RTG ANNOUNCES COMPLETION OF FEASIBILITY STUDY FOR THE MABILO COPPER-GOLD PROJECT Supports Robust New Development Project even at current lower Commodity Prices 33% IRR After Tax Lowest quartile costs with US$0.42/lb Cu Eq for DSO and US$0.80/lb Cu Eq for Concentrate Production
Level 2, 338 Barker Road Subiaco WA 6008 Phone: +61 8 6489 2900 www.rtgmining.com
ABN: 70 164 362 850
RTG ANNOUNCES COMPLETION OF FEASIBILITY STUDY FOR THE MABILO COPPER-GOLD PROJECT
Supports Robust New Development Project even at current lower Commodity Prices 33% IRR After Tax
Lowest quartile costs with US$0.42/lb Cu Eq for DSO and US$0.80/lb Cu Eq for Concentrate Production
33% Increase in NPV approx.
with only 10% Lift in Commodity Prices
Probable Reserves at 4.1% Cu Equivalent Grade (before recoveries)
18 March 2016
RTG Mining Inc. (“RTG”, the “Company”) (TSX Code: RTG, ASX Code: RTG) is pleased to announce the results from an independent Feasibility Study (“FS”) for 100% of the high grade Mabilo Copper/Gold Project (the “Project”) in southeast Luzon, Philippines. The Feasibility Study demonstrates the potential for Mabilo to outperform, specifically reinforcing the resilience of the Project despite current commodity prices. The Project is both high grade and low cost underpinning the robust economics presented in the FS including a 33% IRR after tax (43.6% with only a 10% lift in commodity prices) and an equivalent operating cost of US$0.80/lb copper equivalent for concentrate production.
“RTG targets high grade, low operating cost gold projects with low technical and Project risk,” said Justine Magee, CEO, RTG Mining. “Since investing in the Mabilo Project in June 2014, the Company has added significant value through rapid and successful exploration to delineate a substantial resource (see November 11, 2015 press release), and again in maintaining this accelerated pace through to a full FS in less than 15 months from the maiden resource.
The high quality resource at Mabilo presents RTG with an excellent near term development opportunity that is financially robust, attractive to potential debt providers, and with additional drilling the resource is expected to grow further, which will only enhance the already strong financials. We look forward to first production and to bringing continued value to our shareholders.”
The Mabilo Project is a joint venture between Mt. Labo Exploration and Development Corporation (“Mt. Labo”) and Galeo Equipment Corporation in the Philippines.
MABILO 1.35 Mtpa CASE HIGHLIGHTS*
A Robust New Development Opportunity
Probable Mineral Reserves: 7.792Mt @ 2.04 g/t Au, 1.95% Cu, 8.79 g/t Ag, 45.5% Fe
Containing 316Kt Cu equivalent at 4.1% (before recoveries)
IRR (after tax): 33.4% (US$5000/t Cu, US$1200/oz Au and US$50/t Fe)
Payback for Plant: 2.5 years
DSO Capex: US$17.4M
DSO Opex US$0.42/lb Cu equivalent
DSO Production 25,000t of Cu and 39,000oz Au
34,700t of Cu equivalent
Plant Capex US$161.4M (includes US$14.83 of recoverable VAT)
Plant Pre-strip US$24.4M (includes US$2.61 of recoverable VAT)
Plant Opex: $0.80/lb Cu equivalent
Plant Annual Production 38,300t Cu equivalent Contained Metal:
*The FS is based on a treatment rate of 1Mtpa. A treatment rate of 1.35Mtpa was also considered in an upside case. Factored indicative capital and operating cost estimates were developed for a planned throughput of 1.35 Mtpa.
DEVELOPMENT SCHEDULE
Optimized Approach to Maximize Returns at Mabilo
Project implementation is planned to be executed in two key stages. Stage 1 is intended to minimize initial capital requirements through a Direct Shipping Ore (“DSO”) Operation of an exceptionally high grade, near surface oxide portion of the Mabilo Resource. By utilization of existing infrastructure within easy transport of the Project, the joint venture is able to defer the more capital intensive components of primary production. The early cash flow generated by the DSO should then also minimize any possible equity dilution in the financing of the Stage 2 Primary Production Plant.
