Trek Mining Announces Positive Feasibility Study for the Aurizona Gold Mine and Award of EPCM Contract to Ausenco
TSX-V: TREK
Suite 730 – 800 West Pender St., Vancouver, BC Canada V6C 2V6
[email protected] +1 604.558.0560 www.trekmining.com
NEWS RELEASE
Trek Mining Announces Positive Feasibility Study for the Aurizona Gold Mine
and Award of EPCM Contract to Ausenco
July 31, 2017 – Vancouver, British Columbia – Trek Mining Inc. (TSX-V: TREK) (“Trek Mining” or the “Company”) is
pleased to announce the results of the feasibility study (“FS”) for its 100% owned Aurizona Gold Mine (“Aurizona”
or the “Project”) located in northeastern Brazil. All amounts are in US dollars, unless otherwise indicated.
HIGHLIGHTS
• After-tax NPV5% of $197.1 million and IRR of 34% at $1,250/oz gold
• Low initial capital cost of $130.8 million, with LOM sustaining capital cost of $51.3 million
• LOM gold production of approximately 886,000 ounces at an average gold recovery of 91%
• Average annual gold production of approximately 136,000 ounces
• Average LOM AISC of $754/oz, placing Aurizona in the lowest quartile of the industry average
• Proven and Probable Mineral Reserves of 19.8 million tonnes at 1.52 g/t gold for 971,000 ounces of gold
• FS supports the viability of a mine restart plan with an upgraded 8,000 tonnes per day crushing and grinding
circuit to treat all ore types
• First gold pour targeted for year-end 2018
The FS is based on a new mine plan and updated Mineral Reserve estimate and outlines the design of an open -pit
gold mine producing on average approximately 136,000 ounces of gold per year, with an initial 6.5 -year mine life
and significant exploration upside, as demonstrated with recent drill results. Initial capital to fund construction and
commissioning is estimated at a modest $130.8 million due to the Company’s ability to leverage significant existing
infrastructure in place at the brownfields mine site. Life -of-mine (“LOM”) sustaining capital is estimated at $ 51.3
million, including closure costs. All-in-sustaining costs (“AISC”) are estimated at $754 per ounce (“$/oz”) over the
life of the Project, which is in the lowest quartile of the industry average. The Project demonstrates strong returns
in the current gold price environment, with an after-tax internal rate of return (“IRR”) of 34 % and an after-tax net
present value using a 5% discount rate (“NPV5%”) of $197.1 million using a base case gold price of $1,250 per ounce
($254.3 million and 42% at $1,350/oz gold price).
The FS was prepared by Lycopodium Minerals Canada Limited with the support of three other globally recognized
engineering firms: AGP Mining Consultants Inc. (“AGP”), SRK Consulting (Canada) Inc. (“SRK”) and BVP Engenharia
in partnership with Walm Engenharia e Tecnologia Ambiental. The FS is being summarized into a technical report
that will be filed on SEDAR within 45 days, in accordance with National Instrument 43-101 (“NI 43-101”).
Christian Milau, CEO, stated, “The feasibility study outlines a robust, construction -ready, open-pit gold mine that
we can rapidly advance to production . This new mine plan supports the original conviction of Trek Mining’s
executive team that we are developing a low -cost, high -margin operation that will provide substantial cash
generation for the Company , producing on average 136,000 ounces of gold per year at respectably low all- in
sustaining costs. Further, based on recent drill results w e are confident that we can extend the mine life with
exploration success, bringing additional value to both our shareholders and community partners.”
David Laing, COO, added, “This feasibility study reflects extensive engineering and technical work conducted over
the last two years. With much of the necessary infrastructure already in place, initial capital to restart Aurizona is
significantly less than other similar- size projects, resulting in quick project payback. With the feasibility study
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complete, we will turn our attention to engineering, procurement and construction activities to get Aurizona back
into production.”
BASE CASE HIGHLIGHTS
The 100% -owned Project, located in Maranhão State in northeastern Brazil, is a 2 23,000-hectare property
containing a past-producing open-pit mine and gold processing plant, the Piaba and Boa Esperança gold deposits
and numerous exploration targets. The FS provides a compilation of the engineering and geological studies
performed in 2016 and 2017 , which incorporated the results from drilling conducted in 2015 and additional
geotechnical and geochemical site characterization work carried out in 2016 and 2017. FS highlights are summarized
in the table below.
