Deep-South Discloses a Preliminary Economic Assessment, NPV: Ca $ 895 Million, Pre-Tax IRR: 30.4% at a Price of Copper of US $ 3.00 PER Lbs, ON the Haib Copper Project IN Namibia.
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DEEP-SOUTH DISCLOSES A PRELIMINARY ECONOMIC ASSESSMENT,
NPV: CA $ 895 MILLION, PRE-TAX IRR: 30.4% AT A PRICE OF COPPER OF
US $ 3.00 PER LBS, ON THE HAIB COPPER PROJECT IN NAMIBIA.
Vancouver, B.C., Canada – February 26, 2018 – Deep-South Resources Inc. ("Deep-
South" or “the Company") (TSX-V: DSM) today announced that it has received the
results of a Preliminary Economic Assessment ("PEA") from Mineral Engineering and
Technical Services of Australia (“METS”) on its Haib Copper project in Namibia.
Highlights of PEA
Four recovery options were considered for economic evaluation. The best economic
outcome is derived by using option 3 which combines an initial ore sorter upgrade with
subsequent heap leaching of the upgraded material. All financial metrics are based on
the recent 43-101 indicated resource estimation of 456.9 MT @ 0.31% Cu. The salient
features of this option are as follows:
Table 1: Option 3 financial metrics
Financial Metric $3.00/lb Cu Price $3.30/lb Cu Price $3.60/lb Cu Price
CAPEX US$191.8M US$191.8M US$191.8M
Total Operating
Expense1 US$1.41/lb CuEq US$1.42/lb CuEq US$1.43/lb CuEq
NPV7.5%, pre-tax
US$716.2M
(CA$895.3M)
US$883.1M
(CA$1,103.9M)
US$1,049.3M
(CA$1,311.6.1M)
IRRpre-tax 30.4% 34.9% 39.2%
Payback Period pre-tax 4.2 years 3.6 years 3.3 years
NPV7.5%, post-tax US$463.1M
(CA$578.9M)
US$567.4M
(CA$709.3M)
US$671.3M
(CA$839.1M)
IRRpost-tax 23.0% 26.1% 29.1%
Payback Periodpost-tax 5.7 years 4.9 years 4.4 years
Throughput (Mtpa) 8.5 8.5 8.5
Annual production
lbs / CuEq 47 million 47 million 47 million
Strip ratio 2:1 2:1 2:1
LOM 55 years 55 years 55 years
1Variable due to change in absolute royalty payment due to increased revenue
The PEA focuses on the potential of heap leaching treatment. Several opportunities are
identified in the PEA that could significantly enhance the economic return outlined in the
report, including more assays of the molybdenum to be included in future resources
estimation, sorting technologies enhancing the recovery processing performance and
reduced power costs. The PEA recommends these opportunities be pursued and to
proceed with a pre-feasibility study (“PFS”).
"By going with heap leach treatment and sorting technologies, we have been able to
provide low capital cost and operating costs and, equally as important, reduce the
environmental footprint of the project," said Pierre Léveillé, President & CEO of Deep-
South. "The PEA proposes a robust economic return that we expect to enhance during
the PFS stage."
Four recovery options were considered for economic evaluation:
Option 1: Ore sorter upgrading, dense media upgrading, flotation and heap leaching of
the tails.
Option 2: Two-stage dense media upgrading, flotation and heap leaching of the tails.
Option 3: Ore sorter upgrading and heap leaching of the upgraded material.
Option 4: Whole ore heap leaching.
