SRG Announces Positive Feasibility Study Results for Its Lola Graphite Project - Pre-Tax NPV of USD 277M and IRR of 28% Over a 29- Year Mine Life
SRG Announces Positive Feasibility Study
Results for Its Lola Graphite Project - Pre-Tax
NPV of USD 277M and IRR of 28% Over a 29-
Year Mine Life
MONTREAL
,
July 4, 2019
/CNW Telbec/ -
SRG Mining Inc.
(TSXV: SRG) ("SRG" or the
"Company") is pleased to announce the results of its Feasibility Study ("FS") for the development of
the Lola graphite project in the Republic of
Guinea
,
West Africa
. The FS was prepared by
Montreal
-
based DRA/Met-Chem, a division of DRA Americas Inc. ("DRA/Met-Chem"). All dollar figures are in
United States
dollars.
The FS was officially started in
September 2018
and has been produced with the input of numerous
engineering and consulting firms, notably DRA/Met-Chem, Epoch, BBA, Sahara Natural Resources,
MDEng, SGS Canada, CCIC, and Jenike & Johanson. Included in the FS is an updated resource
calculation, which follows the Company's 2018 drilling campaign, bringing the total resource to 46.0
million tonnes ("Mt") of measured and indicated resources grading 4.09% graphitic carbon ("Cg").
The following lists the highlights of the Feasibility Study:
Average annual production of 54,600 tonnes of graphite flakes over a 29-year mine life
Proven & probable reserves of 42.0Mt @ 4.17% Cg
Capital costs of
$123 million
("M") including a power plant of
$5.8M
, concentrate transport
equipment of
$3.6M
, and contingency of
$12M
Added flexibility of the plant to process soft saprolite and fresh rock, provides optionality and
the ability to expand the production profile
Average operational costs of
$470
/tonne ("t") and
$38
/t of transport. For the first 16 years of
production, the average operational costs are
$447
/t.
Pre-tax NPV(8%) of
$277M
and internal rate of return ("IRR") of 28%
Post-tax NPV(8%) of
$159M
and IRR of 21%
Average grade of graphite flakes over 95%
A low strip ratio of 0.69
This
video
is a flyby simulation of the project layout.
"These results are the culmination of many months of studies to de-risk the project and add to its
robustness" said
Ugo Landry-Tolszczuk
, President and Chief Operating Officer of SRG. "The
economic highlights present a highly profitable business using reasonable estimates for graphite
selling price. Basic engineering will focus on improvements in the front-end of the plant, tailings
management, and reducing the mining footprint."
A technical report detailing the completed feasibility study in accordance with National Instrument
(NI) 43 – 101 guidelines will be filed and available on SEDAR within 45 days from
July 4, 2019
.
The effective date of the technical report is
June 18, 2019
.
Commercial Sales, Revenues & Project Economic Sensitivities
Over the life of the mine, the Lola project will produce an average of 54,600 tonnes of saleable
graphite flakes per year. At an average sale price of
$1,321
/t, this represents $72.2M annual
revenue incurring average operating costs of
$508
/t representing
$27.7M
annually. Given the
volatility of graphite prices in recent years and the bilateral nature of sales contracts, a sensitivity
analysis of the project's economics is presented below in Table 1.
Table 1 Project economics sensitivity analysis
LOM Average Sale Price ($/t)
1,056
1,189
1,321
1
1,453
1,585
Average annual revenue (million)
2
57.8
65.0
72.2
79.5
86.7
Pre-tax returns
Average annual cash flow (million)
2
25.6
32.9
40.1
47.3
54.6
NPV (million) @ 8% discount
135
206
277
348
420
IRR (%)
18.5%
23.4%
28.1%
32.6%
36.9%
Payback (years)
5.0
4.0
3.4
3.0
2.7
Post-tax returns
Average annual cash flow (million)
2
17.4
22.2
27.0
31.8
36.6
NPV (million) @ 8% discount
64
111
159
206
253
IRR (%)
13.7%
17.6%
21.2%
24.6%
27.8%
Payback (years)
5.8
4.8
3.9
3.6
3.2
1
Base case
2
Does not include years 1 and 29 as they do not represent full production
Mineral Resource Update
The resource estimate was established using data from boreholes drilled and sampled up to
December 1, 2018
. The total resource estimate of the Lola Project includes 6.84Mt grading 4.39%
Cg, indicated resources of 39.2Mt grading 4.04% Cg, and inferred resources of 4.25Mt grading
3.75% Cg. The resource estimate has been prepared using a cut-off grade of 1.65% Cg, and has
an optimized physical pit shell constrained at
$1,400
/t of concentrate.
