Velocity Announces Preliminary Economic Assessment for the Rozino Gold Project, Southeast Bulgaria Post-Tax NPV5% of $129 million and IRR of 33% Mineralization Remains Open for Expansion
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NR18-17 September 17, 2018
Velocity Announces Preliminary Economic Assessment
for the Rozino Gold Project, Southeast Bulgaria
Post-Tax NPV5% of $129 million and IRR of 33%
Mineralization Remains Open for Expansion
Vancouver, British Columbia – Velocity Minerals Ltd . ( TSXV: VLC) (“ Velocity” or the “ Company”)
announces the results of an independent Preliminary Economic Assessment (“ PEA”) on its Rozino gold
project (“ Rozino” or the “ Project”) located in southeast Bulgaria. The PEA provides a base case
assessment of developing the Proj ect by open pit mining and gold recovery by a combination of on-site
preconcentration in a flotation plant (“Flotation Plant”) and further processing in an existing operating
carbon-in-leach plant (“CIL Plant”) located in Kardzhali, 85km by road from Rozino . S aleable gold doré
will be produced at Kardzhali. The PEA financial model returns an after-tax NPV5% of $129 million and an
after-tax internal rate of return (“IRR”) of 33.1%.
Rozino is located within the Tintyava prospecting license , an exploration property in which Velocity has
an exclusive right to acquire a 70% interest by delivering the PEA report to the underlying property owner,
Gorubso Kardzhali A.D. (“Gorubso”), in the coming weeks.
“We have achieved our goal of advancing Rozino from discovery and exploration drilling through to
this positive economic assessment in just over one year . On delivery of the PEA , the Company will
have earned its 70% interest in the Project and will move forward towards a prefeasibility study in joint
venture with our partner Gorubso,” commented Keith Henderson, Velocity’s President & CEO. “We
believe that there is significant potential for resource expansion at Rozino and additional exploration
drilling is expected to be completed over the coming months in tandem with infill drilling of the existing
mineral resource.”
Mr. Henderson continued, “The work completed at Rozino represents an important first step in
Velocity’s strategy to explore a nd develop multiple satellite deposits for processing in the existing
centrally located CIL Plant. The Company is completing due diligence on other advanced properties
located within the exploration and mining alliance area, with a view to earning 70% interests through
additional option agreements with Gorubso. The aim is to build a multi -asset production profile that
maintains annual production of more than 100,000 ounces of gold over a period in excess of 10 years.”
PEA1 Highlights
• After-Tax Financials: After-tax NPV5% of $129 million and after-tax IRR of 33%
• Cash Cost: All-in sustaining cost2 of US$543 per ounce
• Annual Gold Production: Steady state 3 annual production of 65 ,000 ounces, peak annual
production of 78,000 ounces
• Capital Costs: Total estimated capital costs of $97.6 million (includes contingency)
• Sustaining Capital: Low estimated sustaining capital of $6.3 million
NR18-17 Continued September 17, 2018
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• Mining: Open pit with 0.6 g/t gold Cut-Off Grade (COG), attractive strip ratio of 2.5 and 1.51 g/t
Life of Mine (“LOM”) gold grade
• Processing: On-site flotation producing gold bearing pyrite concentrate assaying 30 g/t and
transportation to the CIL Plant (located 85 km from the Project) for processing
• ROCE: Return on capital expenditure of 3.3
(1) Base case parameters assume a gold price of US$1,250/ounce and an exchange rate (CAD$ to US$)
of 0.75. All amounts are reported in Canadian dollars unless otherwise specified. Financial results on
100% equity basis.
(2) All In Sustaining Cost (AISC) is defined as all cash costs related to mining and processing to final
product. It includes on-mine and off-mine costs (direct and indirect). Sustaining capital costs related
to continuing the business including exploration, develo pment and equipment required to sustain
production are included. Taxes, working capital, M&A, disposals and acquisitions as well as new mine
development capital costs are excluded.
(3) Steady state refers to the long-term average over time where processing throughput is maintained
at nameplate capacity.
The PEA is preliminary in nature and includes Inferred mineral resources that are too speculative
geologically to have 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.
The PEA was prepared by CSA Global, an international mining consultancy with experience in Bulgaria, in
accordance with National Instrument 43 -101 Standards of Disclosure for Mineral Projects (“ NI 43-101”).