Stage 1 will mine the oxide ore down to 30 Relative Level (95m below surface). Three main products will be produced from this oxide mining stage.
- Gold cap ore will be crushed on site and trucked to a nearby existing CIL processing plant. The plant is planned to be upgraded to 300,000tpa throughput and will likely be operated by the Mabilo Joint Venture personnel.
- Both oxide skarn and high-grade supergene chalcocite will be crushed on site with a plan to truck to the existing Larup Port, within 40km, for direct shipping.
Stage 2 of the operation involves processing of primary ore through a purpose-built plant on site. The Mabilo process plant is planned to be built in parallel with the oxide mining phase and Stage 2 permitting process. The processing plant will be a simple crush, grind, float plant with low technical risk, producing three concentrates for sale and is estimated to require approximately 15 months for construction.
Both mining stages are financially robust with the DSO enabling start up and early generation of cash flow within 4-5 months of finalizing the DSO operating permits. The capital expenditure required for the DSO is relatively nominal at approximately US$18M and is capable of generating net operating cash flow after tax in the order of US$ 68M (based on US$5,000/t Cu, US$1,200/oz Au and US$50/t Fe).
Mt. Labo is currently in the final stages of obtaining the necessary operating permits for the first stage of production with timing ultimately dependent on the regulatory processes in the Philippines. The Company is also in discussions with potential debt financiers for the project development.
MABILO FEASIBILITY ECONOMICS (AFTER-TAX)
Highly Sensitive to Both a Growth in Commodity Prices and Resources
The robust feasibility results provide the foundation to grow the Project while generating early cashflows. Mabilo is highly sensitive to both a growth in commodity prices and resources. The 1.35Mtpa case project IRR escalates from 33% to 43.5%* with only a 10% increase in commodity price assumptions. The FS, compiled by Lycopodium Minerals Pty Ltd (“Lycopodium”), is based on the inputs from a number of consultants and the Mabilo Joint Venture (“MJV”) including Lycopodium, CSA Global Pty Ltd, Orelogy Consultants Pty Ltd, Orway Mineral Consultants Pty Ltd, Knight Piesold Pty Ltd and Conrad Partners Limited.
| 1 Mtpa Case | 1.35Mtpa Case | 20% Increase in Commodity Prices to 1.35 Mtpa | |||||
| 10% Increase in | |||||||
| Commodity | |||||||
| Prices to | |||||||
| 1.35 Mtpa | |||||||
| Financial Analysis* | |||||||
| IRR | 26.09% | 33.45% | 43.62% | 56.29% | |||
| NPV 0% 5% 8% | US$197M US$126M US$96M | US$223M US$156M US$125M | US$285M 28% Increase US$207M 33% Increase US$171M 37% Increase | US$361M 63% Increase US$269M 72% Increase US$226M 81% Increase | |||
| US$223M | |||||||
| US$156M | |||||||
| US$125M | |||||||
| Payback for Plant (Years) | 2.5 | 2.5 | 2.42 | 2.25 |
*All the economics, including calculations of equivalent estimates referred to in this announcement are based on the following commodity price assumptions: US$5000/t Cu, US$1200/oz Au and US$50/t 62% Fe. The FS is based on a 1 Mtpa plant base case.
Factored indicative capital and operating cost estimates were developed for a planned throughput of 1.35 Mtpa.
Separately, there remains significant upside in the Project from both extensions to the North Mineralised Zone and Inferred Resources contained within the pit. 41% of the 3.91Mt Inferred Resource falls within the final design of the pit, representing 1.61Mt at 1.22% Cu and 1.21g/t Au that could provide near term potential to significantly grow the resource. The pit optimization study shows that an increase in reserves by 19% results in a 24% increase in undiscounted cashflows.
