Minera Alamos Announces Positive Preliminary Economic Assessment for The Cerro de Oro Gold Project After-Tax IRR of 111% and sub-$30 million CAPEX
Minera Alamos Announces Positive
Preliminary Economic Assessment for The
Cerro de Oro Gold Project
After-Tax IRR of 111% and sub-$30 million CAPEX
Toronto, Ontario--(Newsfile Corp. - October 3, 2022) - Minera Alamos Inc. (TSXV: MAI) ("Minera" or the
"Company") is pleased to announce the positive results of an independent Preliminary Economic
Assessment ("PEA") for its Cerro de Oro Project (the "Project") in Zacatecas, Mexico. The PEA was
prepared in accordance with National Instrument 43-101
Standards of Disclosure for Mineral Projects
("NI 43-101") by Scott Zelligan, P.Geo., Lawrence Segerstrom, M.Sc.,CPG, Peimeng Ling, P.Eng., Alex
Duggan, P.Eng. and Toren Olsen, PG. A Technical Report with the details of the PEA will be filed on
SEDAR under the Company's profile within 45 days of the date of this news release. (
Note to reader:
Unless stated all currency references are in US dollars).
Highlights of PEA
Production highlights
Average annual gold production approaching 60,000oz (~60,000oz to 70,000oz in Years 1
through 4).
8.2 year mine life based on initial mineable total of 59 Mt of mineralization (0.37 g/t Au) heap
leached at an average rate of approximately 20,000 tpd -- +0.40 g/t Au in Years 1 through 4.
477koz of gold produced in loaded carbon/doré.
LOM strip ratio of 0.3:1 (waste: mineralization)
Robust economics using metals prices of $1,600/oz Au
LOM All-In Sustaining Cost (AISC) of $873/oz -- averaging $763/oz in Years 1 through 4.
After-Tax NPV at 5% of $150.5M and IRR of 111%.
Low capital intensity project with rapid payback:
Pre-production capital costs of $28.1M (includes 30% contingency).
Payback period of
11 months.
Used crushing plant already purchased reduces up-front capital requirements.
Significant Upside
Mineralization appears open in multiple directions as well as to depth.
Additional metallurgical testing to examine amenability of gold recovery from deeper
sulphide zones of mineralization not accounted for in current resource calculations and mine
plans (some early indications that material may prove to be leachable).
Updated Inferred Mineral Resource estimate containing 67 million tonnes of 0.37 g/t Au (790 koz
of contained gold) based on an upward revision of the base case resource metal price to
$1,700/oz.
"Leaning on our team's collective experience in mine building in Mexico with capital and operating costs
informed by the recent construction and ramp up of the Santana gold mine, the Cerro de Oro PEA is a
game changer for Minera as we strive to reach our initial target of a +100,000 oz/y gold producer,"
commented Doug Ramshaw, President. "Given the rampant inflationary pressures across the industry, it
is a testament to Minera's smart and nimble business model that a new mine could be developed at
Cerro de Oro for the low capital intensity presented in the PEA."
Table 1 - PEA Economic Parameters Summary
Cerro de Oro PEA Study
Life-of-Mine
Gold Price
1
$1,600/oz
Mine Life
8.2 years
Total Mineralization Processed
59.3M
Total Waste Mined
17.9M
Strip Ratio (Waste/Mineral)
0.30
Average Annual Tonnes Processed
2
7,300,000
Average Daily Tonnes Processed
2
20 ktpd
Heap Leach Gold Grade
3
0.37 g/t
Gold Recovery
68%
Average Annual gold production (oz)
2
58,400
Total Gold Recovered
476,610
Pre-production Capital
$28,080,000
Sustaining Capital
$14,700,000
Average AISC
4
$873/oz
After-Tax NPV (5%)
$150,500,000
After-Tax IRR
111%
After-Tax Payback Period
11 months
Exchange Rate (MXP/USD)
20
After-Tax NPV (10%)
$115,500,000
Net Cash Flows (undiscounted)
$200,000,000
Notes:
1
.
Base case price for gold was assessed using long term consensus pricing factoring in a modest discount against the average of available
bank and brokerage firm estimates.
2
.
Life-of-Mine Averages exclude partial production in year 9
3
.
LOM average combined grade of run-of-mine ("ROM") and crushed material sent to leach pads
4
.