A technical report prepared pursuant to NI 43-101 on the Project will be filed on SEDAR within 45 days of
the date of this news release.
Rozino Development: Mine Site to Payable Gold
The PEA provides a base case assessment o f developing Rozino by open pit mining, on-site crushing,
milling and simple flotation to produce a 30 g/t gold concentrate. The concentrate would then be trucked
85km on existing roads to the currently operating CIL Plant where saleable gold doré would be produced.
In addition to returning positive economic result s, this assessment also provides significant benefits ,
including shortened permitting timelines and capital cost reductions for the following reasons:
• the existing CIL Plant and t ailing management facility (“ TMF”) are fully permitted, currently
operational, and have sufficient capacity to process concentrate from Rozino
• the use of the existing CIL Plant reduces total capital cost requirements
• development on-site at Rozino only requires permitting for mining, preconcentration and disposal
of relatively benign waste products
The engineering work leading to the PEA economic results presented here included a range of
development scenarios, which will be documented in the upcoming PEA.
PEA Results and Sensitivity
The PEA’s financial model returns an after-tax NPV5% of $129 million and an after-tax IRR of 33.1%. Total
undiscounted post-tax cash flow over the life of the Project is estimated to be $182 million, with a robust
return on capital expenditure of 3.3.
NR18-17 Continued September 17, 2018
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Sensitivities After-Tax IRR% After-Tax NPV5% ($M)
CAPEX
-25% 43.8% $148.5
Base Case 33.1% $129.2
+25% 25.7% $110.3
OPEX
-25% 41.2% $173.6
Base Case 33.1% $129.2
+25% 24.2% $84.5
Gold Price
US$1,000 17.6% 51.3
Base Case US$1,250 33.1% 129.2
US$1,500 46.0% 207.0
Cut-off Grade
0.5 g/t gold 29.2% $133.3
Base Case 0.6 g/t gold 33.1% $129.2
0.7 g/t gold 36.7% $122.3
Mining
The PEA model uses open pit contractor mining and a gold price of US$1,250, which is the 3-year trailing
average gold price. Pit shells at this gold price returned 46 1,000 ounces of potentially mineable gold at
the Rozino deposit, based on an updated mineral resource estimate (effective date September 10, 2018).
Mining of the Rozino deposit would follow a conventional drill and blast, load and haul open cut mining
operation using contractor mining services. Mining would commence in 2022 and ramp-up to a maximum
annual total mining tonnage of approximately 6.8 million tonnes per annum (“Mtpa”). The steady state
feed rate to the flotation plant is 1.75 Mtpa delivered by haul truck. The mining operation requires a fleet
of 90-tonne class excavators loading blasted and free -dig material into 45-tonne class articulated dump
trucks (ADTs). The planned mining operation is to be supported by a fleet of ancillary equipment including
graders, dozer, bowsers , drill rigs and other support equipment. The mining costs also include grade
control drilling, pit dewatering and monthly management fees.
Mining Parameters Units Base Case
Steady State Production Rate Mtpa 1.75
Average Waste Mining Rate Mtpa 4.50
Total Mineralization Mined Mt 9.5
Total Waste Mined Mt 23.7
Total Material Mined Mt 33.2
LOM Average Strip Ratio Wt : Ot 2.5
Average Mined Gold Grade g/t Gold 1.5
Total Mined Gold Koz's 461
Cut-off Grade g/t Gold 0.6
LOM Yr's 6
Mining Cost - OPEX $/t mined 3.0
Processing
The Project would process 1.75 Mtpa through a conventional crushing, milling and flotation processing
facility located at the Rozino mine site, with a LOM average grade of 1.5g/t gold to produce
436,000 tonnes of dry concentrate at 30 g/t gold, with a mass pull of approximately 4.5% by weight.
NR18-17 Continued September 17, 2018
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The Rozino mineralization contains less than 1% total sulphides of which 98% is expected to be recovered
in the flotation circuit resulting in a very low-sulphide tailings, with no deleterious elements that would
be deposited in a tailings impoundment located to the south of the Flotation Plant . A waste rock and
water storage dam would be located in the same catchment area in order to minimize the environmental
footprint.
