Lupaka Announces Positive PEA for Invicta with Average Annual Pre-Tax Cash Flow of US$10.2 Million
Lupaka Announces Positive PEA for Invicta with Average
Annual Pre-Tax Cash Flow of US$10.2 Million
VANCOUVER, BRITISH COLUMBIA, March 1, 2018 -- Lupaka Gold Corp. (" Lupaka
Gold" or the “Company") (TSX-V: LPK, FRA: LQP) today announced the results of the
Preliminary Economic Assessment (“PEA”) prepared pursuant to National Instrument 43-
101 (NI 43 -101) on the Company’s 100% owned Invicta Gold Development Project
(“Invicta Project” or “Invicta”), located 1 20km north of Lima, Peru . All values are in US
dollars unless otherwise indicated.
Invicta Project PEA Highlights:
• Updated Mineral Resource Statement of 3.0 million tonnes of Indicated
Mineral Resources at 5.78 grams per tonne (“ g/t”) gold equivalent ounces
(“Au-Eq.”) using a 3.5 g/t cut-off, and 0.6 million tonnes of Inferred Mineral
Resources at 5.49 g/t Au-Eq.
• Initial 6-year mine plan (underground) designed on a portion of th e mineral
resource utilizing the existing infrastructure and minimizing capital start-up
costs
• Sub-level open stope mining producing ~ 670,000 minable tonnes at 8.6 g/t
Au-Eq.* with production of ~ 185,000 Au-Eq. oz (within initial 6-year mine
plan)
• Average annual pre-tax cash flows of $10.2 million, average annual after-tax
cash flow of $8.2 million
• Annual production of 33,700 Au-Eq. oz, during steady state
• Annual payable metal of 26,700 Au-Eq. oz, during steady state
• All-in Sustaining Costs of $575 Au-Eq. oz over initial 6-year mine life, average
annual pre-tax operating profit of $12.3 million
• Pre-tax 5% NPV of $53.6 million
• After tax 5% NPV of $43.4 million
• Low capital investment: $4.3 million in pre-production capital with a payback
of less than one year
• Strong upside potential for additional mineral resource growth
• Located in a premier South American mining jurisdiction, operating permits
and community agreement in place
* Au-Eq. calculations in the PEA are based on $1300 Au, $16.75 Ag, $3.00 Cu, $1.25 Zn, and $1.05 Pb
“We are highly encouraged by the robust economics contained in the PEA, which
considers only a small portion of the total resource adjacent to Invicta’s existing
infrastructure. A combination of the high-grade 6-year initial mine plan and the relatively
low capital start -up costs results in immediate meaningful cash flows. The PEA
demonstrates the viability of the project and provides us with confidence to reinvest cash
flow into the project, in order to realize its full potential. As we initiate the operational plan
outlined in the PEA, our next steps will include increasing the resource confidence level,
expanding the resource base, and evaluating opportunities for the Company to acquire or
develop its own processing plant.”
Will Ansley, President and CEO of Lupaka
Project Background
Lupaka’s Invicta Gold Project is a polymetallic development project located approximately
120 kilometres north of Lima, Peru. A Preliminary Economic Assessment (PEA) has been
undertaken on the project to evaluate the economic viability of the underground extraction
of Indicated and Inferred M ineral Resources from the Atenea V ein close to the existing
3,400 Level adit (up to 130 metres above the 3400 Level) utilizing a sub -level long hole
open stoping mining method supported by initial toll treatment processing options.
The PEA considers only part of the reported Mineral Resource (the Atenea Vein close to
existing infrastructure) with the objective of generating a positive cash flow from a low-
cost operation while simultaneously re-investing in and further evaluating the deposit to
potentially expand production in future.
The PEA has been undertaken by a multi -disciplinary team of independent consultants
from SRK Consulting (Peru) Inc., SRK Consulting (Canada) Inc. and Transmin
Metallurgical Consultants in collaboration with Lupaka.
The PEA is preliminary in nature and includes Inferred 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, and th ere is no
certainty that the PEA will be realized.
Geology / Mineral Resources
The generation of the geology and mineral resource model was undertaken by SRK
Consulting (U.S.), Inc. in 2012 considering 112 core boreholes drilled by previous operator
Pangea Peru S.A. during the period of 1997 to 1998, 53 core boreholes drilled by Invicta
Mining Corporation S.A.C.(Invicta) between 2006 and 2008 and 10 underground channels
between 2007 and 2008. Mesothermal to Epithermal gold mineralization has been
modeled within seven quartz -hosted wireframes at the Invicta Project. The mineral
resource model is a geostatistically -based block model constrained by geological
wireframes, documented in a technical report filed by previous owner , Andean American
Gold Corporation, in April 2012. No additional exploration data has been acquired on the
project since the generation of the model in 2012.