OVERVIEW OF PLANNED OPERATIONS
Producing 3 High Quality Concentrates Through the Plant
The FS on the construction and operation of the plant forms the basis for the life of mine plan, which incorporates both the Stage 1 mining and DSO on the oxide ore and the Stage 2 development of a processing plant for the primary ore. The primary plant will include a simple crush, grind, float facility with thickening and filtration to produce 3 high quality concentrates. The plant produces the following three (3) high-grade products:
- 27% Cu and 21g/t Au concentrate
- 3g/t Au pyrite concentrate
- 65% magnetite concentrate
The FS is based on a treatment rate of 1 Mtpa. A factored case at a treatment rate of 1.35 Mtpa was also considered by applying a factor of 7.3% to the capital costs. Given the planned operating throughput is likely based on the 1.35Mtpa case, sensitivity modeling for the 1.35 Mtpa case is shown below indicating strong operating and economic results:
| 1.35Mtpa Case* | 20% Increase in Commodity Prices* | |||||
| 10% Increase in | ||||||
| Commodity Prices* | ||||||
| Oxide/DSO | ||||||
| Capex | US$17.4M | |||||
| Cu Produced | 25,000 t | |||||
| Au Produced | 39,000 oz | |||||
| CuEq Produced** | 34,700 t | |||||
| Net Operating Cashflow before Tax | US$95M | US$110M | US$125M | |||
| Net Operating Cashflow after Tax | US$68M | US$78M | US$88M | |||
| Average Costs | ||||||
| Per Tonne | US$62 | |||||
| Per CuEq | US$0.42/lb | |||||
| Primary/Plant Operation | ||||||
| Capex | US$161.37M | |||||
| (includes US$14.83M of recoverable VAT) | ||||||
| Pre- strip for Stage 2 | US$24.37 | |||||
| (includes US$2.6M of recoverable VAT) | ||||||
| Contained Metal in Average Annual Production | ||||||
| Cu | 18,300 t | |||||
| Au | 67,000 oz | |||||
| Fe | 347,000 t | |||||
| CuEq** | 38,300 t | |||||
| Ave Annual Net Operating Cashflow before Tax | US$72.9M | US$84M | US$97M | |||
| Ave Annual Net Operating Cashflow after Tax | US$51.8M | US$58M | US$67M | |||
| Average Costs | ||||||
| Per Tonne | US$54/t | |||||
| Per CuEq | US$0.80/lb |
| Production Metrics for Stage 2 | |||
|---|---|---|---|
| Mining | |||
| Pre-strip | Mt | 18 | |
| Average Mining Rate | Tpd | 28,400 | |
| Average Mine Production | Mtpa | 10.4 | |
| Total Material Mined | Mt | 80.4 | |
| Overall Strip Ratio | W:O | 10 | |
| Processing | |||
| Daily Mill Throughput | Tpd | 3,700 | |
| Annual Mill Throughput | Tpa | 1,350,000 | |
| Production | |||
| Average Annual Cu/Au Con Produced | Tpa | 64,900 | |
| Average Annual Pyrite Con Produced | Tpa | 219,000 | |
| Average Annual Magnetite Con Produced | Tpa | 534,000 | |
| Recoveries | |||
| Gold Recoveries in Cu/Au Con | % | 55.1 | |
| Gold Recoveries in Pyrite Con | % | 29.8 | |
| Copper Recoveries | % | 83.7 | |
| Silver Recoveries | % | 60.7 | |
| Iron Recoveries | % | 60.7 | |
| Payables/NSR - DSO | |||
| Gold Cap Ore | % | 100 | |
| Copper in Oxide Skarn | % | 30 | |
| Gold in Chalcocite | % | 75 | |
| Copper in Chalcocite | % | 74 | |
| Payables/NSR - Plant | |||
| Copper in Cu/Au Concentrate | % | 87 | |
| Gold in Cu/Au Concentrate | % | 91 | |
| Gold in Pyrite Concentrate | % | 50 | |
| Silver in Cu/Au Concentrate | % | 83 | |
| Iron in Magnetite Concentrate | % | 100 |
*All the economics, including calculations of equivalent estimates referred to in this announcement are based on the following commodity price assumptions: US$5000/t Cu, US$1200/oz Au and US$50/t 62% Fe. The FS is based on a 1 Mtpa plant base case.
