Orezone Announces Positive Feasibility Study for the Bomboré Gold Project After-tax NPV5% of US$224.5M, IRR of 42.6% and LOM AISC of $746/oz
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Orezone Announces Positive Feasibility Study for the Bomboré Gold Project
After-tax NPV5% of US$224.5M, IRR of 42.6% and LOM AISC of $746/oz
July 9, 2018, Orezone Gold Corporation (ORE -TSXV) (“Orezone” or the “Company”) is pleased to announce
the summary results of an updated independent Feasibility Study (the “ FS”) for its 90%-owned Bomboré
Gold Project in Burkina Faso, West Africa. All reported figures are in U.S. dollars and are on a 100% project
basis unless otherwise stated.
FEASIBILITY STUDY HIGHLIGHTS (Base Case parameters assume a gold price of $1,275/oz)
• Pre-tax NPV5% of $315.3 million and IRR of 59.4% with a 1.3 year payback
• After-tax NPV5% of $224.5 million and IRR of 42.6% with a 1.7 year payback
• Mine life of 13 years with LOM gold production of 1,024,239 ounces and an average annual
production of 102,613 ounces in the first 7 years
• The mineral reserves used in the FS are limited to the Measured and Indicated near-surface saprolite
and upper transitional resources to an average depth of 45 metres only
• Initial project construction costs estimated at $143.7 million with a 24 -month construction period
(includes six months allotted for resettlement activities that will allow the commencement of main
construction activities) with first gold pour targeted by Q4 2020
• LOM sustaining capital costs of $58.9 million
• LOM cash costs of $677/oz with cash costs of $445/oz in the first 3 years
• LOM AISC1 of $746/oz with AISC of $485/oz in the first 3 years
The FS envisions a shallow , free-dig open pit mining operation with a simple processing circuit consisting
of a single stage grinding ball mill followed by a seven -stage carbon-in-leach (“CIL”) and standard Zadra
gold recovery circuit. Tailings will be stored in a HDPE -lined facility that will be constructed in several
stages over LOM from compacted mine waste, resulting in a smaller environmental footprint and improved
costs.
“The robust FS results clearly demonstrate that Bomboré is a compelling project . The project’s favourable
location, soft and shallow free-digging ore, simple flowsheet, modest power demand, and rapid leaching
kinetics contribute to its low capital intensity and top-tier per tonne operating costs. Its modest upfront
capital will also allow Orezone to advance directly into construction, ” said Patrick Downey , President and
CEO of Orezone. “With a strong treasury , we plan to commence with the Re settlement Action Plan ( “RAP”)
and detailed engineering in Q3 2018 followed by main project construction in Q2 2019. Furthermore, we
see several opportunities to enhance value and increase LOM gold production, and we will advance th ese
during the detailed engineering phase. Bomboré is one of the largest and most advanced undeveloped gold
deposits in the region and has a very large free -milling sulphide resource directly beneath the oxide
1 All-in sustaining costs (“AISC”) do not have any standardized meaning under IFRS. AISC include mining, processing,
site G&A, refining & transportation, government royalties, sustaining capital and closure costs.
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deposit that forms the basis of the FS . The Company plans to complete a detailed review of this sulphide
resource in light of the excellent recent high g rade drill results from the P17S zone with the aim of
expanding the circuit to process higher grade sulphide zones as supplemental ore feed.”
BASE CASE SUMMARY
The Base Case assumptions include mineral reserves determined using an average gold price of $1,250/oz
and revenues based on $1,275/oz. Capital estimates are based on quotes including taxes and freight
received up to Q2 2018 from potential equipment and service providers. The thirteen-year operational plan
is designed to bring forward a significant amount of gold production and cashflows by delivering higher
grade ore in the early years with l ower grade ore stockpiled and processed in the final two years of
operations. However, based on a first stage review by the FS engineering consultants, the addition of one
CIL tank and minor modifications to the remainder of the circuit could allow annual throughput to increase
from the current design level of 4.5M tonnes per annum (“tpa”) to 5.2M tpa, enhancing Bomboré’s annual
gold production profile as further described in the “Project Opportunities” section below.
Pre-production capital costs include the construction of a large water storage system and completion of all
RAP a ctivities. Previous studies envisioned a three-stage RAP program with only Stage 1 in the pre -
production years.
