Deep-South’S PEA Shows Robust Economics - Pre-Tax NPV US$ 977 Million; IRR 30.1% at $2.50 PER Lb of Copper
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DEEP-SOUTH’S PEA SHOWS ROBUST ECONOMICS - PRE-TAX NPV US$ 977
MILLION; IRR 30.1% AT $2.50 PER LB OF COPPER
- The deposit showed to be amenable to Bio-heap leaching;
- Throughput of 20 Mtpa
- Copper recovery of 80%
- Production of 35,332 tpa copper cathodes and 51,080 tpa copper sulfate;
- Copper price US $ 2.50 per lb: after-tax NPV US $ 611 million; IRR: 22.7%;
- Low Capex at US $341 million;
- Low-strip ratio at 1.41:1
- Pre-tax payback: 4.22 years, after-tax : 5.71 years;
- Life of mine : 24 years.
Vancouver, B.C., Canada – May 20, 2020 – Deep-South Resources Inc. ("Deep-South"
or “the Company") (TSX-V: DSM) today announced that it has received the results of the
updated Preliminary Economic Assessment ("PEA") from METS Engineering Group
(“METS”) on its Haib Copper Project in Namibia.
"We are thrilled with the updated PEA. By going with a heap leach treatment
operation, we have been able to demonstrate robust economics to the Haib Copper
Project. The past year metallurgical work enabled the project to show a potential
low CAPEX and OPEX operation in a challenging copper price environment. With
our recent Management nominations, we are well positioned to optimize and
advance the project further." said Pierre Léveillé, President & CEO of Deep-South.
“The updated PEA has set the scene for us to move towards a very exciting
feasibility phase on Haib, with ever improving economics. The application of great
technological advances in; geological exploration, mineral processing and
extractive metallurgy will most likely see Haib rapidly becoming a global “tier one”
copper project, with the right economics for development. We have a tremendous
project team, in Namibia, South Africa and Australia, and I really look forward to
working with our team in moving the project into its feasibility phase, and beyond”.
said Paul Smith, COO, Deep South.
The PEA update was carried out to incorporate the results from the Mintek metallurgical
test work program (2019 - 2020) and is based on the PEA report completed by METS in
February 2018. This report presents the findings of the optimized PEA focussed on the
heap leaching process route and is the only process technology option updated from the
2018 PEA. The complete report will be filed soon on SEDAR under Deep-South's profile
and on the web site of the company. Our shareholders will be kept informed upon filling
of the report.
Highlights of PEA
The recent leaching test-work was carried out by Mintek of South Africa. Mintek is a world
leader in Bio-leaching technologies.
Amenability test work confirmed copper recoveries of up to 95% in bacterially assisted
heap leaching of the Haib mineral. Recoveries of 80% and 82% were showed to be very
achievable and sustainable for the project by the test-work to date.
Further work is required in order to refine and optimize process conditions to improve
recoveries and operating costs.
Run-of-Mine mineral Bio heap leaching was determined to be the most viable process
route for the Haib mineral. Six processing scenarios were established with the key
variables being recoveries, final products (copper cathode and copper sulfate) and metal
price. The base case chosen by Deep-South is the scenario (1) below, which is based on
the production of copper cathodes and copper sulfate. All financial metrics are based on
the recent 43-101 indicated resource estimation of 456.9 MT @ 0.31% Cu:
Table 1: Scenario 1 - project metrics
20 Mtpa @ 80% Cu Recovery + CuSO4
LME Cu, tpa 35,332.3
CuSO4.5H2O, tpa 51,080.9
CAPEX, (US$M) $341
OPEX, (US$M / year) $91
Avg Annual Revenue
LME Cu (US$M)
$195
Avg Annual Revenue
CuSO4 (US$M)
$90
Total Cost, US$/t ROM $7.64
Total Cost, US$/lb CuEq $1.34
Copper Price, US$/lb $2.00 $2.25 $2.50 $2.85 $3.00
NPV7.5%, pre-tax (US$ M) $424 $701 $977 $1,364 $1,530
IRRpre-tax 18.6% 24.6% 30.1% 37.3% 40.2%
Payback Period pre-tax 6.91 5.21 4.22 3.38 3.13
NPV7.5%, after-tax (US$ M) $119 $439 $611 $853 $957
IRR after-tax 14.9% 18.9% 22.7% 27.6% 29.7%
Payback Period after-tax 8.87 6.94 5.71 4.59 4.23
Strip Ratio 1.41:1
LOM, years 24