Figure 1
depicts the resource
location which, represents approximately 40% of the deposit outline.
The mineral resources update was estimated as of
June 18
, 2019, in accordance with the definitions
adopted by the Canadian Institute of Mining, Metallurgy and Petroleum and incorporated into
National Instrument 43-101 – Standards of Disclosure for Mineral Projects (NI 43-101). The mineral
resources estimate update for the Lola graphite project was carried out by
Desmond Subramani
(Pri. Sci. Nat - 400184/06), Independent QP and Principal Geologist – Mineral Resource Estimation
at Caracle Creek International Consulting MINRES (Pty) Ltd. (CCIC MINRES).
Mining
The Lola deposit is characterised by its saprolite surface mineralization, which continues at depth
into the fresh rock bed. For the FS, mining operations considered the mineralized material contained
in the weathered zones (lateritic and saprolitic ore), as well as the mineralized material contained in
the fresh-rock formation.
This results in a total Mineral Reserves estimate of approximately 42.0Mt grading 4.17% Cg, and an
overall strip ratio of the operation (all the pits combined) of only 0.69.
Figure 2
presents the overall
site layout. The table below shows the proven and probable reserves.
Table 2 Proven & probable reserves
Category
Tonnage (Mt)
1
Cg grade (%Cg)
Proven Reserves
6.7
4.43%
Probable Reserves
35.4
4.13%
Proven & Probable Reserves
42.0
4.17%
1: The totals may not add up due to rounding.
The average grade fed to the processing plant over the 29-year mine life is 4.17% Cg, and the total
material mined per year is 2.5Mt (ore and waste). Mining costs were established at
$2.23
/t material
moved, considering pit design and access roads.
Table 3 Mining highlights
Mining costs ($/t material moved)
2.23
Average graphite grade (% Cg)
4.17%
Stripping ratio (waste/ore)
0.69
Average ore material mined per year (t/y)
1,450,000
Life of mine (years)
29 years
Process
The mineral processing plant consists of a crushing area and a concentrator where material
beneficiation and concentrate dewatering, screening, and packaging takes place.
The process flowsheet includes crushing, scrubbing and grinding, rougher flotation, polishing, and
cleaner flotation. The back end of the concentrator includes tailings and concentrate thickening,
concentrate filtration and drying, dry screening and bagging of graphite products, and material
handling.
All the tailings from the concentrator will be thickened and pumped to the tailings ponds. Reclaiming
water from the tailings ponds has been considered in the process design to minimize fresh water
makeup to the concentrator.
The graphite concentrate will be recovered by a conventional flotation process. Saprolite ore
beneficiation process has an overall graphite recovery of 73.1%, producing a graphite concentrate
grade of 95.4 % Cg. The addition of up to 45% of fresh rock in the feed blend improves the overall
graphite recovery to 84.2%. A suitable process flowsheet able to handle saprolite as well as a feed
blend with fresh rocks has been developed for the feasibility study.
Over the life of the mine, the plant will produce graphite concentrate divided into four (4) standard-
size fractions: +48 mesh, -48+80 mesh, -80+100 mesh and -100 mesh presented in Table 5.
Figure 3
depicts the simplified flowsheet.
