Vendetta Announces Positive Preliminary Economic Assessment with Pre-Tax IRR of 31% and NPV (8%) of $204M on Pegmont Lead-Zinc Project
FOR IMMEDIATE RELEASE January 28, 2019
(VTT2019 – NR #1)
Vendetta Announces Positive Preliminary Economic Assessment
with Pre-Tax IRR of 31% and NPV (8%) of $204M on Pegmont
Lead-Zinc Project
Vancouver, BC – January 28, 2019 − Vendetta Mining Corp. (VTT-TSX: V) (Vendetta or the Company)
is pleased to announce the results of an independent Preliminary Economic Assessment (PEA) for its
Pegmont Lead-Zinc Project (the Project) in Queensland, Australia. The PEA was prepared in accordance
with National Instrument 43-101 Standards of Disclosure for Mineral Projects (NI 43-101).
The PEA was developed by a team of independent consultants, including
AMC Mining Consultants (Canada) Ltd., (AMC), G R Engineering Services (GRES), and
AARC Environmental Solutions (AARC). Unless otherwise noted, a ll dollar figures reported are
Australian dollars.
Project Economic Highlights:
• Mine Life 10 years at 3,000 tonne per day open pit followed by underground
• Long Term Consensus Metal Prices: $0.94 /lb Lead, $1.09 /lb Zinc and $16.50 /oz Silver
• US Dollar to Australian Dollar exchange rate of 0.75
• Preproduction Capital of $170M and Life of Mine Sustaining Capital of $59M
• Pre-Tax NPV (8%) $201M and IRR 32%
• After Tax NPV (8%) $124 M and IRR 24%
• After tax payback period 3.5 years
• Spot price case after tax NPV (8%) $158 M and IRR 27%
• Spot price case after tax payback period 3.0 years
• Average annual production of 124M lbs of lead, 50M lbs of zinc and 298K ounces of silver
• Life of mine all-in sustaining Cash Cost (AISC) of $ 0.71 / lb payable lead in concentrate
(after credits)
• Average net smelter return (NSR) 135 /t of ore
• Opportunities for continued refinement through further mine plan optimization and
metallurgical test work
• There remain significant Mineral Resources not included in the PEA mine plan, which,
with further drilling will potentially increase the mine life or increase production rate
Michael Williams, Vendetta’s President and CEO commented “The results outlined in the PEA
demonstrate a robust, stand -alone project. The Project has been able to take advantage of Pegmont’s
location in the centre of well -developed infrastructure to deliver a pre-start capital that makes this an
achievable project to develop for an aspiring junior miner. We are pleased with the strong results of the
PEA and intend to now move to add incremental tonnes that can be brought into the mine plan, continue
with early permitting work and expand exploration efforts . In addition to extracting more value out of
the Project Vendetta will move forward with evaluating value adding opportunities in the region. The
PEA demonstrates low risk economics and well -established mining and milling techniques in a stable
and supportive jurisdiction.”
Project Technical and Financial Details
Economic Results and Sensitivities
Table 1 summarises the key economic inputs. Base case metal prices and exchange rates are based on
institutional consensus pricing. Income and other taxes presented in the PEA are preliminary, based on
general Australian corporate tax rates and do not reflect any tax planning opportunities.
Table 1: Summary of Key Economic Inputs and Results
Unit Base Case Spot Case1
Inputs Zinc Price US$/lb $1.09 $1.18
Lead Price US$/lb $0.94 $0.91
Silver Price US$/oz $16.50 $15.31
Discount Rate % 8 8
Exchange Rate AUD/USD 0.75 0.71
Payable Metal – Lead % 95 95
Payable Metal – Zinc % 85 85
Minimum Deduction – Lead % 3 3
Minimum Deduction – Zinc % 8 8
Australian Corporate Tax % 30 30
Economics Pre-Tax NPV at 8% $M 201 249
IRR % 31 37
Payback Period Years 2.7 2.4
Economics After-Tax LOM Cash Flows (Undiscounted) $M 288 343
NPV at 8% $M 124 158
IRR % 24 27
Payback Period Years 3.5 3.0
LOM Payable Metal Lead M lbs 1,069 1,069
Zinc M lbs 317 317
Silver M oz 1.1 1.1
Costs Cash cost2 $/lb payable
lead 0.65 0.60
AISC cost3 $/t lb payable
lead 0.71 0.66
1. As of January 22, 2019, spot lead, zinc and silver prices are London Metal Exchange cash buyer,
and exchange rate is Reserve Bank of Australia official rate.
2. Cash costs include all operating costs, smelter, refining and transportation charges, net of by‐
product (zinc and silver) revenues.
3. All in Sustaining Costs (AISC) include total cash costs and all sustaining capital expenditures.
As indicated in Table 2, project cashflow and NPV are particularly sensitive to changes in exchange rate
and lead price, while relatively less sensitive to changes in zinc price, operating and capital expenditures.
The table below shows the effect on the after-tax economics of the Project of increasing or decreasing
metal prices, capital and operating costs and exchange rates against the disclosed base case assumption.