Table 2: Economic summary for the 4 recovery options
Financial Metric Option 1 Option 2 Option 3 Option 4
Throughput (Mtpa) 8.5
Copper Recovery (%) 77.1 82.1 73.2 80.0
CAPEX
($M)
US$221.2 US$250.1 US$191.8 US$220.3
Total Operating Expense
($/lb CuEq) US$1.46 US$1.47 US$1.41 US$1.37
NPV7.5%, pre-tax ($M) US$645.1
(CA$817.6)
US$662.6
(CA$828.3)
US$716.2
(CA$895.3)
US$794.1
(CA$992.6)
IRR pre-tax (%) 25.9% 24.4% 30.4% 29.7%
Payback Period pre-tax 5.0 years 5.3 years 4.2 years 4.3 years
NPV 7.5%, post-tax ($M)
US$421.0
(CA$526.3)
US$434.3
(CA$542.9)
US$463.1
(CA$578.9)
US$514.1
(CA$642.6)
IRR post-tax (%) 20.0% 19.0% 23.0% 22.6%
Payback Period post-tax 6.7 years 7.1 years 5.7 years 5.8 years
Options 3 & 4 have shown better economic figures, despite option 3 having a relatively
low copper recovery compared to the other options as the use of ore sorting technology
has the benefit of reducing the downstream capital requirements. Those two options will
be the object of further testwork and a Pre-Feasibility Study (“PFS”).
Option 3 is the case presented in this press release.
Economic Opportunity
METS believes a ramp up to 20 Mtpa as the project is nearing positive cash flow will
increase the financial viability. METS have developed a scenario which focuses on
option 3 – the best economic option in terms of IRR – in assessing the impact of
increasing the scale of the project. The assessment looks at beginning the project at 20
Mtpa, however it is recommended to stage the expansion over a number of years (e.g.
start at 8.5 Mtpa, increase to 10 Mtpa and then increase to 20 Mtpa for instance). The
following table outlines the key economic outcomes for the larger throughput scenario
(using the base case figures – e.g. $3.00/lb copper price).
Table 3: Option 3 at an increased 20 Mtpa throughput
Financial Metric 8.5 Mtpa Scenario
($3.00/lb Cu)
20 Mtpa Scenario
($3.00/lb Cu)
CAPEX US$191.8M US$320.5M
NPV7.5%, post-tax US$463.1
(CA$578.9)
US$854.9M
(CA$1,061.9M)
IRR post-tax 23.0% 28.6%
Payback Period post-tax 5.7 years 4.5 years
LOM 55 years 24 years
A throughput optimisation study should be performed once a final process design has
been selected.
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 is the low grade nature
of the deposit and the vast scale of the orebody. Previous work conducted on the Haib
project suggests that a conventional crush-grind-float and sale of copper concentrate is
not economically feasible due to the low grade and hardness of the ore – requiring a
significant amount of energy for grinding. The low costs associated with heap leaching
compared to a whole ore flotation circuit is believed to improve the viability of the project.
Heap leaching is traditionally performed on oxide material, although there h as been
increasing development in the application to acid insoluble sulfides.
Previous sighter amenability testwork, carried out by Mintek, METS and SGS South
Africa, suggests the Haib material can extract high amounts of copper, up to 95.2% via a
bacterial assisted leaching, although additional testwork is required to determine the
optimal operating parameters. Given these results there is no reason to suggest the
chalcopyrite in the Haib deposit will not be amenable to bacterial assisted heap leaching.
The system design proposed will use 3 crushers and an ore sorting system (either on
the primary crushed product or the secondary crushed product depending on the
technology selected) that will provide higher grade ore 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). The process is designed for a
90% availability, processing over 23,000 tonnes of ore per day (at the 8.5 Mtpa scenario)
at a strip ratio of waste:ore of 2:1.
Haib Copper flow sheet diagram:
Molybdenum recovery has been considered for the flowsheet design, although no
operating expense, capital expense or revenue has been considered for the economic
analysis. The economics of the molybdenum will be assessed once it is included in the
indicated resource.