The Mineral Resource Statement which forms the basis of the PEA was reviewed by SRK
Consulting (Peru) S.A., and was found to fairly reflect the informing data and the geological
interpretation at the time of modeling. The Mineral Resource Statement has been re-stated
to reflect current metal prices and costs. The Mineral Resource Statement for the Invicta
Project is tabulated in Table 1, reported to a cut-off grade of 3.0 g/t Au-Eq. Cut-off grades
are based on a price of US$1,250 per ounce of gold, US$17.00 per ounce of silver,
US$3.00 per pound of copper, US$1.05 per pound of lead and US$1.20 per pound of zinc.
The equivalent gold calculation assumes mill recoveries of 85 percent for gold, 80 percent
for silver, 82 percent for copper and lead and 77 percent for zinc.
This Mineral Resource Statement differs from that previously reported in 2012, primarily
due to the reduction of metallurgical recovery assumptions, an increase in gold equivalent
cut-off grade from 1.3 g/t to 3.0 g/t, and revisions to metal price assumptions.
Table 1: Mineral Resource Statement*, Invicta Project, Huaura Province, Peru, SRK
Consulting (Peru) S.A., February 28, 2018
Zone Category
Metal Grade Contained Metal (000's)
Tonnes
(000's)
AuEq
(g/t)
Au
(g/t)
Ag
(g/t)
Cu
(%)
Pb
(%)
Zn
( %)
AuEq
(oz)
Au
(oz)
Ag
(oz)
Cu
(lb)
Pb
(lb)
Zn
(lb)
Atenea -
All Zones
Mea - - - - - -
Ind 2,516 6.03 4.19 26.68 0.64 0.39 0.47 488 339 2,158 35,513 21,429 25,988
Mea+Ind 2,516 6.03 4.19 26.68 0.64 0.39 0.47 488 298 1,999 33,051 20,139 24,467
Inferred 535 5.40 5.09 4.77 0.06 0.11 0.16 93 88 82 673 1,315 1,878
Dany
Mea - - - - - -
Ind 55 4.03 1.36 31.57 1.39 0.05 0.06 7 2 56 1,683 59 77
Mea+Ind 55 4.03 1.36 31.57 1.39 0.05 0.06 7 2 56 1,683 59 77
Inferred 4 4.50 1.48 38.57 1.56 0.03 0.06 1 0 5 132 3 5
Pucamina
Mea - - - - - -
Ind 229 4.63 4.02 10.27 0.09 0.31 0.30 34 30 76 443 1,582 1,495
Mea+Ind 229 4.63 4.02 10.27 0.09 0.31 0.30 34 30 76 443 1,582 1,495
Inferred 21 3.76 3.37 5.32 0.16 0.04 0.08 3 2 4 75 18 35
Ydalias -
All Zones
(12)
Mea - - - - - -
Ind 9 7.60 4.38 39.21 1.50 0.37 0.23 2 1 11 294 71 45
Mea+Ind 9 7.60 4.38 39.21 1.50 0.37 0.23 2 1 11 294 71 45
Inferred 0 8.00 3.91 51.60 2.00 0.27 0.18 0 0 0 13 2 1
Zone 4
Mea - - - - - -
Ind 190 4.38 3.38 14.93 0.43 0.13 0.09 27 21 91 1,805 536 371
Mea+Ind 190 4.38 3.38 14.93 0.43 0.13 0.09 27 21 91 1,805 536 371
Inferred 16 3.92 1.72 20.79 1.17 0.08 0.05 2 1 11 417 28 20
Total All
Zones
Mea - - - - - -
Ind 2,999 5.78 4.07 24.81 0.60 0.36 0.42 558 392 2,392 39,739 23,678 27,977
Mea+Ind 2,999 5.78 4.07 24.81 0.60 0.36 0.42 558 392 2,392 39,739 23,678 27,977
Inferred 577 5.29 4.91 5.49 0.10 0.11 0.15 98 91 102 1,311 1,365 1,939
* Mineral resources are not mineral reserves and do not have demonstrated economic viability. All figures are rounded to reflect
the relative accuracy of the estimate. All composites have been capped where appropriate.