Factored indicative capital and operating cost estimates were developed for a planned throughput of 1.35 Mtpa.
** The Copper equivalent tonnes is based on the following formula – CuEq = (Cu produced/contained*$5000) + (Au produced/contained*$1200+ (Any Contained Fe metal produced* $50))/$5000
MINERAL RESERVES
March 2016 Mineral Reserve Estimate The Probable Reserve represents an equivalent copper grade of 4.1%* (before recoveries) containing 316Kt of equivalent copper.
| Probable Mineral Reserve Estimate | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Ore | Waste | Strip Ratio | |||||||
| Class | Type | Mt | Fe % | Au g/t | Cu % | Ag | Mt | ||
| g/t | |||||||||
| Probable | Gold Cap Supergene Oxide Skarn Fresh | 0.351 40.1 3.11 0.38 3.26 0.104 36.5 2.20 20.7 11.9 0.182 43.6 2.52 4.17 19.9 7.155 45.9 1.97 1.70 8.73 | 77.713 | 10.0 | |||||
| Total Probable Ore | 7.792 | 45.5 | 2.04 | 1.95 | 8.79 |
The copper equivalent grade is based on the following formula – CuEq=((((AuOz*$1,200)+(CuMetal*$5,000)+(FeMetal*$50)+ (AgOz*$14)) / $5,000)/Total ore tonnes)
The November 2015 resource estimation provided by CSA Global Pty Ltd classified the resource for the Mabilo Project as Indicated and Inferred. Only Indicated Mineral Resources as defined in NI 43-101 were used to establish the Probable Mineral Reserves. No reserves were categorized as Proven.
Application of edge dilution and ore loss to the resource model resulted in a 4% increase in the mining model tonnages and a 5% decrease in gold, copper and silver grades. This mining model was used in all mine planning activities, including pit optimization, mine design and mine scheduling.
Mineral Reserves are quoted within specific pit designs based on indicated resources only and take into consideration the mining, processing, metallurgical, economic and infrastructure modifying factors.
The Mineral Reserves and Resources in this announcement conform to the latest Canadian Institute of Mining, Metallurgy and Petroleum (standards, and have been reconciled from JORC categories. No Inferred Mineral Resources (JORC) have been included in the Reserves in the FS.
MINERAL RESOURCE ESTIMATE
CSA Global has completed two resource estimates for the Mabilo Project, the first in November 2014 and the second in November 2015. The November 2015 resource was an update of the November 2014 estimate based on infill drilling and formed the basis of the DFS. All resource estimation technical reports were completed in compliance with NI 43-101, JORC and CIM standards. There has been no additional drilling on the deposit since the release of the last resource.
| Mineral Resource Estimate as at November 2015 for the Mabilo Project | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Weathering State | Classification | Million Tonnes | Cu % | Au g/t | Ag g/t | Fe % | Cu | Au Oz ('000s) | Fe Metal (Kt) | |||
| Metal | ||||||||||||
| (Kt) | ||||||||||||
| Oxide + Supergene | Indicated | 0.78 | 4.1 | 2.7 | 9.7 | 41.2 | 32.1 | 67.1 | 320.8 | |||
| Inferred | 0.05 | 7.8 | 2.3 | 9.6 | 26 | 3.7 | 3.5 | 12.3 | ||||
| Fresh | Indicated | 8.08 | 1.7 | 2 | 9.8 | 46 | 137.7 | 510.5 | 3,713.70 | |||
| Inferred | 3.86 | 1.4 | 1.5 | 9.1 | 29.1 | 53.3 | 181.5 | 1,121.80 | ||||
| Combined | Indicated | 8.86 | 1.9 | 2 | 9.8 | 45.6 | 169.8 | 577.6 | 4,034.50 | |||
| (Total) | ||||||||||||
| Combined | Inferred | 3.91 | 1.5 | 1.5 | 9.1 | 29 | 57 | 184.9 | 1,134.10 | |||
| (Total) | ||||||||||||
| Note: Differences may occur due to rounding. All elements reported as total estimated in-situ for blocks above 0.3 g/t Au lower cut-off, no recovery factors have been considered. Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability. |
CAPITAL COSTS
2-Stage Development: Overall Low Capital Costs
The capital cost estimates were derived from first principles for the 1 Mtpa process plant to an accuracy of +/- 15% and then the capital cost estimates were factored with an accuracy of +/- 25% for the 1.35 Mtpa process plant.