"AISC per ounce" is a non-GAAP financial performance measures with no standardized definition under IFRS; additional reference info at
bottom of release
PEA Cautionary Note:
Readers are cautioned that the PEA is preliminary in nature and includes inferred resources that are
considered too speculative to have the economic considerations applied to them that would enable them
to be categorized as mineral reserves.
There is no certainty that the PEA results will be realized.
Mineral
resources are not mineral reserves and do not have demonstrated economic viability.
Additional work is
needed to upgrade these mineral resources to mineral reserves.
Capital Cost Estimates
Total pre-production capital costs at the Cerro de Oro Project are estimated at $28.1 million.
Sustaining
capital costs over the LOM are estimated at $14.7 million for a total Project capital cost of $42.8 million.
The pre-production capital cost estimate includes the construction of a stand-alone gold recovery (to
carbon) facility, Phase 1 of the heap leach pad construction and all necessary site infrastructure to bring
the mine into production.
Preliminary site layouts for the project were completed and included suitable areas for life of mine leach
pad areas, required pond volumes and other infrastructure items in addition to the process plant and
crushing operations.
Cost estimates are primarily based on cost factors/data obtained from the
company's recent project construction experience in Mexico including the Santana gold project
completed in 2021.
To reduce initial capital requirements all open pit mining operations and associated
capital costs are the responsibility of an independent mining contractor.
In addition, the company plans
to utilize (with some modifications) an existing crushing plant purchased previously and personnel will
stay in the local municipality eliminating the requirement for any significant mine site camp facilities.
Table 2 - Initial and Sustaining Capital Costs (CAPEX)
Area
Initial ($US)
Sustaining
($US)
Total ($US)
Preproduction technical work and engineering (geo tech
drilling, etc.)
1,500,000
1,500,000
Infrastructure and Misc. Construction
(excl. crushing)
3,000,000
Process Plant
3,400,000
Pad construction
7,000,000
13,200,000
21,200,000
Pond construction
2,700,000
Crushing and Stacking Refurbishment
2,000,000
Substation, Misc. Power
2,000,000
Contingency (30%)
6,480,000
Total Project
28,080,000
14,700,000
42,780,000
Operating Cost Estimates
The total unit operating cost for the Project is estimated at US$ 6.66/t of mineralised material (including
general and administrative costs - "G&A").
Operating costs were developed based on first principles
where possible including estimated staffing levels, reagent consumptions and power requirements.
Unit
costs and allowances for G&A, maintenance supplies, etc. are based on data from current Minera
Alamos facilities (Santana gold project) and other similar heap leach operations in Mexico.
Power
requirements for the process operation (excluding crushing) were estimated based on operating
equipment motor sizes and plant availability, and costs assume diesel generation with a delivered diesel
fuel cost of US$1.10/litre (approx. US$ 0.30/kWh).
Power for the crushing system is assumed to be
taken from the nearby power grid at a price of US$ 0.13/kWh.
An overall contingency of 20% was
applied to the operating cost totals to account for additional cost items such as outside contractors,
laboratory consumables, vehicle fuel requirements, etc.
All mine operating activities are assumed to be the responsibility of a third party mining contractor.
Contractor rates include drilling, blasting and transportation of the waste/ore. Costs for the Company
mine services group were prepared separately and included.
LOM operating costs are summarized in
Table 3 below. Actual annual costs in the economic models for the project will vary based on the
proposed annual mine schedule and utilize the unit costs detailed below.
Table 3 - Operating Costs (OPEX)
Area
US$/t mineralized
material
1
US$/t mined
2
Open pit mining
3
2.90
2.23
Crushing
4
0.52
0.40
Processing
2.29
1.76
G&A
0.32
0.25
Contingency (20%)
5
0.63
0.48
All-in OPEX
6.66
5.13
Notes:
1
.
"Mineralized Material" represents mined material estimated to generate positive cash flows
2
.
"Mined" means total tonnes mined (mineralized + waste)
3
.
Open pit mining cost is $2.00/t for waste and $2.30/t for mineralization.
A cost of $0.30/t mineralization has been included in the base case
mining cost for mineralization to account for a longer haulage route to the leach pads than to the waste dumps.
4
.
Crushing costs are calculated per tonne of mineralized material to leach pad (or mined) assuming 30% of mineralized material is crushed
(crushing unit cost is estimated at $1.74/t of crusher feed material)
5
.
Contingency is applied to OPEX excluding mine contractor rates which are current
Mineral Resources
As part of the PEA an updated Cerro de Oro project Mineral Resource Estimate was completed to
reflect a higher gold price of US$1,700/oz which is more reflective of the three-year trailing average
price.