Feasibility Study Highlights
Gold price (base case) $1,250/oz
Exchange rate (Brazilian Real to US Dollar) 3.3:1
Average annual gold production (LOM) 136,000 ounces
Total gold production (LOM) 885,700 ounces
Average gold grade 1.52 grams per tonne (“g/t”)
Strip ratio 5.7:1 (waste:ore, tonnes)
Average gold recovery 91%
Throughput 8,000 tonnes per day (“tpd”)
Initial mine life 6.5 years
Cash costs (LOM) $691/oz
Direct operating costs (LOM) Mining - $2.44/tonne mined; Processing - $8.43/tonne
milled; G&A - $2.88/tonne milled; Non-recoverable taxes -
$0.89/tonne milled
AISC (LOM) $754/oz
Cash flow (after tax) (LOM) * $286 M
Initial capital $130.8 M ($148/oz)
Sustaining capital, including closure costs $51.3 M ($54/oz)
NPV5% (after tax) $197.1 M (base case), $254.3 M ($1,350/oz gold)
IRR (after tax) 33.8% (base case), 41.6% ($1,350/oz gold)
Payback (after tax) 2.8 years
* Net of initial capital cost.
ECONOMIC SENSITIVITIES
Using the base case gold price of $1,250/oz and incorporating only Proven and Probable Mineral Reserves of
971,000 ounces of gold, the Project has an after -tax NPV5% of $197.1 million and an after- tax IRR of 33.8 %. The
Project’s economics are most sensitive to fluctuations in the gold price and foreign exchange rate, as summarized
in the tables below.
Aurizona Mine Sensitivity to Gold Price
Gold price ($/oz) $1,000 $1,150 $1,250 $1,350 $1,500
NPV5% (after tax) $49.2 M $139.6 M $197.1 M $254.3 M $339.8 M
IRR (after tax) 12.3% 25.6% 33.8% 41.6% 52.9%
Payback period (years) 5.2 3.4 2.8 2.3 1.8
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Aurizona Sensitivity to Brazilian Real:US Dollar Exchange Rate
Foreign exchange (BRL/US$) 3.1:1 3.2:1 3.3:1 3.4:1 3.5:1
NPV5% (after tax) $165.9 M $182.0 M $197.1 M $211.2 M $224.6 M
IRR (after tax) 28.1% 31.0% 33.8% 36.5% 39.2%
CAPITAL & OPERATING COSTS
Initial capital to fund construction and commissioning is estimated at a modest $130.8 million due to the Company’s
ability to leverage significant existing infrastructure in place at the brownfields mine site. Most major mine and
processing elements are already in place, including a tailings storage facility (“TSF”) and waste dumps, a dedicated
power line, camp offices and accommodations, water, roads and communications.
The re-engineered plant includes an entirely new 8,000 tpd crushing an d grinding circuit that will allow all known
types of mineral bearing rock at Aurizona to be processed through the gold recovery plant. Procurement and
construction of the new components and equipment for the mine restart are expected to take up to 18 mont hs,
with first gold pour targeted for year-end 2018.
Initial and sustaining capital costs reflect the use of contractor mining, eliminating the need to purchase a new
mining fleet.
Aurizona Capital Cost Estimate
(Including duties and taxes)
Initial Capital $M Sustaining Capital $M
Mining 22.5 Mining 10.6
Treatment plant & repairs 49.3 Tailings dam 35.8
Reagents & plant services 12.0 Owner’s costs 1.2
Tailings dam 3.1 Closure costs (net of salvage value) 3.7
Owner’s costs * 29.0
Management costs 6.7
Construction indirects 7.7
Waste storage facilities 0.5
Total Initial Capital $130.8 Total Sustaining Capital $51.3
* Includes pre-production costs, working capital and power substation upgrade activities.
Aurizona Operating Cost Estimate
(Including non-recoverable taxes and excluding recoverable taxes)
Onsite Operating Costs Cost Per Ounce Cost Per Tonne Milled Cost Per Tonne Mined
Mining $355 $15.83 $2.44
Processing $189 $8.43 -
G&A $64 $2.88 -
Non-recoverable taxes $20 $0.89 -
Total Direct Operating Costs $628 $28.03 -
Refining & transport $14 - -
Total Operating Costs $642 - -
Royalties $49 - -
Total Cash Costs * $691 - -
* For IFRS accounting purposes, some stripping costs may be capitalized and included in sustaining capital instead of in operating costs.
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Mineral Reserves and Resources
Proven and Probable Mineral Reserves are estimated at 971,000 ounces of gold contained in 19.8 million tonnes of
ore at a diluted grade of 1.52 g/t of gold. These Mineral Reserves support an initial 6.5-year mine life with excellent
potential to expand the reserve base and extend the mine life with exploration success.