Sustaining capital is estimated at $ 58.9 million consisting mainly of tailings dam construction.
Replacement of process plant equipment will be minimal due to the projected low abrasion by the oxide
material and all mining fleet replacement will be undertaken by the mining contractor. Reclamation and
closure costs are estimated at $14.5 million.
Base Case Highlights
Description Years 1 to 3 LOM
Base Case Gold Price ($/oz) 1,275
Mine Life (years) 12.3
Total Waste Tonnes Mined (Mt) 25.2 93.8
Total Ore Tonnes Mined (Mt) 17.7 56.0
Strip Ratio 1.42 1.68
Production
Processing Annual Throughput (Mt) 4.5 4.5
Diluted Head Grade (g/t) 1.00 0.64
Gold Recovery Rate (%) 93.1% 89.1%
Total Gold Ounces Recovered (ounces) 405,578 1,024,239
Average Annual Gold Production (ounces) 135,193 83,271
Operating Costs
Unit Operating Costs ($ per tonne processed) 13.36 12.38
Cash Costs ($/ounce) 445 677
AISC ($/ounce) 485 746
Capital Costs
Initial Construction Costs ($M) 143.7
Sustaining Capital Costs ($M) 58.9
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Closure Costs ($M) 14.5
Financials
100% Project Basis1
NPV Pre-Tax (5%) ($M) 315.3
IRR Pre-Tax (%) 59.4%
NPV After-Tax (5%) ($M) 224.5
IRR After-Tax (%) 42.6%
1 Represents total project cash flows net of government royalties and taxes. The
Government of Burkina Faso benefits from a 10% free-carried interest, sales royalties (4%
NSR at $1,275 Au), Local Development Mining Fund tax (1% NSR), corporate income tax
(27.5% tax rate), fuel taxes, VAT and withholding taxes on services.
Exchange rate assumptions: XOF:USD = 550; USD:EURO = 1.19; XOF:EURO = 655.957
Fuel price delivered to site: Diesel = $1.05/litre; Heavy-Fuel Oil = $0.62/litre
The FS was completed by Lycopodium Minerals Canada Ltd. (“Lycopodium”) of Toronto , Canada (Process
Engineering and Overall Study Manager), Knight Piésold and Co. of Denver, USA (Tailings and Water Storage
Systems), AMC Consultants (“AMC”) of Vancouver, Canada and Maidenhead, United Kingdom (Reserves and
Mining) and WSP Canada Inc. (“WSP”) of Montreal, Canada in conjunction with SOCREGE and BEGE of Burkina
Faso (Social & Environmental).
Mineral Resource and Mineral Reserve
The Mineral Reserve estimate for the FS was prepared by AMC and is based on the January 5, 2017 Mineral
Resource estimate prepared by RPA Inc. (“RPA”) of Toronto, Canada which includes 218.1 Mt of Measured
and Indicated resources grading 0.68 g/t for 4. 8 Moz plus 48.2 Mt of Inferred resources grading 0.64 g/t
for 1.0 Moz. The mineral reserves used in the FS are limited to the Measured and Indicated near-surface
saprolite and upper transitional resources to an average depth of 45 metres.
The Mineral Resource estimate consists of three separate block models:
• The North model, which consists of the Maga, CFU, OCR, and P8P9 zones.
• The South model, which consists of the P11, Siga E, and Siga W zones.
• The Southeast model, which is to the south and southeast of the South model and consists of the
P16 and P17 zones.