Table 4 Process highlights
Processing costs ($/t plant feed) -100% Saprolite feed
8.91
Processing costs ($/t plant feed) - blend of 55% Saprolite / 45% Fresh rocks feed
10.86
Average concentrate grade (%Cg)
95.4%
Graphite plant recovery based on 100% Saprolite feed
73.1%
Graphite plant recovery based on blend of 55% Saprolite / 45% Fresh rocks feed
84.2%
Table 5 Size fraction profile & grade
Size Fraction (mesh)
LoM Expected
Distribution (%)
Grade (%Cg)
+ 48
16.6
97.0
- 48 + 80
27.5
96.0
- 80 + 100
8.8
94.5
- 100
47.1
94.9
Total
100.0
95.4
Capital & Operating Costs
The capital costs for the project are presented below in Table 6. The capital costs shown include the
Company's assumed mining operations, graphite flake transport from-plant-to-port operations, and
production of its own power using generators. All three of these items could be contracted to third
parties. The average annual sustaining capital expenditure over a 29-year period is
$4.4M
.
Table 6 Capital cost summary
Capital Costs
Initial ($M)
Mining
9.3
Process
31.5
Tailings
8.4
Site infrastructure
11.8
Off-site infrastructure
1.4
Preliminary & general
16.6
Sub-total
79.2
Power plant
5.8
Graphite transport equipment
3.6
Total Direct Costs
88.5
EPCM
10.3
Pre-production
5.6
Other indirect costs
0.7
Total Indirect Costs
16.6
Contingency
12.4
Owner's costs
5.5
Total Costs
1
123.1
1: The totals may not add up due to rounding.
The operating costs presented in Table 7 indicate the average operating costs, including graphite
flake transport from mine-site to the port of
Monrovia
as well as port fees. These operating costs
also assume the Company will mine and produce its own power using generators.
The average operating costs without transport for the first 16 years is
$447
/t, increasing thereafter.
Table 7 Operating cost summary
Operating Costs Breakdown
Average Annual Costs ($M)
2
Average $ per tonne of concentrate
Mining
5.9
108
Process
16.1
294
General and Administration
3.3
60
Tailings
0.4
7
Total operating costs
25.7
470
Graphite Transportation to port
2.1
38
Total OPEX
1
27.7
508
1: The totals may not add up due to rounding.
2: Excludes the first and last year.
Quality Control And Assurance
Qualified Persons ("QP") have reviewed and verified that the technical information with respect to
the FS contained in this press release is accurate, and have approved the written disclosure of such
information. For readers to fully understand the information in this press release, they should read
the Technical Report in its entirety when it is available on SEDAR, including all qualifications,
assumptions, and exclusions that relate to the information to be set out in the Technical Report,
which qualifies the technical information contained in the Technical Report. The Technical Report is
intended to be read as a whole, and sections should not be read or relied upon out of context.
The QPs who will prepare the Technical Report are:
DRA:
Silvia Del Carpio
, P.Eng., MBA (Project Manager and Financial Modelling),
Yves Buro
, P.
Eng. (Geology),
Patrick Perez
, P.Eng. (Mineral Reserves and Mining), Volodymyr Liskovych,
PhD, P.Eng. (Metallurgy),
William Shadeed
, P.Eng. (Processing)
CCIC:
Desmond Subramani
, Pri. Sci. Nat. (Mineral Resources)
MDEng:
Kathy Kalenchuk
, PhD, P.Eng. (Geotechnical Design)
BBA:
Luciano Piciacchia
, PhD, P.Eng. (Water Management, Closure and Rehabilitation Plan)
David Sims Inc.:
David Sims
, Geo, P. Geo (Hydrogeology)
Epoch: Guy Wiid, Pr.Eng. C.Eng,
George Papageorgiou
, PhD, MSc, BSc Eng. (Tailings Design)
By virtue of education and relevant experience, the aforementioned are independent "Qualified
Persons" for the purpose of NI 43 - 101. Other than as set forth above, all scientific and technical
information contained in this press release has been reviewed, verified, and approved by Raphaël
Beaudoin, P. Eng., Director of Operations and a Qualified Person for SRG under NI 43 - 101.