This reflects a change in the "reasonable prospects for eventual economic extraction" due to the
current market conditions. Other than the change to the gold price assumption, the remainder of the
estimate methodology remain identical to that utilized in the previous NI 43-101 report "Mineral
Resource Estimate for the Cerro de Oro Project" by Scott Zelligan, P.Geo dated November 16th, 2020
that is currently available on SEDAR. The block model was constrained using an economic pit shell at
the updated gold price resulting in the new and current Mineral Resource estimate as presented in Table
4.
Table 4 - Cerro de Oro Project, Estimate of Mineral Resources
Resource
Category
Material Type
Tonnes
(t)
Au
(g/t)
Au
(oz)
Inferred
Oxide
67,000,000
0.37
790,000
Notes:
The independent and QP for the mineral resource estimates, as defined by NI 43-101, is Scott Zelligan, P.Geo. The effective date of the 2022
mineral resource estimate is September 28, 2022.
A gold price of $1,700/oz was used in calculating the Mineral Resources.
The estimate is reported for a potential open pit/heap leach scenario.
The limits of the Resource-constraining pit shell assumed a mining cut-off based on a total operating cost (mining, milling, and general and
administrative [G&A]) of $8.80/t stacked, a metallurgical recovery of 70%, and a constant open pit slope angle of 45°. Inferred resources are
too speculative geologically to have economic considerations applied to them.
The gold cut-off grade applied to oxide mineralized material is 0.15 g/t Au
These Mineral Resources are not Mineral Reserves as they do not have demonstrated economic viability.
The Mineral Resource estimate follows CIM Definition Standards.
Results are presented in-situ. Ounce (troy) = metric tonnes x grade / 31.103. Calculations used metric units (metres, tonnes, g/t). Rounding
followed the recommendations as per NI 43-101.
The number of tonnes has been rounded to the nearest million.
The QPs of this Report are not aware of any known environmental, permitting, legal, title-related, taxation, socio-political, marketing, or other
relevant issues that could materially affect the Mineral Resource estimate other than those disclosed in this NI 43-101 compliant Technical
Report.
The Mineral Resource estimate has been wholly classified as Inferred.
The estimate represents the
oxidized portion of the Cerro de Oro deposit. Although drill spacing is locally sufficient for Indicated
classification, there remain necessary revisions and updates to the geological logs; better definition of
the limit between the oxides and fresh rock; understanding of mineralization controls; and bulk density
measurements. The reported inferred resources are estimated with an average drilling grid of
approximately 85m by 85m.
Table 5 shows the open pit constrained Mineral Resource sensitivity to the gold price.
The reader should
be cautioned that the figures provided in Table 5 should not be interpreted as a Mineral Resource
statement. The reported quantities and grade estimates at different gold prices are presented for the
sole purpose of demonstrating the sensitivity of the resource model to the selection of a reporting gold
price. The gold price of $1,700/oz that was used to report the Mineral Resources (the base case) for
Cerro de Oro is highlighted in bold. Mineral Resources that are not Mineral Reserves do not have
demonstrated economic viability.
Table 5 - Sensitivity of Mineral Resource to Gold Price
Gold Price
($/oz)
Category
Tonnes
(Mt)
Gold Grade
(g/t)
Contained
Ounces
('000s)
1,500
Inferred
54
0.40
690
1,600
Inferred
60
0.38
740
1,700
Inferred
67
0.37
790
1,800
Inferred
73
0.36
833
1,900
Inferred
78
0.35
865
Note:
Mineral Resource is shown in bold.
Mining
The Cerro de Oro Project is planned as a conventional open pit operation that will utilize 100-t haul
trucks and front-end loaders.
Material will be drilled and blasted, before being loaded and hauled to a
waste dump, crusher, or direct to the heap leach pad.
Mining activities will be completed by a contractor
who will supply all of the required mine equipment and personnel working under the supervision of the
Company's technical staff.
Using a nested pit shell that is based on a gold price of $1,500/oz and the economic parameters applied
to the resource estimate as a guide, a full open pit mine plan was completed.
Upon completion of the
ultimate pit designs a check was completed that considered both revisions to the Company's gold price
forecast and its operating cost estimates for the Project.
A LOM gold price of $1600/oz was selected for
use in the final mine planning economics.
