Spanish Mountain Gold Announces Results of New PEA for the First Zone
1120-1095 West Pender Street
Vancouver, British Columbia, V6E 2M6
Tel: 604.601.3651
April 10, 2017
Spanish Mountain Gold Announces Results of New PEA
for the First Zone
VANCOUVER, B.C. Spanish Mountain Gold Ltd. (the “Company”) (TSX-V:SPA) is
pleased to announce the results of the Preliminary Economic Assessment (the “PEA”) for
the pit-delineated high grade core (the " First Zone ") of the 100% owned Spanish
Mountain gold project (the “Project”) located near Likely in central British Columbia,
Canada. The PEA, the commencement of which was announced in a news release dated
February 14, 2017, has been prepared in accordance with NI 43- 101 Standards of
Disclosure for Mineral Projects.
As disclosed in the previous news release , the PEA is based on a 20,000 tonnes per day
(tpd) processing rate with a streamlined flowsheet to process the Measured and Indicated
Resources within the First Zone. Please refer t o Section 1 below for details of the
proposed operation.
Highlights of the PEA are as follows:
• At the proposed 20,000 tpd throughput, the First Zone has a project life of 24
years and a total life of mine (LOM) production of approximately 2.2 million
ounces of gold and 1.5 million ounces of silver.
• The initial capital expenditure is expected to be C$507M (or US$380M) including
a contingency of C$51M . The sustaining capital over the life of the mine is
estimated at C$194M
• At an assumed LOM gold price of US$1,250 per ounce (the base case), the First
Zone generates a pre -tax NPV (@5%) of C$ 597M and a post -tax NPV of
C$482M. Pre -tax and post -tax Internal Rates of Return are 21% and 19%,
respectively. Payback of capital is expected to be less than four years.
• Selected operational and cost metrics for Years 1 - 5; Years 1 - 10 and LOM are
as follows:
Units Years 1 - 5
Avg.
Years 1 - 10
Avg.
LOM
Gold grade g/t 0.77 0.69 0.43
Strip Ratio 0.96 1.55 1.44
Annual Gold Production koz 157 142 92
Cash Cost/ oz US$ 469 555 595
All-in-sustainable Cash Cost US$ 533 619 659
Total Cost/ oz US$ 667 752 792
Larry Yau, CEO, commented: “ Once again our team's diligence has delivered impressive
results for our shareholders. I believe that this PEA has convincingly validated our two- zone
project approach for advancing our multi -million ounce resource: the First Zone alone gener ates
robust investment returns and an operation lasting 24 years whereas the Second Zone , comprised
of additional multi-million ounces of gold within the current geologic resource estimate, largely
as Inferred Resources, potentially adds development flexibility and leverage on the future gold
price.
“While there have been numerous improvements since the 2012 PEA, a few key comparisons
highlight the excellent progress our team has made in demonstrating the robust economics of our
project as follows:
• Compared with the previously (2012) estimated NPV ( @5%) for the entire resource, the
PEA has achieved an NPV for the First Zone alone that is up to 63% higher even at a
gold price that is US$210 lower than assumed for the 2012 PEA
• Post-tax IRR has increased from 12% to 19%
• Initial capital has decreased by up to C$257M (or 33%) from C$764M to C$507M
• LOM All-in-sustainable Cash Cost per ounce has decreased from US$834 to US$659
• Project life for the First Zone extends 24 years vs. 13 years for the entire resource in the
2012 PEA
The noted improvements to project economics are the result of focusing the study on a lower
throughput, smaller footprint and smaller impact Project.
We believe the current PEA provides a reasonable basis for the Company to advance the Project
in the present gold price environment.”
Please refer to the Company’s redesigned website for additional details on the new PEA
and the project: www.spanishmountaingold.com
Section 1: Proposed Operations
The mine plan adopted for the PEA includes 178 Mt of mill feed and 257 Mt of waste over the 24
year project life. The mill feed is comprised entirely of Measured and Indicated Resources.
Approximately 21 Mt of Inferred material within the pit has been treated as waste for this study.