2017 Mineral Resources Statement – RPA, Inclusive of Mineral Reserves, January 5, 2017
Measured
Mineral Resource
Indicated
Mineral Resource
Measured and Indicated
Mineral Resource
Inferred
Mineral Resource
Cutoff Tonnes Grade Gold Tonnes Grade Gold Tonnes Grade Gold Tonnes Grade Gold
Material Type gpt Mt gpt koz Mt gpt koz Mt Gpt koz Mt gpt koz
Oxide+Tran
HG 0.45 16.9 0.94 513 36.5 0.83 974 53.4 0.87 1,487 4.8 0.77 117
Oxide+Tran LG 0.2 to 0.45 18.5 0.33 196 50.1 0.33 531 68.6 0.33 727 16.4 0.29 151
Total Ox+Tr 0.20 35.4 0.62 709 86.7 0.54 1,505 122.0 0.56 2,214 21.2 0.39 268
Fresh HG 0.50 2.3 1.18 87 68.7 0.96 2,121 71.0 0.97 2,208 20.1 0.97 630
Fresh LG 0.38 to 0.50 0.8 0.43 11 24.2 0.43 337 25.0 0.43 348 6.9 0.43 96
Total Fresh 0.38 3.1 0.99 97 93.0 0.82 2,458 96.0 0.83 2,556 27.0 0.84 726
Total HG 19.2 0.97 600 105.3 0.91 3,095 124.5 0.92 3,695 24.9 0.93 747
Total LG 19.2 0.33 206 74.4 0.36 868 93.6 0.36 1,075 23.3 0.33 246
Total HG + LG 38.4 0.65 806 179.6 0.69 3,964 218.1 0.68 4,770 48.2 0.64 994
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Notes: 1. CIM definitions were followed for Mineral Resources. 2. HG indicates material above the higher -grade cutoffs, LG indicates
low grade material between the high grade and breakeven cutoff grades. 3. Mineral Resources are estimated at variable cutoff grades
depending on weathering layer and location. 4. Mineral Resources are estimated using a long -term gold price of US$1,400 per ounce.
5. A minimum mining width of approximately 3 m was used. 6. Bulk densities vary by material type. 7. Mineral Resources that a re not
Mineral Reserves do not have demonstrated economic viability. 8. Mineral Resources are reported inclusive of Mineral Reserves 9.
Numbers may not add due to rounding. 10. The effective date of this Mineral Resource statement is January 5, 2017.
For the Mineral Reserve estimate , AMC developed new reserve block models, for each of the three resource
block models, by applying the modifying factors necessary for conversion of Mineral Resources to Mineral
Reserves. Those factors included amongst others, weathering profiles, mine cost centers, mining dilution
and extraction factors, and pit slope angles. Cut-off grade ( “CoG”) determinations for block assignments
(ore versus waste) were based on a gold price of $1,250/oz.
Mineral Reserve Estimate – AMC, July 9, 2018
Category Proven Probable Proven & Probable
Tonnes Gold
Grade
Gold
Ounces Tonnes Gold
Grade
Gold
Ounces Tonnes Gold
Grade
Gold
Ounces
Mt g/t Au Koz Au Mt g/t Au Koz Au Mt g/t Au Koz Au
North 21.35 0.68 466 19.54 0.57 356 40.89 0.63 823
South 14.92 0.67 322 14.92 0.67 322
Southeast 0.19 0.85 5 0.19 0.85 5
Total 21.54 0.68 472 34.47 0.61 678 56.00 0.64 1,149
1. Mineral Reserves have been estimated in accordance with the CIM Definition Standards.
2. Mineral Resources which are not Mineral Reserves do not have demonstrated economic viability.
3. Mineral Reserves are estimated at an average long-term gold price of US$1,250.
4. Mineral Reserves are reported effective July 9, 2018.
Mine Plan and Processing Summary
The FS mine plan is based on an annual feed rate to the plant of 4.5M tpa of ore and delivering relatively
higher-grade ore in the early years of the project . This results in building 6.1Mt of low grade stockpiles
prior to Year 1 with further stockpile additions in Years 1 through 3 and subsequent drawdowns in the later
years of operations. Over 80% of mine waste will be utilized as construction material for the tailings
storage facility, thereby reducing water management costs and closure costs associated with waste dumps.
The ore is free-digging with the oxides composed of over 70% passing 150 micron material that requires
minimal grinding before leaching. The upper transition, although relatively soft , will require some grinding
to achieve expected recoveries. The ball mill is sized to take a blend of 70 % oxide/30% upper transition
material. The current mine plan does not anticipate such a high percentage of transition material in the
mill feed thus providing extra grinding capacity should a plant expansion be considered. Estimated gold
ounces produced and diluted head grades for each year are summarized in the table below. An estimated
24,526 ounces of gold are recovered during the planned two-month commissioning period. During years
12 to 13, only lower-grade stockpiles are processed.