The resulting low volume concentrate would be trucked 85km on existing roads to the currently operating
CIL Plant. The concentrate would be trucked utilizing a fleet of standard on-highway 20 tonne class trucks
requiring approximately 11 trips per day.
Flotation Plant Processing Parameters Units Base Case
Flotation Plant Throughput tpd 5,000
Annual Plant Throughput Mtpa 1.75
Float Plant Metallurgical Recovery % 91.4
Mass Pull % 4.4
Moisture in Concentrate % 8.0
Average Annual Concentrate Production dmt x 1000 73.0
Total Concentrate Production kt 436
Concentrate Grade g/t Gold 30.0
Flotation Process Costs - OPEX $/processed t 5.84
Concentrate Transport Cost $/t conc 15.9
New concentrate handling facilities would be constructed at the CIL Plant and would feed a reconstituted
slurry directly into a conventional carbon -in-leach circuit, elution and electro winning facility to produce
saleable gold doré.
A total of 365,000 ounces of gold doré would be produced as saleable gold product over the LOM. The
tailings from the CIL Plant would be deposited in the existing and fully permitted TMF.
CIL Plant Processing Parameters Units Base Case
CIL Plant Metallurgical Recovery1 % 86.6
Steady State Average Doré Production Kozpa 65.0
Total Gold Production Koz Gold 365
CIL Planned Upgrade Cost $m 0.7
CIL Operating Cost $/tmilled 2.4
CIL Operating Cost $/tconcentrate treated 52.0
(1) CIL metallurgical recovery is calculated as the product of the leach recovery (87.5%) and the final gold
recovery from on-site electrowinning (99%).
Operating Costs
Operating costs for mining have been developed from international benchmarked contractor mining rates
based on similar sized mining operations utilizing similar mining equipment for drill and blast, load and
haul, support equipment and incremental depth increases in cost. The mining costs also allow for
dewatering, re-handle and grade control drilling. The unit costs have been developed in conjunction with
the detailed bench mining schedule to develop a cost profile commensurate with the mining plan.
NR18-17 Continued September 17, 2018
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The Flotation Plant processing costs have been developed from international benchmarked operating
costs based on similar sized processing plants and adjusted for local energy and reagent costs.
The CIL P lant processing costs have been developed from actual costs adjusted based on required
throughput of concentrate.
On-mine costs largely consist of general and administrative costs and have been calculated from first
principles based on local labour rates (derived from similar operations within the region) and include
provision for stores and equipment.
A provision for sustaining capital has been allowed at 4% of the total oper ating cost. A provision of
$1.00/tonne mineralized material milled has been allowed for the rehabilitation of the site once mining
ceases.
The operating costs have been used to determine the breakeven cut-off grade used to select the specific
cut-off in the updated mineral resource model for use in the pit optimization study for the determination
of the ultimate optimal pit-shell based on a gold price of US$1,250/oz.
Operating Costs $/tonne milled
Mining 14.0
Flotation Plant 5.8
CIL Plant 2.4
On-Mine1 4.1
Rehabilitation Provision 1.0
Sustaining Capital 0.6
All-In OPEX 27.9
All-In OPEX (AISC) - US$/ozpayable 543.3
(1) On-mine costs consist of labour, stores and equipment costs related
to General and Administrative functions of the mining operation
outside the mining and processing functions.
Capital Costs
Capital costs for mining have been calculated from international benchmarked contractor rates for
mobilization of equipment and construction on a m ine services area that includes heavy equipment
workshops, stores and administrative structures.
The Flotation Plant capital cost estimate has been calculated from international benchmarked c apital
costs based on similar sized floatation processing plants. A capital allowance has been calculated for the
TMF and water storage facilit ies at the Rozino site based on international benchmarking capital rates in
conjunction with estimated dam wall volumes.
At the currently operating CIL Plant a $0.7 million capital expenditure provision has been estimated for
the construction of a truck off -load facility, concentrate storage, re -pulping facility, additional go ld
stripping vessel and electrowinning cell. The remaining equipment and facilities at the CIL Plant have been
determined to be of adequate size and condition and would require no further capital expenditure.