Grade Sensitivity Analysis
The Mineral Resources of the Invicta Project are sensitive to the selection of the reporting
cut-off grade. To illustrate this sensitivity, the global block model quantities and grades are
presented in Table 2.
Table 2: Global Block Model Quantities and Grade Estimates*, Invicta Project at Various
Cut-off Grades
Cut-off
Grade
(g/t Au-Eq.)
Indicated Inferred
Quantity Grade AuEq Metal Quantity Grade AuEq Metal
(000't) AuEq (g/t) (000' oz) (000't) AuEq (g/t) (000' oz)
2.5 3,796 5.14 628 928 4.37 130
3.0 2,999 5.78 558 577 5.29 98
3.5 2,451 6.35 501 526 5.49 93
4.0 2,024 6.90 449 473 5.69 86
4.5 1,674 7.46 402 366 6.09 72
5.0 1,405 7.98 361 179 7.44 43
Mining and Processing
The PEA operating plan is based on the underground extraction of Indicated and Inferred
Mineral Resources from the Atenea vein close to the existing 3,400 Level adit (up to 130
metres above the 3400 Level) utilizing a sub-level long hole open stoping mining method,
with waste rock as backfill where possible.
Utilizing in part existing historic mine development, the main extraction level will be on the
3400 Level with surface access via the adit. A secondary ramp from surface will develop
drilling horizon sub-levels spaced 15m to 30m. Long hole drilling and blasting techniques
will be used. The blasted material will be mucked from the extraction level by 4 yd3 LHD’s
where it will then be dumped directly into 30 tonne haulage trucks. The trucks will then
transport the material from the adit to an off-site mill processing facility.
The 130m high, 40 m long, 4m to 12m wide stopes will be separated by rib pillars and
filled with available waste rock from mine development waste.
Production as outlined by the PEA considers an average peak steady state rate of
approximately 350 tonnes per day . The initial 6 -year mine life commencing in 2018 is
expected to produce a total of 669,813 tonnes of mineralized material inclusive of a 11%
external dilution with an 83% mine recovery (Table 3).
Table 3: Summary of PEA Production Schedule and Grades
Total 2018 2019 2020 2021 2022 2023
Annual Mine Production tonnes 669,813 89,905 124,510 124,949 124,368 123,790 82,291
Average Daily Production tpd 319 257 356 357 355 354 235
Au-Eq. Grade g/t 8.58 8.55 8.47 9.20 8.62 7.45 9.45
Au-Eq. Produced Ounces Oz. 184,708 24,723 33,896 36,963 34,484 29,644 24,997
Au-Eq. Payable Ounces Oz 145,765 19,487 26,822 29,057 27,315 23,513 19,572
Results of metallurgical tests indicate that conventional flotation technology can be used
to treat the mineral resources from Invicta. The flowsheet includes crushing, a coarse
primary grind, bulk lead, copper, gold and silver flotation, flotation of a Zn concentrate,
bulk concentrate regrinding, and selective Cu/Pb flotation. Table 4 illustrates the assumed
concentrate recoveries and Table 5 shows the assumed concentrate grades.
Table 4: Concentrate Recoveries
Recovery
Cu conc Pb conc Zn conc Total
Gold % 77.3 10.6 87.9
Silver % 45.5 34.1 79.6
Copper % 84.1 84.1
Lead % 82.6 82.6
Zinc % 14.3 68.4 82.7
Table 5: Concentrate Grades
Concentrate
Cu Pb Zn
Copper % 30.1 5.7 2.8
Lead % 5.2 48.5 1.0
Zinc % 1.9 5.5 54.9
Cash Flow Analysis
Over the initial 6-year operating plan outlined in the PEA, the pre-tax NPV using a 5%
discount rate is $53.6 million (Table 6) and the post-tax NPV using a 5% discount rate is
$43.4 million (Table 7).
Table 6: Pre-tax Discounted NPV – Metal Price Sensitivities
Pre-Tax NPV ($ M) -10% Base Case +10%
Discount Rates
0% $43.6 $60.9 $78.2
Base Case 5% $38.2 $53.6 $69.0
8% $35.5 $50.0 $64.4
Payback Years <1 <1 <1
Table 7: After-tax Discounted NPV – Metal Price Sensitivities
After-Tax NPV ($ M) -10% Base Case +10%
Discount Rates
0% $36.2 $49.0 $61.4
Base Case 5% $31.9 $43.4 $54.4
8% $29.8 $40.6 $50.9
Payback Years <1 <1 <1
Metal price assumptions for the base case are $1 ,300 oz Au, $16.75 oz Ag, $3/lb Cu,
$1.25/lb Zn, $1.05 Pb.