An indicated resource of 456.9 Mt at 0.31% copper at an annual throughput of 8.5 Mtpa
would correspond to a 55 year project life. Due to the long project life, it is suggested to
start at 8.5 Mtpa and operate at this throughput for approximately 3 years and then
execute staged expansions to eventually ramp up to 20 Mtpa, ultimately shortening the
project life. As the resource expands and the inferred resource progresses towards
measured, then additional expansion to possibly 40+ Mtpa should be assessed. All
flowsheets, mass balances, design criteria and equipment lists are based on an 8.5
Mtpa throughput; although financial components have been scaled to provide estimates
for the higher throughput scenario.
The PEA technical report will be filed on SEDAR at www.sedar.com and on the
Deep-South website at www.deepsouthresources.com shortly after the issuance
of this news release.
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 the
intrusive Vioolsdrift suite which are closely related in space and time.
The principal mineralised hosts at the Haib are a Quartz Feldspar Porphyry (QFP) and a
Feldspar Porphyry (FP).
The Haib deposit is in essence a very 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 sulphides within the Haib body are pyrite and chalcopyrite with 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 W alker 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 4: 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 5: 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 6: 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
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 mineralised 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) hav e
shown that mineralisation is present. The deepest drillhole did not pass out of
mineralised material. In addition, there are 5 satellite mineralised 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 sulphide ore deposit. Copper is mainly present as a
sulphide 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 ore 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 being suitable for the Haib project would most likely consist
of between 80 t and 120 t sized hydraulic excavators, off highway dump trucks with a
capacity of between 65 t to 90 t, supported by standard open-cut drilling and auxiliary
equipment.
Tailings disposal
Option 1 and 2 will generate approximately 250 ktpa tonnes per annum of tailings from
the flotation circuit. Due to environmental and water recovery considerations the tailings
will undergo dry staking. All options include dry stacking of the iron oxide waste from the
iron removal stage (250-500 ktpa depending on the process option). The remaining
waste will either be from the ore sorter rejects or from the heap leach pads (~8 Mtpa)
and will be coarse rock material. The heaps will remain in place and undergo periodic
washing to ensure copper extraction is maximised. Washing will be stopped once the
ore is considered ‘spent’. The ore sorter rejects and the spent ore can be disposed of in
a manner that produces a suitably stable landform.
Environmental considerations
In terms of environmental aspects, dry stack facilities offer a number of advantages to
other surface tailings storage options – some of these include:
- Reduced water requirements, principally achieved by recycling process water
and near elimination of water losses through seepage and/or evaporation;
- Groundwater contamination through seepage is virtually eliminated;
- Significant safety improvement with the risk of catastrophic dam failure and
tailings runout being eliminated;
- Easier to close and rehabilitate.
Waste rock storage
It is suggested to consider stockpiling the low-grade ore to process it at the end of mine
life, in case the copper price increase considerable by the end of the mine life and/or a
new mineral processing technology be created or developed.
Capital Cost
Direct capital costs were estimated at US $ 139.6 million, including off-site infrastructure.
Indirect costs and a 10% contingency were estimated at US $ 52.2 million, which bring
the initial capital cost to a total of US $ 191.8 million.
Table 7: Capital cost breakdown
Cost (US$M) Option 3
Crushing & HPGR 56.2
Agglomeration & Heap Leaching 12.4
Copper Recovery 32.1
Iron Removal 1.8
Water 2.8
Reagents 1.6
Services 2.0
Sulphuric Acid Production 22.0
Supporting Infrastructure 2.8
First Fill 6.0
Working Capital 14.0
Insurance 3.3
EPCM 14.0
Contingency 14.0
Commissioning 2.8
Accommodation & Temp Services 2.8
Spares & Tools 1.5
Total (US$M) 191.8
Operating Costs
Total operating costs, including capital leases as an operating expense, are estimated in
the PEA as US $ 7.79 per tonne of ore processed, broken down as follows:
Table 7: Option 3 operating cost breakdown
Area Annual Cost
(‘000 USD)
Unit Cost
(USD/t ROM)
Unit Cost
(USD/lb CuEq)
Mining 19,210 2.26 0.41
Processing 38,696 4.55 0.82
Product Freight 2,109 0.25 0.04