag pour from Zgounder is expected to occur in Q1-2024. A production summary is provided
below, and the entire LOM mine plan is presented in Tables 3 and 4 in the appendix.
Production Summary (for 2,700 tpd) Zgounder
OPERATION TYPE
Mine type Open pit - underground
Mill type (new plant) Flotation / CIP plant
RESERVES & RESOURCES
P&P reserves 8,590 kt at 257 g/t; 70.9Moz
M&I resources 9,765 kt at 306 g/t; 96.1Moz
Inferred resources 542 kt at 367 g/t; 6.4Moz
LOM PRODUCTION
Mine life, years 11
Strip ratio, Waste: Ore 10.6:1
Tonnes processed, Mt 8.6
Grade processed, Ag g/t 257
Silver processed, Moz 70.9
Average recovery rate, % 91.3%
Silver production, Moz 64.7
Average annual production, Koz post expansion1 6,828
Cash costs, $/oz 7.36
AISC1, $/oz 9.58
CAPITAL COST
Upfront capital cost, $M 139.4
Sustaining capital cost, $M 69.7
1 Average annual production on the basis of 2,700 tpd operation
Figure 1- LOM Production Profile
0
50
100
150
200
250
300
350
0
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
7,000,000
8,000,000
9,000,000
10,000,000
2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032
Ag grade (g/t)
Ag oz
Total Ag oz produced
Ag grade processed
1- AISC is a non-IFRS measure and is calculated in accordance with the standard adopted by the World Gold Council.
Project Operating Costs
The table below details the LOM cash operating cost per tonne processed at Zgounder. Mining and
processing operating costs have been prepared by DRA and are based on a mining contractor fleet for
the open pit, and an owner-operated fleet for underground mining. General and administration (“G&A”)
costs derive from the current Zgounder operation and have been reviewed by DRA.
LOM cash operating cost $ per tonne
milled
Mining ($/t) $29.3
Processing ($/t) $19.0
G&A & ESG ($/t) $6.0
Operating cost ($/t) $54.3
The table below details the LOM AISC1 for the Zgounder expansion:
LOM AISC1 $/oz
G&A 0.78
ESG 0.17
UG mine opex 3.50
OP mine opex 0.38
Process opex 2.53
Sustaining capital 1.18
Royalties & mining taxes 1.05
Total AISC1 ($/oz) $9.58
Figure 2 – LOM After-tax Cash Flow Profile
-200,000,000
-100,000,000
0
100,000,000
200,000,000
300,000,000
400,000,000
500,000,000
600,000,000
-100,000
-50,000
0
50,000
100,000
150,000
200,000
250,000
2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032
Total revenue (k$)
Total Revenues
After-Tax Cash flow
Cumulative After-Tax Cash flow (undiscounted)
Zgounder Capital Expenditures
The project capital cost estimate was compiled by DRA with input from Groupement des Consultants et
Ingénieurs du Maroc, a Moroccan engineering firm, on the tailings storage facility (TSF) aspects. Aya has
provided project -specific portions for mine establ ishment and facilities, owner costs, and the high -
voltage power supply.
A 24-month construction period, including commissioning, is projected with the initial cost to expand
the Zgounder plant estimated at $139.4 million, inclusive of equipment and infrastructures, open pit pre-
stripping, owner costs and contingency costs, as summarized below.
Capital Expenditures Split Initial Capex
(In millions of $)
Sustaining Capex
(In millions of $)
Processing plant 60.8 7.3
Infrastructures & TSF 6.6 12.2
New power line 7.6
Mining – Open pit pre-stripping 2.9
Mining – UG equipment & infrastructures 8.8 14.7
Mining – UG development 35.5
Indirect costs 30.8
Indirect contractors 8.8
Initial spares & first fills 4.1
Transport & freight 2.2
EPCM & commissioning 15.7
Direct & indirect cost subtotal 117.5
Owner costs 5.4
Contingency 16.6
Total 139.4 69.7
Closure costs 6.6
Tailings Management
The tailings system will comprise a new TSF located 2.7 kilometers south -east of the current
cyanidation TSF. The newly built TSF will be fully lined with high -density polyethylene membrane.
Recycled water will be optimised throughout the process to minimise the addition of fresh water to the
process.
The new TSF will take all the tailings produced at the new processing facility, including all the tailings
from the existing flotation plant. All the material processed at the existing flotation plant will be directed
to the new process plant (the flotation concentrate to the concentrate leaching circuit, and flotation
tailings to the CIP circuit) for further Ag recovery. Tailings from the existing flotation plant will go to the
CIP circuit of the new plant for further Ag extraction, and hence all the tailings produced will go to the
new TSF.
Opportunities to Further Enhance Value
Aya has identified the following opportunities to further enhance the economics of the Zgounder
expansion project and current operations , and will continue to update these opportunities in 2022 and
into 2023:
➢ Expansion of near-mine mineralization along strike
➢ Expansion and potential discovery of new resources at depth
➢ Potential to optimize:
o Costs regarding the initial CAPEX of the expansion project
o Process plant flowsheet during the FEED to reduce the capital intensity, while simplifying
the operability and constructability of the new plant
o Underground mine design, to reduce the total operating development meters and
accelerate access to high productivity areas
Enhanced ESG Plan
In 2020, an ESIA was launched for the Zgounder expansion. Public hearings were successfully
completed in Q4-2021, and full approval of the ESIA is expected in February 2022.
The Corporation has leveraged the FS and other resources to achieve the most economically and
environmentally sustainable solutions for Zgounder, in addition to maximising its impact in the
community.
Among its ESG initiatives, Aya plans to
➢ Revegetate and recycle waste from the mine’s historical TSF
➢ Reduce carbon emissions intensity through
o Powering its operations with 100% renewable energy
o Lower fuel consumption through the production of silver bars
o Evaluation of a clean fleet energy replacement strategy for end-of-service trucks
➢ Lower water consumption through
o Use of recycled water from the TSF in the cyanidation circuit
o Production of domestic drinking water with hydropanels which generate water from
moisture in ambient air
➢ Foster local wealth creation through
o Focus on national recruitment and procurement for the mine expansion
o Creation of 600 -900 agri -business livelihood projects over a 5-year business
entrepreneurship program
o Support for local healthcare and education facilities
Assumptions
➢ Silver price of $22.00 per oz
➢ Light fuel oil: $0.85 per liter
➢ Exchange rate: $0.759 US dollars to the Canadian dollar
➢ Exchange rate: $0.108 US dollars to the Moroccan dirham
➢ NPV calculated using a discount rate of 5%
➢ Based on the 2016 Moroccan mining code