The revenue contributions of each metal are tabulated in Table 8.
Table 8: Revenue Contribution by Commodity and Percentage
Total Project %
Gold $125.0 66
Silver $11.3 6
Total Precious Metal $136.3 72
Copper $31.9 17
Zinc $12.1 6
Lead $9.2 5
Total $189.5 100
Capital Cost Estimates
The PEA has been designed to minimize initial capital outflows by utilizing the existing
underground infrastructure to access mineralization in proximity to the 3400 Level adit,
rehabilitate and utilize the existing 65-person camp, and truck mineralized material to toll
milling facilities thereby avoiding the require ment to build a plant on site . Initial pre -
production capital expenditures are estimated at $4.3 million (Table 9). The projects pre-
production capital consists of rehabilitation to existing underground and surface
infrastructure, installation of underground services, preparation and development of
underground infrastructure including a new adit at the 3 ,430 Level, associated cross-cut
and connection to the 3,400 Level which completes the ventilation circuit and secondary
egress, as well as significant improvements to the projects access road.
Excluded from capital expenditures is $1 million which was spent in 2017 to buy-back and
extinguish the 1% royalty over Invicta owned by Franco Nevada. No additional royalties
remain on the property.
Table 9: Initial Pre-Production Capital and Sustaining Capital Breakdown
Initial
Capital (M)
Sustaining
Capital (M)
Total
Capital (M)
Project infrastructure $1.8 $2.3 $4.1
Development $2.5 $6.1 $8.6
Total $4.3 $8.4 $12.7
Lupaka have identified multiple toll treatment plants that would be capable of treating the
mineral resources within the PEA mine plan with minor modifications. The mineral
resources will be trucked to one of these facilities where separate copper, lead a nd zinc
concentrates would be produced by the toll facility, supervised by Lupaka staff. All capital
and operating costs associated with the ROM treatment and tailings disposal would be the
responsibility of the toll treatment facility, under a cost per tonne agreement.
Preliminary review of marketing terms for the Invicta Project’s saleable concentrates has
occurred and discussions with traders are ongoing. Concentrates will be trucked from the
selected toll treatment facility to the port of Callao for sale or export.
Operating Cost Estimates
The PEA estimates that the Invicta Project will produce approximately 187,000 Au -Eq.
ounces over the initial 6-year mine plan. Mining and trucking costs are estimated based
on third party contractor rates, processing charges are estimated based on discussions
held with local toll processing facilities. General and administration is based on internal
estimates, local labor rates, and from experience running operating the Invicta camp
facility. Estimates project operating costs are tabulated in Table 10. Average cash costs
and all-in costs for the project are tabulated in Table 11.
The Invicta Project does not have any royalties.
Table 10: Operating Unit Costs
Unit Operating Costs
Underground Mining and Development $/tonne mined $37.30
Trucking and Haulage $/tonne mined $50.20
Processing $/tonne mined $37.53
General & Administration $/tonne mined $12.62
Total $/tonne mined $137.6
Table 11: Cash Costs
Unit Cash Costs
Operating Cost Au-Eq oz $508
All-in Sustaining Cost Au-Eq oz $575
Qualified Persons
This news release has been reviewed and approved by the following “Qualified Persons”,
as defined by NI-43-101:
• Glen Cole, PGeo, of SRK Consulting (Canada) Inc., an “Independent Qualified
Person” (Geology and Mineral Resources)
• Camila Passos, PGeo, S RK Consulting (Peru) S.A. , an “Independent Qualified
Person” (Mineral Resources)
• Gary Poxleitner, P Eng, of SRK Consulting (Canada) Inc., an “Independent
Qualified Person” (Mining and Financial Analyses)
• Adam Johnston, MAusIMM, Chief Metallurgist , Transmin Metallurgical
Consultants, an “Independent Qualified Person” (Mineral Processing)
Technical Report
Further information about the PEA and the resource estimate referenced in this news
release, including data verification, key assumptions, parameters, risks and other factors,
will be provided in a technical report prepared following Canadian Securiti es
Administrators’ National Instrument (NI) 43-101 and Form 43 -101F1 guidelines for the
Invicta Project that the Company will file on SEDAR (www.sedar.com) within 45 days of
this Press Release.