Based on available metallurgical data for the project and an
evaluation of the host rock lithologies it was assumed that the majority of mineralization mined will be
placed directly on the heap leach as run-of-mine ("ROM") with approximately 30% of the mineralization
reporting to the crusher for size reduction (equivalent to crushing cut-off grade of approximately 0.40-
0.45 g/t Au).
The mine production schedule anticipates that mining starts at the beginning of year 1 following the
completion of all required earthworks activities such as road, dump and starter leach pad construction.
Due to the low LOM strip ratio (0.30:1) and the size of the mineralization the PEA did not adjust the
planned mining physicals to account for mining losses or dilution (magnitude of losses likely similar to
dilution).
Mine planning efforts going forward will be aimed at cut-off grades and the smoothing of the
mining activities later in the mine life that may provide additional economic upside for the project.
Over
the life of mine of 8.2 years a total of 59Mt of mineralization grading 0.37 g/t gold (~700koz of contained
gold) are anticipated to be mined.
Table 6 - Cerro de Oro Mine Production Schedule
Year
Total
Processed
(tonnes)
Processed
Head
Grade
Au (g/t)
Contained
Gold
(ounces)
Total Mined
Material
(tonnes)
Strip Ratio
(Waste t: Mineral
t)
1
6,540,000
0.44
93,400
7,230,000
0.11
2
6,650,000
0.41
87,300
8,500,000
0.28
3
7,500,000
0.41
99,000
10,000,000
0.33
4
7,510,000
0.42
100,800
10,730,000
0.43
5
7,200,000
0.32
73,800
10,500,000
0.46
6
7,740,000
0.37
91,300
10,520,000
0.36
7
7,500,000
0.32
76,900
10,740,000
0.43
8
7,500,000
0.27
65,000
7,800,000
0.04
9
1,160,000
0.36
13,400
1,160,000
-
59,300,000
0.37
700,900
77,180,000
0.30
Notes:
1
.
Processed totals include mineralization sent direct to the leach pad (41.5 million tonnes) and material sent to the crusher before stacking on
the heap leach pad (17.8 million tonnes).
2
.
Total mined material values include all production from the open pit mine (mineralization + waste) for noted intervals.
Pit bench heights were selected at 5m intervals in order to provide good ore/waste selectivity although
use of larger bench heights in zones of primarily waste and on final open pit walls should be considered
as part of future optimization studies.
Overall average pit slopes with the benches/ramps in place range
between approximately 30-43 degrees in the north pit and 34 - 38 degrees in the south pit.
It is assumed that all drilling/blasting/loading/hauling operations at the Project are planned to be
completed via an open pit mining contractor.
Mining costs were developed for the project utilizing recent
Mexican cost information for similar heap leach operations and as part of the Company's recent work at
its Santana mine.
Contractor availability in northern Mexico is currently high and rates are competitive.
An additional cost was applied to the mineralized material to account on average for longer hauls to the
heap leach pads over the mine life.
Mine planning and supervision activities will be performed by
Company personnel and these costs are excluded from contractor rates.
Processing
The process flowsheet for the Cerro de Oro project is similar to that utilized by the Company at their
recently constructed Santana gold heap leach project.
Metallurgical testwork completed to date on
samples from the Cerro de Oro deposit indicate that the gold mineralization is well disseminated
throughout the host rock and that the oxide mineralization responds positively to cyanidation.
Residual
gold contents following leaching in multiple series of bottle roll tests (conventional and coarse particle)
appear to trend towards a typical range of ultimate values near 0.10 g/t Au.
Leach kinetics were
generally rapid in nature with low to moderate reagent consumptions (lime and cyanide).
A limited
number of column tests have been completed resulting in leach extractions consistent with those
observed from bottle roll studies.
Additional studies have been recommended to better define leaching
parameters and any variability that may exist between the different mineralized zones and lithologies.
The process design for the Cerro de Oro gold project includes crushing of high grade material to less
than 3/4-7/8" (30-35% of total with remaining low grade sent to leach pad as run-of-mine), a heap
leaching pad, solution ponds and carbon column recovery of gold from pregnant leach solutions. The
current design excludes carbon desorption and gold refining facilities as gold-loaded carbon will be
shipped off-site for final dore production.
The overall plant design was based on a nominal rate of
7,000,000 tonnes per year of mineralized material stacked to the leach pad at an average grade of 0.4
g/t Au.
Sufficient excess capacity is included in the design to allow for expected annual variations in mine
production around these nominal values.
Base case leach solution flow rate to the carbon column
recovery area was set at 800 m
3
/h with allowances to expand to 1,200 m
3
/h to accommodate increases
in annual production rates and/or an expansion in the overall project resources.