Note: The PEA is based only on the estimated indicated resource and the inferred resource are not
part of this economic assessment
With further metallurgical work and testing, the company's goal is to attain higher recovery
rates. The below scenario (2) illustrate the potential economic upside of higher recoveries:
Table 2: Scenario 2 - project metrics
20 Mtpa @ 85% Cu Recovery + CuSO4
LME Cu, tpa 38,336.8
CuSO4.5H2O, tpa 51,080.9
CAPEX, (US$M) $341
OPEX, US$/year $96
Avg Annual Revenue
LME Cu (US$M)
$211
Avg Annual Revenue
CuSO4 (US$M)
$90
Total Cost US$/t ROM $7.91
Total Cost, US$/lb CuEq $1.32
Copper Price, US$/lb $2.00 $2.25 $2.50 $2.85 $3.00
NPV7.5%, pre-tax (US$ M) $503 $796 $1,088 $1,498 $1,673
IRR pre-tax 20.4% 26.5% 32.2% 39.6% 42.6%
Payback Periodpre-tax 6.32 4.83 3.94 3.18 2.94
NPV7.5% after-tax (US$ M) $119 $497 $681 $937 $1,04
IRR after-tax 16.0% 20.2% 24.1% 29.2% 31.3%
Payback Period after-tax 8.22 6.47 5.34 4.30 3.98
Strip Ratio 1.41:1
LOM, years 24
Note: The PEA is based only on the estimated indicated resource and the inferred resource are not
part of this economic assessment
Please note that: Mineral Resources that are not mineral reserves do not have demonstrated
economic viability. Mineral resource estimates do not account for mineability, selectivity, mining
loss and dilution. These mineral resource estimates ar based on Indicated Mineral Resources that
are considered too speculative geologically to have the economic considerations applied to them
that would enable them to be categorized as mineral reserves. However, there is no certainty that
these indicated mineral resources will be converted to measured categories through further drilling,
or into mineral reserves, once economic considerations are applied. There is no certainty that the
preliminary economic assessment will be realized.
Other scenarios
The other scenarios can be found in the NI 43-101 technical report for the Haib Copper
project that will be filed soon on SEDAR under Deep-South's profile and on the web site
of the company. Our shareholders will be kept informed upon filling of the report.
Geology & Mineralization
The Haib deposit is located within part of the Namaqua -Natal Province called the
Richtersveld geological sub-province which is further subdivided into a volcano -
sedimentary sequence (locally, the Haib Subgroup), the Orange River Group and t he
intrusive Vioolsdrift suite which are closely related in space and time.
The principal mineralized hosts at the Haib are a Quartz Feldspar Porphyry (QFP) and a
Feldspar Porphyry (FP).
The Haib deposit is, in essence, a large volume of rock containing copper mineralization.
The grade is variable from higher grade in the three core zones progressively dropping
towards the margin of the deposit.
The principal sulfides within the Haib body are pyrite and chalcopyrite w ith minor
molybdenite, bornite, digenite, chalcocite and covellite.
Mineral Resources
The mineral resources for the Haib Copper Project were estimated by Dean Richards of
Obsidian Consulting Services, supervidsed by Peter Walker of P & E Walker Consultancy,
both independent Qualified Persons as defined by NI 43-101 and were reported in a news
release dated January 16, 2018 but are summarized below for convenience. Readers
should review that news release for additional information or read the full report that can
be viewed on our web site at: www.deepsouthresources.com or on the SEDAR web site
at: www.sedar.com.
Table 3: Classified mineral resources of the Haib Project at a 0.25% Cu cut-off
grade
Resource
Class
xMillion
Tonnes Cu(%) Contained Cu
x billion lbs
Indicated 456.9 0.31 3.12
Inferred 342.4 0.29 2.19
Notes:
1- Dean Richards of Obsidian Consulting Services, a Member of the Geological Society of South Africa and
Professional Natural Scientist (Pr. Sci. Nat) with the South African Council for Natural Scientific Professions
(SACNASP), estimated the Mineral Resources under the supervision of Peter Walker of P & E Walker
Consultancy, both of whom are the Qualified Persons for the Mineral Resource Estimates. The effective date
of the estimate is January 15, 2018. Mineral Resources are estimated using the CIM Definition Standards for
Mineral Resources and Reserves (2014).