Aurizona Mineral Reserve Estimate
Effective Date May 29, 2017
Proven Probable Total
Ore Type
Tonnage
(kt)
Gold
Grade
(g/t)
Contained
Gold
(oz)
Tonnage
(kt)
Gold
Grade
(g/t)
Contained
Gold
(oz)
Tonnage
(kt)
Gold
Grade
(g/t)
Contained
Gold
(oz)
Laterite 122 1.94 8,000 539 0.98 17,000 661 1.16 25,000
Saprolite 1,684 1.52 82,000 1,310 1.38 58,000 2,994 1.46 140,000
Transition 2,553 1.34 110,000 1,363 1.18 52,000 3,916 1.29 162,000
Fresh Rock 4,079 1.46 192,000 8,186 1.72 452,000 12,265 1.63 644,000
Total 8,438 1.44 392,000 11,398 1.58 579,000 19,836 1.52 971,000
Proven Probable Total
Pit
Tonnage
(kt)
Gold
Grade
(g/t)
Contained
Gold
(oz)
Tonnage
(kt)
Gold
Grade
(g/t)
Contained
Gold
(oz)
Tonnage
(kt)
Gold
Grade
(g/t)
Contained
Gold
(oz)
Piaba 8,088 1.43 373,000 10,286 1.60 529,000 18,374 1.53 902,000
East 350 1.68 19,000 585 1.87 35,000 935 1.80 54,000
Boa Esperança 527 0.84 14,000 527 0.84 14,000
Total 8,438 1.44 392,000 11,398 1.58 579,000 19,836 1.52 971,000
Notes: This Mineral Reserve estimate has an effective date of May 29, 2017 and is based on the Mineral Resource estimate dated January 5,
2017 by SRK. The Mineral Reserve calculation was completed under the supervision of Gordon Zurowski, PEng of AGP , who is a Qualified
Person as defined under NI 43 -101. Mineral Reserves are stated within the final design pit based on a $1,056 per ounce gold price pit shell
with a $1,200 per ounce gold price for revenue. The cut-off grade was 0.60 g/t Au for the Piaba pit area and 0.41 g/t Au for the Boa Esperança
area. The mining cost averaged $2.32/tonne mined, processing averaged $11.30/tonne milled and G&A was $2.84/tonne milled. The process
recovery averaged 90.3%. The exchange rate assumption applied was R$3.30 equal to $1.00. The FS scope only considers the Piaba and Boa
Esperança open pit mineralized zones. The Mineral Reserve estimates contained herein may be subject to legal, political, envi ronmental or
other risks that could materially affect the potential developm ent of such Mineral Reserves. Mineral resources that are not included within
the Mineral Reserves do not have demonstrated economic viability.
The combined Measured and Indicated Mineral Resources are estimated at 1,431,000 ounces of gold (inclusive of
reserves) contained in 28.3 million tonnes at a grade of 1.57 g/t gold, with additional Inferred Resources in the open
pit of 45,000 ounces of gold contained in 880,000 tonnes at a grade of 1.61 g/t gold and underground Inferred
Resources of 490,000 ounces of gold contained in 5.1 million tonnes at a grade of 2.99 g/t gold.
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Aurizona Mineral Resource Estimate
Effective Date January 5, 2017
Deposit Area Category
Tonnes
(kt)
Gold
(g/t)
Gold
(oz)
Piaba Open Pit
Measured 8,860 1.46 415,000
Indicated 19,030 1.64 1,002,000
Measured and Indicated 27,890 1.58 1,417,000
Inferred 740 1.56 37,000
Boa Esperança Open Pit
Indicated 370 1.14 14,000
Inferred 140 1.88 8,000
Total Open Pit M&I 28,260 1.57 1,431,000
Inferred 880 1.61 45,000
Piaba Underground Inferred 5,090 2.99 490,000
Notes: This Mineral Resource estimate has an effective date of January 5, 2017 and was prepared by Mr. Marek Nowak, M.A.Sc., P.Eng. of
SRK, who is a qualified person under NI 43-101. Mineral Resources are inclusive of Mineral Reserves. Mineral Resources that are not included
within the Mineral Reserves do not have demonstrated economic viability. Open pit mineral resources are reporte d at 0.6 g/t gold cut -off
and underground resources are reported at 2.0 g/t gold cut-off. Tonnes are rounded to the nearest 10,000; ounces are rounded to the nearest
1,000. Small tonnage and grade differences may be found due to rounding. The Mineral Resource estimates contained herein may be subject
to legal, political, environmental or other risks that could materially affect the potential development of such Mineral Resources.