The overall Cerro de Oro gold recovery facilities consist of the following unit operations and support
facilities:
Low grade run-of-mine material leach pad loading via direct truck dump
Two stage crushing (jaw and cone) and screening operations for higher grade mine material with
conveyor/stacker transport to leach pad
Lined heap leach pad area sufficient to handle current life-of-mine resource (40-50% constructed
initially as Phase 1 with subsequent expansions)
Lined leach solution ponds adjacent to the leach pad - barren, pregnant and emergency overflow
solution capacity
Four trains of 4 stage carbon in columns with area to expand to six trains
All required process pumping and loaded and barren carbon handling
Reagent preparation and storage facilities
Metallurgical laboratory (necessary production samples only)
Utilities including water supply system (surface wells) and diesel power generation
Infrastructure
Access
The Cerro de Oro Project is accessible by road from the city of Saltillo in neighbouring Coahuila State, a
driving distance of approximately 165 km, about a two-hour drive.
The exit to Melchor Ocampo is off
Federal Highway 54 approximately 5 km northeast of the town of Concepción del Oro.
The site access
road is approximately 2.5 km east of Melchor Ocampo, and itself is a 3 km gravel road that provides
access to the Project site.
All roads to the town are paved and in good condition.
Based on preliminary engineering a total of approximately 11km of new access roads are required for
initial site development and early mine production.
Roads will consist of gravel surface suitable for the
operation of mining trucks and general purpose vehicles.
An allowance has also been included for some
upgrading of existing roads including the widening of sections that pass through/near the project mining
operations in order to better accommodate two-way truck traffic
Power
Details of the complete modifications to the existing crushing system previously purchased by the
company have not yet been completed but the arrangement will include a truck dump hopper/feeder, two
stage crushing and screening as well as required transfer conveyors and area sufficient for short term
material stockpiles.
It is planned that "grasshopper" style conveyors will be utilized to transfer crushed
rock to a mobile stacker located at the leach pad for final stacking/placement.
In total an allowance has
been included for a connected load of approximately 1.5 MW to power all the major crusher and transfer
equipment unit operations.
An existing 2MW backup diesel generator was acquired as part of the overall
used crushing circuit equipment and will be installed as a backup.
The nearest federal electricity ("CFE") connection to the planned crushing area is a local line
approximately 0.5 km to the east.
The main line supplying the town of Melchor Ocampo runs along the
primary access road to the town approximately 2 km to the south.
The company is currently discussing
the project requirements with the CFE to confirm sufficient capacity exists within the local network and to
confirm acceptable locations for connection to the power grid.
It is assumed for the foreseeable future that all power required for the Cerro de Oro gold leaching and
recovery plant operations will be generated at site via diesel generators. The total maximum operating
plant power load is estimated at 780 kW (actual draw will vary over LOM and as leach pad evolves)
which will be supplied via a single diesel generator unit (1 MW).
A backup generator (300-400 kW) will
also be installed to manage basic requirements during maintenance periods or periods of reduced
solution pumping.
Generators are to be located within close proximity to the processing plant area, so
transmission line requirements will be negligible. Wherever possible, smaller power consumers not
associated with the processing plant (i.e., test wells, local offices) will be self-contained with local diesel
hydraulic/electric generation.
At current fuel prices in Mexico diesel generation is equivalent to an electric power cost in the range of
$0.30/kWh, which has been used for budgeting purposes in the PEA.
Should the project resources
continue to grow further studies would be warranted to investigate the economics of extending grid
power to the process plan area.
Water Management
The sources of process water available for the Cerro de Oro project consist of groundwater wells.
In mid
2022, a hydrogeological consulting group was retained by the Company to perform reviews of the Cerro
de Oro area and to better understand the regional water flows around Melchor Ocampo.
A series of
reconnaissance visits were completed to review available regional geology maps for the area and to
make local field investigations (including electromagnetic geophysical surveys -- TEM).
Seven (7) high
priority targets have been selected by the company for test drilling down to a maximum depth of 300
meters.
The majority of the target areas are located north of the planned leach pad/processing plant
facilities and at a distance of less than 5km.
Other Infrastructure
Preliminary estimates were completed to calculate the total amount of material to be excavated during
the overall site preparations.
Of this total approximately 40% will be moved short distances and utilized
as compacted fill.
The remainder will be moved to one of the site waste storage dumps.