2- Reported Mineral Resources contain no allowances for hanging wall or footwall contact boundary loss and
dilution. No mining recovery has been applied.
Rounding as required by reporting guidelines may result in apparent differences between tonnes, grade and
contained metal content.
Table 4: Haib copper indicated mineral resources, sensitivity cases
%Cu Cut-off xMillion
Tonnes Cu(%) Contained Cu
x billion lbs
0.20% 904.8 0.27 5.39
0.25% 456.9 0.31 3.12
0.30% 219.8 0.36 1.74
Table 5: Haib copper inferred mineral resources, sensitivity cases
%Cu Cut-off xMillion
Tonnes Cu(%) Contained Cu
x billion lbs
0.20% 686.2 0.26 3.93
0.25% 342.4 0.29 2.19
0.30% 109.8 0.34 0.82
Note: The PEA is based only on the estimated indicated resource and the inferred resource are not
part of this economic assessment
This Haib Copper Mineral Resource has been defined by diamond core drilling
covering a total surface area of some 2.6 square kilometres.
The mineral resource classification is closely related to data proximity. Topographic
elevations within the mineral resource area vary from 320m to 640m above mean sea
level and average 480m above mean sea level.
Indicated resources are constrained between the variable topographic surface and a
horizontal level which is 75m above mean sea level and within which the majority of
the drill and assay data are constrained. Inferred resources are laterally constrained
by the last line of drill holes and extend vertically from the horizontal surfaces defined
by the +75m and -350m above mean sea level (a block of 425m thickness) within
which there is a lesser data set derived from drilling.
Mineralization is open near surface and at depth to at least 800 metres deep. The
Mineral Resource estimate is based on the results from approximately 66,500 metres
of drilling in 196 holes. The most recent drilling data comes from Teck Resources
drilling programs totalling 14,500 metres (2010 & 2014) and from re-assaying a part
of the 164 historical drill cores which are well preserved on site. Indicated Resources
are defined by a drill grid of 150 metres by 150 metres, while Inferred Resources are
defined by a drill grid of 300 metres by 150 metres.
The Haib Copper exploration licence provides significant potential for resource
expansion, since there is known, but poorly drilled and assayed , mineralisation
beyond the drill grid boundaries and below the main mineralized body (which covers
some 2 square kilometres of surface area), where a few drillholes from 75m above
mean sea level to -350m above mean sea level (i.e. a thickness of 425m) have shown
that mineralisation is present. The deepest drillhole did not pass out of mineralized
material. In addition, there are 5 satellite mineralized target areas surrounding the
main Haib porphyry body which still require further evaluation.
Mineral Resources that are not mineral reserves do not have demonstrated economic viability.
Mineral resource estimates do not account for mineability, selectivity, mining loss and dilution.
These mineral resource estimates ar based on Indicated Mineral Resources that are considered
too speculative geologically to have the economic considerations applied to them that would enable
them to be categorized as mineral reserves. However, there is no certainty that these indicated
mineral resources will be converted to measured categories through further drilling, or into mineral
reserves, once economic considerations are applied. There is no certainty that the preliminary
economic assessment will be realized.
Mineralogy
The Haib Copper Deposit is a large sulfide mineral deposit. Copper is mainly present as
a sulfide in the form of chalcopyrite. Copper is also present as oxides (chrysocolla,
plancheite, malachite and azurite), occurring as intrusions in shear zones.
Initial testwork results showed that the Haib mineralisation is a competent quartz feldspar
porphyry rock.
It can be seen that the main mineral is copper with only an accessory amount of
molybdenum present. The chalcopyrite also occurs as occasional coarse irregular grains
from 0.1 mm to 0.35 mm.
Mining Methods
Considering the Haib copper deposit characteristics, the suitable mine design is based on
an open pit method. As the deposit is basically composed of hard rock material, the mining
operations will involve drill and blast of all excavated material, which will be segregated
by cut-off grade.