A PEA level mine operation design, approximately 14- year LOM production schedule, and cost
model have been developed for the open pit. The in-pit resource is summarized in the following
table:
Pit Delineated Resources
Measured & Indicated Resource Unit Amount
Measured and Indicated Pit Delineated Resource kt 177,968
Gold Grade g/t 0.44
Measured and Indicated Gold koz. 2,480
Silver Grade g/t 0.67
Measured and Indicated Silver koz. 3,837
Pit Delineated Waste kt 257,102
Strip Ratio t/t 1.4
Inferred Resource Unit Amount
Inferred Pit Delineated Resource (included in Waste)
kt 21,226
Gold Grade g/t 0.30
Silver Grade g/t 0.67
Notes: Cutoff gold grade of 0.15g/t calculated, and utilized in pit delineated resources.
Whole block diluted grades, with an additional 1% of block to block dilution at 0g/t gold, and 99% mining
recovery, included in pit delineated resources
To maintain the assumed mill feed grades during the initial 11 years of production, a mill -feed
cut-off grade of 0.3 to 0.4 g/t Au is utilized with material between the mining cut -off grade and
mill feed cut-off grade being stockpiled for treatment during years 12 through 24.
Processing of the mill feed is by means of a conventional process flowsheet including primary
grinding, flotation, regrinding of the concentrate , and cyanidation via a CIL circuit to produce
doré. The process achieves an average overall LOM gold recovery of 89% with a recovery of
90% being achieved during the initial higher grade years. A silver recovery of 40% is assumed
for the life of the project. Tailings from the plant are stored in a tailings management facility that
has been designed to minimize water above the dam. The balance of the site water is managed
through a separate water management pond that includes a water treatment plant for any water to
be discharged.
Section 2: Capital Expenditures
The following table summarizes the estimated capital costs:
Direct Costs Initial Capital
Cost (C$ Million)
Overall Site 16.6
Open Pit Mining 97.3
Processing Plant (including Ore Handling)
140.0
Tailing Management Facility & Water
56.8
Environmental 12.0
On-Site Infrastructure 28.6
Off-Site Infrastructure 14.3
Sub-Total 365.6
Indirect Costs
Project Indirects 84.6
Owner’s Costs 5.8
Contingencies 51.1
Sub-Total 141.5
Total Initial Capital Cost 507.1
LOM sustaining capital requirements are estimated at C$ 193.5 million.
Section 3: Operating Costs
Area Unit Cost
(C$)
Mining ($/t mined) $1.96
Mining ($/t milled) $4.79
Processing ($/t milled) $4.01
Tailings ($/t milled) $0.05
G&A ($/t milled) $1.09
Total ($/t milled) $9.94
Section 4: First Zone’s Economics
The following pre-tax financial parameters were calculated:
• 21% IRR
• 3.7-year payback on C$507 million capital
• C$597 million NPV at 5% discount value.
The following post-tax financial parameters were calculated:
• 19% IRR
• 3.7-year payback on C$507 million capital
• C$482 million NPV at a 5% discount rate.
The following parameters are used for the financial analysis throughout the life of mine:
• Gold price of US$1,250/oz.
• Silver price of US$18/oz.
• Exchange rate of US$0.75 to C$1.00.
• 99.8% payable gold and 90% payable silver.
• US$1.00/oz. gold refining charges and US$0.60/oz. silver refining charges.
• US$1.00/oz. transport charges on produced gold and silver.
• 0.15% insurance on value of produced gold and silver.
• 1.5% NSR royalty.
Section 5: Sensitivity to Gold Price
Section 6: The Second Zone
While the development of the balance of the geologic resource referred to as the "Second Zone"
has not been incorporated into the PEA, it has the potential to benefit significantly from the
infrastructure, equipment and labour put in place as a result of the development of the First Zone.
The Second Zone comprises multi -million ounces of gold contained within the current geologic
resource estimate, primarily as Inferred Resources, and surrounds the pit that has been delineated
for the current study. The C ompany believes that the Second Zone, while not included in the
PEA, could deliver additional value over time by expanding or extending the Project's overall
production profile. There is no assurance that all or any part of an Inferred Resource will ever be
upgraded to a higher category.