The capital costs for the Project will be required in two tranches. The first tranche will be prior to oxide mining commencing. The second tranche is planned to coincide with the development and construction schedule associated with Stage 2 of the Project.
| Cost Area | Stage 1 -DSO US$M | ||
|---|---|---|---|
| Direct | |||
| Pre-Strip | 3.30 | ||
| Mobilisation | 0.66 | ||
| Site Preparation, Roads and Environment | 3.65 | ||
| Port | 0.30 | ||
| Buildings and Equipment | 0.55 | ||
| Mining Facilities | 1.40 | ||
| Upgrade Apex CIL Plant | 0.71 | ||
| Direct Works Subtotal | 10.57 | ||
| Indirect | |||
| Land Acquisition | 5.62 | ||
| Contingency | 1.16 | ||
| Indirect Subtotal | 6.78 | ||
| TOTAL OXIDE MINING CAPITAL COSTS | 17.35 |
| Cost Area | Stage 2 – Primary Plant | ||
|---|---|---|---|
| US$M | |||
| Direct | |||
| Treatment Plant | 57.41 | ||
| Infrastructure, Roads and Port | 31.86 | ||
| Pit Dewatering Bores | 1.28 | ||
| Management Costs | 12.67 | ||
| Direct Works Subtotal | 103.22 | ||
| Indirect | |||
| Project Indirects | 11.49 | ||
| Owners Costs | 13.21 | ||
| Land Acquisition | 4.60 | ||
| Contingency | 14.02 | ||
| Value Added Tax | 14.83 | ||
| Indirect Subtotal | 58.16 | ||
| TOTAL PRIMARY PLANT CAPITAL COSTS | 161.37 |
OPERATING COSTS
Mabilo is Open Pit, High Grade & Low Cost
The operating cost estimates were derived from first principles for the 1Mtpa process plant and then plant costs were factored with an accuracy of +/- 25% for the 1.35Mtpa operating scenario. All costs are in 2015 US dollars. The mining costs were derived from IMC’s Mabilo Mine Operating Cost Estimate Report, which were then reviewed by Orelogy Consulting. The costs are based on a contract mining operation with bench rates ($/bcm), ore rehandle rates ($/t), grade control and dump rehabilitation plus annual fixed mining overheads.
Process plant operating costs for the 1.0Mtpa FS base case were compiled from information sourced by Lycopodium and the Mt Labo Joint Venture (“MJV”):
- Manning levels and pay rates advised by MJV to suit the proposed process plant unit operations and plant throughput.
- Consumable prices from supplier budget quotations and the Lycopodium database.
- Flotation reagent consumption and metal / concentrate recoveries based on laboratory test work results and the mining schedule.
- Modelling by Orway Mineral Consultants for crushing and grinding energy and consumables, based on ore characteristics derived from relevant test work.
- First principle estimates, where required, based on typical operating experience or standard industry practice.
- Benchmarking within the Philippines and comparison with costs at other similar operations.
Processing costs for the 1.35Mtpa upside case were then factored from the FS base case.
The process plant availability has been nominated as 91.3% for milling and downstream operations and 80% for the crushing plant including scheduled and unscheduled maintenance. The product filters will operate in a semi batch mode and a lower operating availability of 75%.