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Gold Production
Year
Ore tonnes
processed
(Mt)
Gold grade
(g/t) Recoveries (%)
Gold
Production
('000 ounces)
Pre-prod. 0.68 1.20 94.2% 24.5
1 4.50 1.14 93.9% 155.4
2 4.50 0.95 92.6% 126.7
3 4.50 0.92 92.5% 123.5
4 4.50 0.71 90.2% 92.0
5 4.50 0.60 88.5% 77.3
6 4.50 0.59 88.1% 74.7
7 4.50 0.54 87.2% 68.7
8 4.50 0.53 86.8% 66.1
9 4.50 0.47 85.1% 57.7
10 4.50 0.46 84.9% 56.7
11 4.50 0.44 84.3% 54.2
12 4.50 0.32 78.3% 36.2
13 1.32 0.32 78.3% 10.6
Life of Mine 56.0 0.64 89.1% 1024.2
Mine Plan
The Company worked with AMC to develop a mine plan and production schedule (based on the January 5,
2017 resource m odel) which have been optimized to maximize project returns by processing the higher
grade ore in the early years and stockpiling the lower grade ore for processing aft er mining is completed in
Year 11. Initial head grades for Years 1 through 3 average 1.00 g/t, with Years 1 through 7 averaging 0.78
g/t. Mining will be by local contractor(s) using a conventional diesel-hydraulic excavator fleet, and small
30t and 50t r oad type rear -dump units as the ore and waste are all free -dig with little or no oversize
material expected. This type of loa d and haul fleet is common in Burkina Faso and West Africa for similar
free-dig material and will provide increased versatility as the mine plan consists of a large number of
shallow pits of varying tonnage.
Total ore processed, including the lower grade stockpiles, will be 56.0 Mt grading an average of 0.64 g/t.
The LOM strip ratio is approximately 1.68:1.
Mineral Processing
Significant metallurgical testing has been completed over several years which formed the basis of the
Bomboré Project Study, with the most recent grinding and reagent optimization work completed at SGS in
Quebec in Q4 2017. Lycopodium have reviewed the hi storical and recent test work data, and based the
process flowsheet on this work.
The flowsheet and plant have been designed to process the soft fine -grained ore which eliminated the need
for a crushing plant ahead of the grinding circuit. The ore is dir ect dumped across a static grizzly into a
large hopper and on to a variable speed apron feeder. The system is designed to break any sticky, lumpy
product that may be expected in the rainy season. From the apron feeder, the ore is transferred to a
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conveyor that feeds directly to the ball mill. The plant is designed with two ore transfer points and one
conveyor, thereby eliminating potential issues associated with wet sticky ore in the rainy season. The ball
mill is equipped with a variable speed drive sized to accommodate a wide range of ore types and hardness.
Ball mill discharge is pumped to a set of cyclones with the oversize reporting back to the mill and the
undersize fed to a seven -stage CIL circuit for gold recovery. The CIL tails are thickened to re cover process
water and then pumped to a HDPE -lined tailings facility. The tailings facility is designed to be zero
discharge, with water recovered in a decant tower and returned to the process water tank at the plant.
Gold is recovered in a standard ca rbon desorption plant, finishing with electrowinning and smelting to
produce gold doré bars.
Project Infrastructure
The project benefits from a mining -friendly jurisdiction , a strong mining culture, and excellent local
infrastructure. Burkina Faso has experienced rapid development of its mining sector over the past decade
which has contributed to the growth of available mining contractors, suppliers , and skilled labour. In
addition, t he project is favourably situated only 85 kilometres from the capital city of Ouagadougou ,
accessed off a 5 kilometre dirt road via the main sealed highway (RN4) that runs between the capital and
the coast.
Offices and Accommodation
Orezone have already constructed a 76 -bed camp which will be augmented by a new 1 8-bed private room
accommodation block for senior staff. A fully functioning kitchen and dining facility are in place operated
by a catering and accommodation service provider . A camp contractor will continue to be responsible for
all operations at the accommodation camp including catering, cleaning and maintenance activities.
All offices and communication systems are in place and will require minimal upgrading.
Power Supply
A heavy-fuel oil (“ HFO”) power station will be constructed at the pro cess plant by an independent power
provider (“IPP”) under a build -own-operate (“BOO”) agreement. The power station will be fitted with 7 x
1.6MW heavy duty HFO generator engines (or similar) with five operating and two standby units.
11 kV aerial transmission lines will be constructed from the power station to the tailings storage facility ,
waste storage facility, accommodation camp, and the mining contractor’s area.
The power station will utilize a dedicated bulk HFO storage facility located adjacent to the power house.