(Base Case)
0%
5%
10%
15%
20%
25%
30%
0
100
200
300
400
500
600
700
$1,100 $1,150 $1,200 $1,250 $1,300 $1,350 $1,400
Post Tax IRR
Post Tax NPV (C$ millions)
Gold Price (US$/oz)
Post Tax NPV (5%) Post Tax IRR
Section 7: Comparisons to 2012 PEA
2012 PEA-
100%
Resource
First Zone
(Standalone
Operations) Change
Assumed LOM Gold Price per ounce US$ $1,462 $1,250 - $212
Post-tax NPV@5% C$million $295 $482 + $187
Post-tax Internal Rate of Return (IRR) 12% 19% + 7%
Payback Period Years 4.4 3.7 - 0.65
LOM Cumulative Free Cashflow including
Initial Capex (undiscounted) C$million $704 $963 + $259
Initial Capital C$million $764 $507 - $257
LOM Production koz 2,799 2,210 - 589
Mine Life Years 14 24 + 10
LOM Strip Ratio 2.3 1.4 - 0.86
LOM Cash Cost per Ounce US$ $774 $595 - $179
LOM AISC per Ounce US$ $834 $659 - $175
Section 8: Resource Estimates
The following tables summarize the total resource estimate, inclusive of the First Zone and
Second Zone resources, used as the basis for the current PEA.
Table 1: Spanish Mountain Gold October 2016 Measured Resource
Au Cut-off
(g/t)
Tonnes > Cut-off
(tonnes)
Grade > Cut-off Contained Metal
Au (g/t) Ag (g/t) Oz. Gold Oz. Silver
0.15 45,730,000 0.53 0.66 770,000 970,000
0.20 38,470,000 0.59 0.66 730,000 810,000
0.25 32,530,000 0.66 0.65 690,000 680,000
0.30 27,840,000 0.72 0.64 650,000 570,000
0.40 20,750,000 0.85 0.64 570,000 430,000
0.50 15,740,000 0.98 0.65 500,000 330,000
Table 2: Spanish Mountain Gold October 2016 Indicated Resource
Au Cut-off
(g/t)
Tonnes > Cut-off
(tonnes)
Grade > Cut-off Contained Metal
Au (g/t) Ag (g/t) Oz. Gold Oz. Silver
0.15 260,800,000 0.37 0.67 3,110,000 5,650,000
0.20 200,370,000 0.43 0.69 2,780,000 4,450,000
0.25 154,710,000 0.49 0.70 2,450,000 3,470,000
0.30 121,410,000 0.55 0.70 2,160,000 2,730,000
0.40 75,280,000 0.68 0.70 1,650,000 1,700,000
0.50 49,310,000 0.80 0.71 1,270,000 1,120,000
Table 3: Spanish Mountain Gold October 2016 Measured plus Indicated Resource
Au Cut-off
(g/t)
Tonnes > Cut-off
(tonnes)
Grade > Cut-off Contained Metal
Au (g/t) Ag (g/t) Oz. Gold Oz. Silver
0.15 306,530,000 0.39 0.64 3,880,000 6,280,000
0.20 238,840,000 0.46 0.66 3,510,000 5,030,000
0.25 187,240,000 0.52 0.67 3,140,000 4,020,000
0.30 149,260,000 0.59 0.68 2,810,000 3,240,000
0.40 96,030,000 0.72 0.69 2,210,000 2,130,000
0.50 65,040,000 0.85 0.69 1,770,000 1,450,000
Notes: Tonnages and Contained metals may not exactly equal individual tables due to rounding.
Whole block diluted grades shown, with no other dilution or recovery factors applied.
Table 4: Spanish Mountain Gold October 2016 Inferred Resource
Au Cut-off
(g/t)
Tonnes > Cut-off
(tonnes)
Grade > Cut-off Contained Metal
Au (g/t) Ag (g/t) Oz. Gold Oz. Silver
0.15 450,640,000 0.28 0.61 4,110,000 8,900,000
0.20 307,410,000 0.34 0.63 3,320,000 6,250,000
0.25 203,740,000 0.39 0.65 2,580,000 4,240,000
0.30 136,250,000 0.45 0.66 1,980,000 2,900,000
0.40 61,590,000 0.59 0.69 1,160,000 1,360,000
0.50 32,180,000 0.72 0.69 740,000 710,000
Notes: Tonnages and Contained metals may not exactly equal individual tables due to rounding.
Whole block diluted grades shown, with no other dilution or recovery factors applied.
This Mineral Resource Estimate was prepared by Gary Giroux, P. Eng. in accordance with NI 43-101 with an
effective date of October 3, 2016.