The mining fleet considered for the Haib project would consist of appropriately sized
hydraulic excavators and off highway dump trucks, depending, supported by standard
open-cut drilling and auxiliary equipment.
Initial open pit mine design work undertaken indicates a strip ratio of 1.41:1 for 20 Mtpa.
The low strip ratio has a significant effect on the low operating cost indication of the
project.
Recovery Method
For the recovery of copper from the Haib deposit, heap leaching was considered for all
options. The primary reasons for the selection of heap leaching are the low-grade nature
of the deposit and the vast scale of the mineral body. Previous work conducted on the
Haib Project suggested that a conventional crush -grind-float and sale of copper
concentrate is not economically feasible under the current copper market conditions. The
low costs associated with heap leaching compared to a whole mineral flotation circuit is
believed to improve the viability of the project. Heap leaching is traditionally performed on
oxide material, although there has been increasing development in the application to acid-
insoluble sulfides.
Previous sighter amenability test-work, carried out by Mintek, METS and SGS South
Africa, suggests that high amounts of copper can be extracted from the Haib material, up
to 95.2% via a bacterial assisted leaching. However, additional test-work is required to
determine the optimal operating parameters. The system design proposed will use 3 stage
crushing and a mineral sorting system (either on the primary crushed product or the
secondary crushed product depending on the technology selected) that will provide higher
grade mineral to the heaps. The primary crusher will reduce the rock to 127 mm (gyratory
crusher), the secondary crusher to 32 mm (cone crusher) and the tertiary crusher to 5 mm
(HPGR).
Haib Copper flow sheet diagram
(on the following page)
Capital Cost
Table 6:
Capital cost breakdown @ 80% Cu recovery at a price of US $ 2.50 per lb of copper
Direct Cost (US$M) 20 Mtpa
Crushing & HPGR 100.1
Agglomeration & Heap Leaching 43.2
Copper Solvent Extraction 72.9
Iron Removal 6.3
Process and Raw Water 4.1
Reagents 5.0
Services 2.9
Supporting Infrastructure 3.0
First Fill 8.3
Indirect Cost (US$M)
Working Capital 24.7
Insurance 7.4
EPCM 24.7
Contingency 24.7
Commissioning 5.0
Accommodation & Temp Services 5.0
Spares & Tools 3.0
Total (US$M) 340.3
Operating Costs
Total operating costs, including capital leases as an operating expense, are estimated in
the PEA and are broken down as follows:
Table 7:
Total operating cost breakdown – Scenario 1
20 Mtpa @ 80% Cu Recovery + CuSO4 @ US 2.50 per lb / Cu
Area
Annual
Cost
Unit Cost Unit Cost
(‘000
USD)
(USD/t
ROM)
(USD/lb
CuEq)
Mining 45,200 2.26 0.40
Processing 90,799 4.54 0.80
Product Freight 3,889 0.19 0.03
Wharfage & Shiploading 432 0.022 0.004
Administration 4,000 $0.20 0.04
Royalty
$2.00 6,824 0.34 0.06
$2.25 7,677 0.38 0.07
$2.50 8,530 0.43 0.08
$2.85 9,724 0.49 0.09
$3.00 10,236 0.51 0.09
Total
$2.00 151,144 7.56 1.33
$2.25 151,997 7.60 1.34
$2.50 152,850 7.64 1.34
$2.85 154,044 7.70 1.35
$3.00 154,556 7.73 1.36
Note: Mineral Resources that are not mineral reserves do not have demonstrated economic
viability. Mineral resource estimates do not account for mineability, selectivity, mining loss and
dilution. These mineral resource estimates are based on Indicated Mineral Resources that are
considered too speculative geologically to have the economic considerations applied to them that
would enable them to be categorized as mineral reserves. However, there is no certainty that these
indicated mineral resources will be converted to measured categories through further drilling, or
into mineral reserves, once economic considerations are applied. There is no certainty that the
preliminary economic assessment will be realized.
Tailing Disposal
There will be no tailings. The spent heaps will be rehabilitated and left in place.
Due to environmental reasons and water resources, the tailings from the pH
adjustment process and the iron removal process will be disposed onto the spent
heaps via the method of filtered dry stacked tailings.