The following capital ratios have been applied in the capital estimate:
• 1.5% capital allowance for project indirect costs
• 3.5% capital allowance for owners costs
• 12.5% capital fee for engineering procurement and construction management (“EPCM”)
• 10% contingency for estimation inaccuracy and miscellaneous items
NR18-17 Continued September 17, 2018
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Capital Costs $m
Mine Infrastructure 6.3
Flotation Plant 55.2
TMF 13.7
CIL Plant Upgrades 0.7
Owners Cost 2.6
Indirect Costs 1.1
EPCM 9.1
Contingency 8.9
Total Project CAPEX 97.6
Future Work
Upon delivery of the PEA report in the coming weeks, a joint venture will be deemed to have been formed
between Velocity (70%) and Gorubso (30%).
Next steps for the Project include completion of a prefeasibility study (“PFS”) , which is expected to be
complete in Q3 2019. Work to be completed as part of the PFS will include:
• exploration drilling of priority targets located contiguous to the PEA pit outlines aimed at
resource expansion
• infill resource drilling aimed at upgrad ing Inferred mineral resource estimates to Indicated
mineral resource estimates
• additional metallurgical testing to optimize gold recovery
• geotechnical and hydrogeological engineering studies
• completion an environmental social impact assessment (“ESIA”). EISA work was initiated in June
2018 and is currently ongoing
The PEA report will include detailed recommendations and a budget estimate.
Updated Mineral Resource Estimate
An updated mineral resource estimate using all of the relevant drill hole information to date was reported
for a range of cut -off grades returning an Inferred mineral resource of 13Mt @ 1.37g/t gold at a 0.6 g/t
gold cut-off grade, for total contained gold of 573,000 ounces. The estimates are based on 2m down-hole
composited gold assay grades from angled diamond drilling.
Velocity has received results from approximately 9,050m of diamond drilling to date. Relative to the
dataset available for the previous March 2018 estimates, the current sampling database contains assay
results for an additional 12 holes for 1,580m of drilling.
Cut-off Grade g/t Gold
Inferred Mineral Resource Estimate
Tonnes
(Mt)
Gold Grade
(g/t)
Gold Metal
(koz)
0.2 50 0.59 948
0.5 17 1.17 639
0.6 13 1.37 573
0.7 9.7 1.57 490
(1) Effective date September 10, 2018.
(2) Mineral resources are not mineral reserves and do not have demonstrated economic viability.
NR18-17 Continued September 17, 2018
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(3) The mineral resource disclosed herein has been estimated in accordance with the Canadian
Institute of Mining, Metallurgy and Petroleum “CIM Definition Standards for Mineral Resources
and Mineral Reserves” (CIM, 2014).
(4) Any known legal, political, environmental, or other risks that could materially affect the potential
development o f the mineral resource are detailed below in the section entitled “Cautionary
Statement Regarding Forward-Looking Information”.
Recoverable resources were estimated for Rozino using Multiple Indicator Kriging (MIK) with block
support adjustment, a method that has been demonstrated to provide reliable estimates of recoverable
open pit resources in gold deposits of diverse geological styles.
The Rozino sampling database includes 197 diamond holes for 31,338m of drilling, of which 86 drill holes
(14,289m) completed by Asenovgrad Geoengineering EAD are not included in the resource estimation
dataset due to insufficient quality control data. Drilling used in the previous March 2018 resource
estimation totaled 90 drill holes (13,558m) and comprise 56 drill holes (9,055m) completed by Velocity,
28 drill holes (3,794m) completed by Hereward Ventures Ltd. (“ Hereward”), and 6 drill holes (740m)
completed by Asia Gold Inc. (“Asia Gold”). The remaining angled drill holes from the database are located
outside the mineralized envelope and did not inform the resource estimation. Relative to the dataset
available for the March 2018 estimates, the current sampling database contains assay results for an
additional 12 holes for 1,580m of drilling.
Samples from Velocity’s diamond drilling provide 67% of the estimation dataset, with angled diamond
holes drilled by Hereward and Asia Gold contributing 28% and 5%, respectively.
Estimated resources are constrained within a mineralized envelope interpreted from 2m down -hole
composited gold grades and geological logging from diamond drilling and surface trenches. The envelope
captures intervals of greater than 0.1 g/t, with the lower boundary reflecting the contact between variably
mineralized sedimentary rocks and un -mineralized basement. It covers an area of approximately 780m
by 600m. Estimated resources extend to the base of mineralized drilling at approximately 190m of depth,
with approximately 90% of estimates from depths of less than 105m and less than 1% from below 140m.