Neither the TSX Venture Exchange nor its Regulation Service Provider (as the term
is defined in the policies of the TSX Venture Exchange) accepts responsibility for
the adequacy of this news release.
About Lupaka Gold
Lupaka is an active Canadian-based company focused on creating shareholder value
through discoveries and strategic development of its assets in some of the most prolific
mining regions of Peru.
Invicta Gold Development Project – 100% owned, the Company’s flagship project is an
advanced stage gold-copper polymetallic underground deposit located approximately 120
kilometres north of Lima. Over $12 million of capital has been spent by previous owners
on development and infrastructure at Invicta , and m anagement expects to commence
potential production in the second half of 2018 by using third-party mining contractors and
utilizing the existing adit and workings. The Invicta project is fully permitted and community
agreements are in place.
The potential underground operation will be focused on underground extraction of
Indicated Mineral Resources and Inferred Mineral Resources from the Atenea vein within
close proximity to the existing 3400 Level adit (up to 130 metres above the 3400 Level).
Invicta’s approved EIA allows for mine production of up to 1,000 tpd, although the current
mining plan is targeting 350 tpd.
Cautionary Note Regarding the Invicta Production Decision
The decision to commence potential production at the Invicta Gold Project and the
Company’s plans for a mining operation as referenced herein (the “Production Decision
and Plans”) are based on economic models prepared by the Company in conjunction with
management’s knowledge of the property and the existing estimate of Indicated and
Inferred Mineral Resources on the property , supplemented by the 2018 PEA . The
Production Decision and Plans were not based on a preliminary economic assessment, a
pre-feasibility study or a feasibility study of mineral reserves demonstrating economic and
technical viability. Accordingly, there is increased uncertainty and economic and technical
risks of failure associated with the Production Decision and Plans, in particular the risk
that mineral grades will be lower than expected, the risk t hat construction or ongoing
mining operations are more difficult or more expensive than expected, the risk that the
Company will not be able to transport or sell the mineralized material it produces to local
custom toll mills on the terms it expects, or at all; production and economic variables may
vary considerably, due to the absence of a detailed economic and technical analysis
according to and in accordance with NI 43-101.
Josnitoro Gold Project – the Company holds an option to earn a 65% interest on this
project from Hochschild Mining PLC. The project is located approximately 800 kilometres
by road southeast of Lima in the Department of Apurimac, southern Peru, within the
Andahuaylas-Yaury Belt, in which the Las Bambas mine (MMG Limited) and the
Constancia mine (HudBay Minerals) are located. Historical work on the disseminated gold
zones includes over 170 shallow drill holes and extensive surface trenching, as well as
artisanal mining.
About SRK Consulting Canada Inc.
SRK Consulting Canada Inc. form part of the SRK Consulting Group which is an
independent, international consulting company that provides focused advice and solutions
to clients, mainly from earth and water resource industries. Formed in 1974, SRK now
employs more than 1,400 professionals in over 40 offices on 6 continents. Among SRK's
1,500 clients are most of the world's major- and medium-sized metal and industrial mineral
mining houses, exploration companies, banks, petroleum exploration companies,
construction firms and government departments.
About Transmin Metallurgical Consultants
Transmin is an independent consulting firm that provides metallurgical expertise and
services to mining projects and operations throughout South America.
FOR FURTHER INFORMATION PLEASE CONTACT:
Will Ansley, President & C.E.O.
Tel: (416) 862-5257
or visit the Company’s profile at www.sedar.com or its website at www.lupakagold.com
Qualified Person
The technical information in this document has been reviewed and approved by Julio
Castañeda Mondragon, MAIG, the President of Lupaka Gold Peru S.A.C. , a Peruvian
subsidiary of the Company, and a Qualified Person as defined by National Instrument 43-
101. Mr. Castañeda has verified the scientific and technical information, including
sampling, analytical and test data underlying the information or opinions contained in this
news release.
Cautionary Statements Regarding Forward Looking Information
All statements, trend analysis and other information contained in this press release relative
to anticipated future events or results constitute forward -looking statements. All
statements, other than statements of historical fact, included herein, includin g, without
limitation, statements relating to improvements in the road to the Invicta Project and its
anticipated benefits and the timing of completion of the improvements, the timing of the