G&A costs were based on current operations in the Philippines and amended to account for the size of the operation and people employed.
| Stage 1 - DSO | Stage 2 – Primary Plant | ||||
|---|---|---|---|---|---|
| Average Operating Costs | |||||
| Mining US$/t mined (includes pre-strip costs) | 1.57 | 1.49 | |||
| Mining US$/t ore (excludes pre-strip costs) | 7.49 | 14.09 | |||
| Processing US$/t ore | 41.26 | 32.14 | |||
| G&A US$/t ore | 6.89 | 7.65 | |||
| Total Operating Cost US$/t ore | 61.91 | 53.89 |
MINING
Mining is planned to be conducted using open pit methods. The ore is to be accessed in a series of stages. The stage designs were generated in order to enhance the scheduling process aiming to defer waste mining as much as practically possible and to bring forward higher-grade ores. Five (5) meter high benches have been used, given the scale of the operation and the equipment planned for the mining operation. A bench height of 5m mined in two 2½m flitches results in acceptable dilution and ore loss projections. A mining contractor is assumed for both pre-production and the ongoing development of the mine.
There are three distinct different loading and hauling situations that require different fleets:
- Pioneering and Pit Development - Pioneering and pit development will be undertaken by 100t excavators (Komatsu PC 1250) and 40t articulated 6WD trucks (Caterpillar 745).
- Ore and Waste Mining - The main fleet for the ore and waste mining activities consists of 100t excavators and 55t rigid haul trucks (Caterpillar 773).
- Bulk Waste Mining - A 200t excavator (Komatsu PC 2000) and a fleet of 90t haul trucks (Caterpillar 777) will be used to undertake waste stripping of the last two cutbacks.
Free digging is expected in all oxide materials while fresh rock materials are broken and loosened with drilling and blasting.
METALLURGY AND PROCESSING
The proposed process plant design for the Mabilo Project is based on a robust metallurgical flowsheet designed for optimum recovery with minimum operating costs, based on an initial 1Mtpa throughput, and then upgraded and optimized for a planned 1.35Mtpa throughput. The flowsheet is constructed from unit operations that are well proven in industry.
The treatment plant design incorporates the following unit process operations:
- Single stage open circuit primary crushing to produce a crushed product size of 80% passing (P80) 120 mm.
- A crushed ore surge bin with a nominal capacity of 120t. Surge bin overflow will be conveyed to a dead stockpile of 20,000 tonnes. Ore from the dead stockpile will be reclaimed by front-end loader (“FEL”) to feed the mill during periods when the crushing circuit is off-line.
- Grinding of ore in a SAG mill circuit in closed circuit with hydrocyclones to produce a P80 grind size of 90 µm.
- Bulk sulphide flotation to recover copper sulphides and gold bearing pyrite.
- Two-stage cleaner flotation to recover copper sulphides into a copper concentrate and pyrite into a product for sale.
- Concentrate thickening and pressure filtration to produce a copper concentrate filter cake.
- Pyrite thickening and pressure filtration to produce a pyrite concentrate filter cake.
- Magnetic separation of the bulk sulphide tails to recover magnetite into concentrate.
- Concentrate thickening and pressure filtration to produce a magnetite concentrate filter cake.
- Combined tailings pumping to the tailings storage facility (“TSF”).
A planned flowsheet for the process is shown below.
Ultimately, the ability to develop and progress the plans as considered in the FS are dependent upon many factors including the ability to secure the necessary permits, working successfully with local communities and governments, securing all necessary surface rights and the support of the Philippine regulatory bodies and our partners.
MARKETING AGREEMENT & DEBT FINANCING
Underway with Positive Progress to Date
Mt. Labo has appointed Conrad Partners, based in Hong Kong, as its agent for the marketing of offtake for both Stage 1, the planned DSO and Stage 2, namely the production of three high grade concentrate products. Conrad Partners has completed a full marketing report for the FS, based on discussions with potential offtake parties and has provided the underlying assumptions used in the compilation of the Life of Mine Financial Model based on the FS results.
RTG is in discussions with a number of potential debt financiers for the Project including both traditional bank debt, derivative instruments and notes and offtake linked facilities. The feedback and progress on the financing has been very positive to date and with the completion of the Feasibility Study, the Company will be able to further advance those discussions with a view to finalizing a mandate with a preferred provider.