About DRA/Met-Chem
Met-Chem, a division of DRA Americas Inc., was originally established in 1969 as a consulting
engineering company, headquartered in
Montreal
, and provides a wide range of technical and
engineering services. DRA is a multidisciplinary global engineering group that delivers mining, mineral
processing, energy, water treatment and infrastructure services from concept to commissioning and
into operation. DRA has offices in
Africa
,
Australia
,
Canada
,
China
and
the United States
.
About SRG Mining
SRG Mining is a Canadian-based mining company focused on developing the Lola graphite deposit
located in the Republic of
Guinea
,
West Africa
. SRG is committed to operating in a socially,
environmentally, and ethically responsible manner.
Neither the TSXV nor its Regulation Services Provider (as that term is defined in the policies of the
TSXV) accepts responsibility for the adequacy or accuracy of this release.
Forward-Looking Statements
This press release contains "forward-looking information" within the meaning of Canadian securities
legislation. All information contained herein that is not clearly historical in nature may constitute
forward-looking information. Generally, such forward-looking information can be identified by the use
of forward-looking terminology such as "will", "continue", "provide", "present", "reasonable",
"established", "has", "demonstrate", "potential", or variations of such words and phrases or state
that certain actions, events or results "may", "could", "would" or "might". Forward-looking information
is subject to known and unknown risks, uncertainties and other factors that may cause the actual
results, level of activity, performance or achievements of the Company to be materially different from
those expressed or implied by such forward-looking information, including but not limited to: (i)
volatile stock price; (ii) the general global markets and economic conditions; (iii) the possibility of
write-downs and impairments; (iv) the risk associated with exploration, development and operations
of mineral deposits including the accuracy of the current mineral reserve and mineral resource
estimates of the Company (including, but not limited to, ore tonnage and ore grade estimates) and
mine plans for the Company's mining operations (including, but not limited to, throughput and
recoveries being affected by metallurgical characteristics); (v) the risk associated with establishing
title to mineral properties and assets including permitting, development, operations and production
from the Company's operations being consistent with expectations and projections; (vi) fluctuations in
commodity prices and other risks and factors described or referred to in the section entitled "Risk
Factors" in the MD&A of the Company and which is available at
www.sedar.com
, all of which should
be reviewed in conjunction with the information found in this news release
Forward-looking information is based on assumptions management believes to be reasonable at the
time such statements are made, including but not limited to, the capacity to produce an average
production of 54,600 tonnes of graphite flakes per year over a 29-year mine life, the Capital costs of
being only
$123 million
, the capacity of the design to provide added flexibility of the plant to process
soft saprolite and fresh rock, the capacity to provide optionality and the ability to expand production
profile, the capacity of the average operational costs to be
$470
per tonne and
$38
/t of transport,
the Pre-tax NPV(8%) of being
$277M
and achieving internal rate of return ("IRR") of 28%, and Post-
tax NPV(8%) of
$159M
and IRR of 21% as well as the continued exploration activities and no
material adverse change in mineral prices. Although the Company has attempted to identify
important factors that could cause actual results to differ materially from those contained in the
forward-looking information, there may be other factors that cause results not to be as anticipated,
estimated or intended. There can be no assurance that such forward-looking information will prove
to be accurate, as actual results and future events could differ materially from those anticipated in
such forward-looking information. Such forward-looking information has been provided for the
purpose of assisting investors in understanding the Company's business, operations and exploration
plans and may not be appropriate for other purposes. Accordingly, readers should not place undue
reliance on forward-looking information. Forward-looking information is given as of the date of this
press release, and the Company does not undertake to update such forward-looking information
except in accordance with applicable securities laws.
For additional information, please visit SRG's website at
www.srgmining.com
.
SOURCE
SRG Mining Inc.
View original content:
http://www.newswire.ca/en/releases/archive/July2019/04/c4120.html
%SEDAR: 00008697E
For further information:
Ugo Landry-Tolszczuk, Email: [email protected];
Benoit La Salle, FCPA FCA, Email: [email protected]
CO: SRG Mining Inc.
CNW 07:00e 04-JUL-19