The Company believes there is considerable potential to expand the reserve and resource base and extend the mine
life through exploration success. The Project’s 223,000-hectare land package includes the Aurizona mining license,
brownfields exploration properties proximal to the Aurizona mine site, and earlier- stage greenfields e xploration
properties that are under option to AngloGold Ashanti Holdings plc. Near -mine, drill- ready exploration targets
include Piaba West, which has the potential to extend the existing Piaba deposit 900 metres to the southwest, and
Tatajuba, which is situated on the same Piaba structure and represents a potential four-kilometre extension along
strike from Piaba West.
AURIZONA MINE PLAN
The mine plan is based on the current Mineral Reserve model and calls for conventional truck and excavator/front
end loader open-pit mine operations with a waste -to-ore stripping ratio of 5.7:1. The new mine plan continues
mining in the existing Piaba open pit, deepening the pit and mining all rock types.
The mine plan was developed to provide a practical mining sequence while optimizing net present value, and
incorporates early mining of the Boa Esperança pit which , on completion, will provide water storage capacity as
part of the overall site water management plan. Primary mining activities will take place in the Piaba pit.
Mining will be performed by a mining contractor, based on quotes received from a variety of experienced mining
contractors. The grade control function will be performed by Aurizona personnel.
Mining costs, including the mining contractor charges and Aurizona supervision and grade control, are estimated to
average $2.44 per tonne mined (excluding taxes) over the current LOM.
Fresh rock accounts for 62% of the Mineral Reserves, while saprolite/laterite and transition account for 18% and
20%, respectively. The mine schedule estimates delivery of 19.8 Mt of ore grading 1.52 g/t gold to the mill over the
LOM. Waste tonnage totaling 113.2 Mt will be placed in the north, west, and south waste rock storage facilities.
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Existing Infrastructure at Aurizona Mine Site
(And Location of Potential Future TSF)
PRODUCTION SCHEDULE
The production schedule reflects a mine plan that provides a practical mining sequence, ensures the availability of
sumps at the appropriate times of year and provides ore stockpiles on the run of mine pad to supplement plant
feed during the rainy season. The LOM production schedule is presented in the table below.
Aurizona Production Schedule
Year Pre-Prod 1 2 3 4 5 6 7 Total
Ore to Plant kt 2,918 3,208 3,006 2,920 2,920 2,920 1,944 19,836
Gold Grade g/t 1.49 1.50 1.66 1.65 1.43 1.43 1.47 1.52
Direct to Mill kt 1,841 2,110 2,501 2,920 2,400 2,920 1,147 15,839
To Stockpile kt 1,073 1,572 708 644 0 0 0 0 3,997
From Stockpile kt 0 1,077 1,098 506 0 519 0 797 3,997
Waste kt 3,517 26,122 29,582 29,063 12,680 8,817 3,058 386 113,226
Total Mined kt 4,590 29,535 32,400 32,208 15,600 11,218 5,978 1,533 133,062
Recovery % 92.8% 91.9% 92.0% 90.4% 90.4% 90.0% 90.2% 91.2%
Gold to Doré oz 130,082 142,161 147,952 139,733 121,876 120,824 83,069 885,696
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PROCESS PLANT
The FS is based on a process plant capable of treating 8,000 tpd of fresh rock through a combination of conventional
gravity concentration and leach/CIP (carbon in pulp) cyanidation processes. The design includes a new comminution
circuit which comprises a primary jaw crusher, SAG (semi- autogenous grinding) mill, ball mill and pebble crusher.
This circuit will treat more than 8,000 tpd of ore as the proportion of saprolite increases. The plan also calls for the
repair, refurbishment and improvement of the existing process plant equipment. This will include new hydro -
cyclones, a new intensive leach reactor, three new leach tanks, a refurbished CIP circuit, a new pressurized elution
circuit, a new carbon regeneration kiln and a new high rate thickener. Additional improvements to the existing
process plant include upgrades to the cyanide destruction and tailings deposition system, gravity recovery circuit,
electrical supply and distribution system, instrumentation and controls, and plant infrastructure.
Average cost to process a tonne of ore is expected to be $ 8.43 per tonne milled over the current LOM. The cash
cost varies dependent on the blend of the three main ore types being processed, with variations in power, steel,
cyanide and lime consumption due to differences in hardness, abrasiveness and mineralogy.
METALLURGY
The process gold recovery is based on previous production from 2010 to 2015, and additional test work conducted
from 2011 through to 2016. The test work has been consistent across the various campaigns and laboratories and
shows that gold is readily recovered using conventional cyanide leaching with a design retention time of 30 hours.