Water Supply
Raw water will be sourced from the seasonal Nobsin River and diverted by a permanent weir into an off -
channel reservoir (“OCR”). The OCR is essentially one of the mine pits excavated early and designed to hold
sufficient water for the project on an annual basis.
Pumps will transfer water from the OCR to the raw and process water tanks by HDPE pipeline.
Initial Project Capital Costs
Project Capital Area US$ M
Process Plant 45.3
Infrastructure 16.2
Mining 1.1
Construction Indirects 13.2
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Project Capital Area US$ M
EPCM 11.6
Resettlement Action Plan 24.3
Owner's Costs 21.5
Subtotal 133.2
Contingency 10.5
Total Initial Construction Costs 143.7
Working Capital (ore stockpiles) 33.7
Pre-production Operating Costs 8.5
Pre-production Gold Sales -31.2
Total Upfront Costs 154.7
Sustaining Capital & Closure Costs
Area US$ M
Tailings and Water Management 57.8
Mining 1.1
Total Sustaining Capital Costs 58.9
Reclamation and Closure 14.5
Salvage Value -2.3
Total Sustaining Capital and Closure Costs 71.1
Sustaining capital costs were estimated on the basis of quotes from potential providers. The closure and
reclamation plan includes work to be conducted from the closure of the mine at the end of operati ng
activities. The goal is to return the site to a satisfactory state as quickly as possible in terms of reducing
the risks for health and safety , controlling erosion and developing a profile compatible with the future uses
of the site.
Operating Costs
Description Total Costs ($M)
$/tonne
processed $/ounce
Mining 257.0 4.59 251
Processing 275.3 4.92 269
Site G&A 94.2 1.68 92
Refining and transport 1.5 0.03 2
Government royalties 65.2 1.17 64
Total Cash Cost 693.3 12.38 677
Sustaining capital 58.9 1.05 57
Rehabilitation and closure (net of salvage) 12.2 0.22 12
All-in Sustaining Cost1 764.4 13.65 746
1 AISC excludes corporate G&A expenses
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Project Sensitivities
The project is sensitive to gold price as demonstrated in the following table:
Gold Price ($/oz) 1,100 1,200
Base Case
1,275 1,300 1,400
NPV After-Tax (5%) ($M) 127.0 181.8 224.5 231.0 287.0
IRR After-Tax 28.6% 36.5% 42.6% 43.5% 51.7%
Development Timetable
Estimated time to construct the Bomboré operation (pre-production) is 2 4 months, including time to
excavate the OCR, complete the RAP, and commission the process plant equipment. The critical path items
are the RAP and OCR excavation. Timely completion of the RAP will allow early commencement of the OCR
excavation which will meet the water needs for commissioning, start -up and subsequent operations as the
OCR is filled during the rainy season each year from May through October.
Permitting
The Bomboré project is fully permitted and ready for construction and operation. All necessary
Environmental Baseline Studies were completed prior to submission of the Mining Permit application in
2015. The Mining Permit was granted on December 30, 2016 and remains in full force and effect.
Project Opportunities
Several opportunities exist for further improvements with the key ones being as follows:
• The addition of one CIL tank and associated equipment could increase the processing rate to 5.2M
tpa from 4.5M tpa. This change would increase production capacity and reduce the need for low-
grade stockpiling and re-handle. This modification would increase annual production, particularly in
the latter years of mine life , reduce LOM operating costs , and potentially improve project
economics. The grinding circuit has been reviewed by Lycopodium and would not require any
upgrades for this additional tonnage of oxide ore . Minor upgrades may be required to other
ancillary equipment and services and these will be fully reviewed and costed during the early stages
of detailed engineering.
• Reduction of waste rock storage areas now provides more “real estate” to optimize the design of the
tailings storage facility by reducing the overall height of the dam . A first stage trade-off between
height and area by the engineers has indicated that this option may reduce sustaining capital
through the LOM. Again, this trade-off will be fully investigated in the early stages of detailed
engineering.
• Mineralization is known to continue through areas of seasonal river flows which has been excluded
from the Company’s current Mineral Resource and Mineral Reserve estimates . Orezone has
performed studies in these “Restricted Zones” with WSP to examine potential mining procedures to
allow for seasonal mining and concurrent final reclamation of these areas without significant impact
to the environment. These plans were presented to the Ministry in charge of Environment which