Bulk densities of 2.31, 2.41 and 2.58 tonnes per cubic metre were assigned to completely weathered,
transitional and fresh material, respectively, using surfaces representing the base of complete oxidation
(“BOCO”) and top of fresh rock (“TOFR”) interpreted by Velocity. Within the resource area the depth to
BOCO averages around 8m, with fresh rock occurring at an average depth of around 19m.
Indicator class grades used for the MIK modelling were determined from the mean composite gold grade
of each indicator class. The effect of extreme grades on estimates was reduced by cutting seven outlier
composites with gold grades of greater than 40 g/t to 40 g/t for determination of the mean grade for the
highest indicator class.
The work program at Rozino was designed and is supervised by Stuart A. Mills, CGeol, the Company's Vice-
President Exploration, who is responsible for all aspects of the work, including the quality control/quality
assurance program. On-site personnel at the Project rigorously collect and track samples which are then
security sealed and shipped to ALS Global laboratory in Romania. Samples were prepared and analyzed
by fire assay using a 30 -gram charge in compliance with industry standards. Field duplicate samples,
blanks and independent controlled reference material (standards) are included in every batch.
Hereward and Asia Gold’s diamond core from angled drilling was sampled and analyzed by industry
standard methods. The core was generally halved for analysis with a diamond saw over generally 1m
intervals, and samples were analyzed for gold by fire assay by commercial laboratories. Information
available to demonstrate the reliability of these results includes duplicates and blanks for both data sets
and certified reference standards for Asia Gold’s drill results.
NR18-17 Continued September 17, 2018
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Qualified Persons
Karl van Olden FAusIMM, has overall responsibility for the PEA and has approved the content of this news
release. Mr. van Olden is a Fellow of the Australasian Institute of Mining and Metallurgy , is a Qualified
Person, as defined by NI 43-101 and he is independent of the Company. He is a full-time employee of CSA
Gobal.
Gary Patrick BSC, MAusIMM (CP) is responsible for reviewing metallurgical aspects of the PEA Study on
behalf of CSA Global and has approved the content of this news release. Mr. Patrick is a Member of the
Australasian Institute of Mining and Metallurgy and C hartered Professional (MAusIMM (CP)) and is a
Qualified Person, as defined by NI 43 -101 and he is independent of the Company. Mr. Patrick is an
Associate Metallurgical Consultant to CSA Global.
Len Holland B.Sc., C.Eng., FIMMM., FMES. is responsible for and supervised metallurgical testing at Rozino
and has approved the content of this news release. Mr. Holland is an employee of Holland and Holland
Consultants, is a Qualified Person, as defined by NI 43-101 and he is independent of the Company.
Jonathan Abbott, MAIG, is responsible for the updated mineral resource estimate and has approved the
content of this news release. Mr. Abbott is an employee of MPR Geological Consultants Pty Ltd, a member
of the Australian Institute of Geoscientists, is a Qualified Person, as defined by NI 43-101 and he is
independent of the Company.
About Velocity Minerals Ltd.
Velocity is a gold exploration and development company focused on eastern Europe. The Company’s
management and board includes mining industry professionals with combined experience spanning
Europe, Asia, and the Americas as employees of major mining companies as well as founders and senior
executives of junior to mid-tier public companies. The team's experience includes all aspects of mineral
exploration, resource definition, feasibility, finance, mine construction and mine operation as well as a
track record in managing publicly listed companies.
About Bulgaria
Bulgaria is a member of NATO (2004) and a member of the European Union (2007). The local currency
(BGN) has been tied to the Euro since 1999 (1.956 BGN/EUR). The country is served by modern European
infrastructure including an extensive network of paved roads. Bulgaria boasts an exceptionally low
corporate tax rate of only 10%. The country’s education system is excellent with good availability of
experienced mining professionals in a favourable cost environment. Foreign mining companies are
successfully operating in Bulgaria. The country’s mining law was established in 1999 and updated in
2011. Mining royalties are low and compare favourably with more established mining countries.
On Behalf of the Board of Directors
“Keith Henderson”
President & CEO
For further information, please contact:
Keith Henderson
Phone: +1-604-484-1233
E-mail: [email protected]
Web: www.velocityminerals.com