Using a P 80 100 µm grind size, gold recoveries of between 90% and 97% are expected over the LOM. Design
recoveries by metallurgical domain are presented in the table below.
Aurizona Gold Recoveries
Process and Mineralization Au Recovery
Piaba Saprolite 93.1%
Piaba Transition 94.1%
Piaba Fresh Rock 90.0%
Boa Esperança Saprolite 91.8%
Boa Esperança Transition 97.1%
Leaching reagent consumption ranges from 0.45 to 0.54 kg/t NaCN and 0.80 to 3.71 kg/t lime.
TAILINGS STORAGE FACILITY
The Project will expand the capacity of the existing Vené T SF in three lifts. The first expansion will be carried out
before the restart of the process plant, followed by two additional lifts approximately every two years thereafter.
Construction of a new tailings facility, Zé Bolacha, will start in year four. Both facilities are designed as unlined,
compacted earth fill structures with sand chimneys and blanket drains. Following neutralization, tailings slurries
(approximately 40% solids) will be pumped via pipeline to the TSF and spigoted from the dam crest to maintain the
water pool towards the rear of the reservoir area and away from the main dam embankment. Water will be
recovered and pumped back to the process plant or the Boa Esperança pit reservoir.
INFRASTRUCTURE
Given the brownfields nature of the Project, Aurizona is endowed with considerable infrastructure, which includes
the back end of the plant, offices, warehouses, laboratories, communications and a camp. It also benefits from the
existing road access from Belem (440 km) and São Luis (320 km), as well as access to the electrical grid (with a
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powerline to site) via the Maranhão power distribution utility, which provides access to lower- cost, free-market
power supplies.
The site- wide water balance work has indicated that the operation has access to sufficient fresh water for
uninterrupted operations in extreme drought conditions, and the storage and discharge capacity to contain flooding
from extreme wet periods.
LABOUR
There is abundant labour in the region and , as a prior operator, the Project has access to previously trained local
and regional staff. The Company has continued with its human resources programs during the care and
maintenance period, in anticipation of restarting operations. Training programs for a variety of administrative and
technical skills will benefit the project by increasing the pool of skilled labour, and benefit local community members
through the development of transferable skills. The Company will provide up to 500 jobs during both construction
and operations, and expects that substantially all employees and contractors will be Brazilian.
PERMITTING
The Project was placed on care and maintenance in the third quarter of 2015. The Company has maintain ed its
licenses and permits in compliance with regulatory requirements and has requested that the existing License to
Operate ( “LO”) be amended to cover changes to th e operating parameters, including the increased plant
throughput to 8,000 tpd and raises to the Vené TSF. Receipt of the License to Install (“LI”) is anticipated in the third
quarter of 2017 and will allow full construction to commence, keeping Aurizona o n track to restart operations by
the end of 2018.
ENGINEERING, PROCUREMENT AND CONSTRUCTION MANAGEMENT
Trek Mining h as awarded the project EPCM work to Ausenco Engineering Canada Inc. (“Ausenco”), a private,
diversified engineering, construction and project management company with extensive experience in the “fit -for-
purpose” design and cost-effective construction of gold plants and mining projects globally, including a number of
recent study, basic engineering and construction proj ects in Brazil. Ausenco will provide EPCM services to the
project from its Vancouver and Belo Horizonte offices and will be complemented by Trek Mining’s team.
TAXES AND TAX CREDITS
The financial model incorporates assumptions about the expansion and extension of the income tax reduction
benefit made available under a government economic stimulus program (the “SUDENE”) to companies for industrial
projects developed in northeastern Bra zil. The income tax rate is 15.25%. The financial model also incorporates
recovery of certain Brazilian value-added type taxes, primarily ICMS and PIS/COFINS.
ADDITIONAL OPPORTUNITIES
The most significant opportunity to add value at Aurizona is through exploration success . Near-mine exploration
targets have the potential to extend the Piaba deposit up to five kilometres along strike to the southwest. Early
results from the planned 30,000-metre 2017 drilling program have successfully demonstrated that significant gold
mineralization persists below the shallow, westernmost reserve pit and that the Piaba gold deposit extends along
strike at least 350 metres to the west. The Company will continue to test mineralization along strike and also at
depth, with the objective of increasing the reserve and resource base and extending the mine life.
Subsequent to completing the Vené TSF design for the FS, engineering work has demonstrated that additional lifts
to the Vené TSF to accommodate the entire LOM tailings are feasible at a substantially lower cost than building the
Ze Bolacha TSF. Work is ongoing to complete this design and cost estimate.