Table 2: After-Tax NPV (8%) Sensitivities
Input Input Factor
85% 90% 95% 100% 105% 110% 115%
Lead Price ($US / lb) 42.7 70.0 97.3 124.4 151.1 177.8 204.5
Zinc Price ($US / lb) 95.3 105.1 114.8 124.4 134.0 143.6 153.2
Capex (life of mine) 145.9 138.7 131.6 124.4 117.1 109.7 102.2
Opex (per tonne milled) 174.9 158.1 141.2 124.4 107.4 90.2 73.1
Exchange Rate (US$:A$) 234.7 197.9 161.2 124.4 87.1 49.5 12.0
Capital and Operating Cost Estimates
Initial and Sustaining Capital
GRES provided capital estimates for all project infrastructure, mineral processing, bore field, gas
pipeline, camp, fuel storage, offices and workshops. Equipment pricing was based on quotations and
actual equipment costs from recent similar GRES projects considered representative of the Project. The
capital estimate is deemed to be of a level of accuracy consistent with industry standards for a PEA .
Underground sustaining capital, including decline access, ventilation and electrical was estimated by
AMC based on benchmarked data.
Contingencies were applied to the capital cost estimate as an allowance by assessing the level of
confidence in the engineering estimate basis and vendor or contractor information.
Table 3: Initial and Sustaining Capital
Area Initial
($M)
Sustaining
($M)
Total
($M)
Site Infrastructure (on and off site) 39.6 1.2 40.8
Mineral Processing 69.9 2.1 72.0
Mining (establishment and underground) 18.3 37.0 55.3
Project Indirects (EPCM & Owner Costs) 32.3 - 32.3
Closure - 14.5 14.5
Contingencies (mine, process & infrastructure) 10.3 3.9 14.2
TOTAL PROJECT 170.3 58.7 229.0
Operating Costs
Operating costs were estimated by GRES and AMC are summarised in Table 4
Table 4: Operating Cost Summary
Area Units Cost
Open Pit Mining $/tonne mined $3.08
Underground Mining $/tonne mined $50
Processing $/tonne milled $26.30
Common Site G&A $/tonne milled $6.24
All-In OPEX $/tonne milled $74.30
Off-site Charges
Projected Treatment Charges (TCs) and transport charges for the lead and zinc concentrates were
provided to AMC by Ocean Partners, specialist consultants and traders in base metal concentrates.
Off-site charges include concentrate transport to smelters, lo cated in Mt Isa (Lead) and Townsville
(Zinc), treatment and refining charges and potential penalties as shown in the Table 5 below.
Table 5: Off-Site Cost Summary
Off-site Charges Units Lead Concentrate Zinc Concentrate
Transport to Smelter $/wmt conc. $50 $100.58
Smelter Treatment Charge US$/dmt conc. $165 $181
Silver Refining US$/oz $0.80 $0.80
Minimum Deduction units 3 8
Lead in Zinc Concentrate US$/dmt conc. - $2/1% lead > 3.5%
Chloride (Cl) + Fluorine (F) Penalty US$/dmt conc. $2/100 ppm Cl+F
> 500 ppm -
Iron (F) Penalty US$/dmt conc. - $1.50/1% iron >9%
Note wmt: wet metric tonne, dmt: dry metric tonne
Mineral Resource Update
The basis for the PEA is the Mineral Resource estimate completed by AMC. The Company reported
details of the Mineral Resource update in a news release dated August 9, 2018. Table 6 summarises the
current Mineral Resource, including those Mineral Resources that were not included in the PEA mining
inventory. Full details of the Mineral Resource estimate are detailed in the Technical Report.
The Company continued to drill subsequent to the effective date. Results from these additional holes
and future planned programs will be used in future updates to the Mineral Resource. Assay results have
been released and will be described in the Technical Report.
Table 6: 2018 Mineral Resource Estimate, as of July 31, 2018 (see notes for details)
Classification Material type Tonnes (kt) Pb (%) Zn (%) Ag (g/t)
Indicated
Transition 1,111 4.9 2.3 8
Sulphide 4,647 6.9 2.6 12
Total 5,758 6.5 2.6 11
Inferred
Transition 1,829 5.2 2.0 7
Sulphide 6,447 5.1 3.1 9
Total 8,277 5.1 2.8 8
1. CIM Definition Standards (2014) were used to report the Mineral Resources.
2. Cut-off grade applied to the open pit Mineral Resources is 3% Pb+Zn and that applied to the
underground is 5% Pb+Zn.
3. Based on the following metal prices: US$0.95/lb for Pb, US$1.05/lb for Zn, and US$16.5/oz for
silver.
4. Exchange rate of US$0.75 : A$1.0
5. Metallurgical recoveries vary by zone and material type as follows:
• Lead to lead concentrate: from 80.6% to 91.3% for transition and 88.0% to 92.7% for sulphide.
• Zinc to zinc concentrate: from 19.3% to 75.2% for transition and 61.8% to 78.5% for sulphide.
6. Using drilling results up to April 15, 2018.
7. Mineral Resource tonnages have been rounded to reflect the accuracy of the estimate, and
numbers may not add due to rounding.
Mine Planning
AMC utilized the Geovia Whittle™ pit optimization process to define ultimate pit limits. The mine
scheduling package Minemax was then used to target the most economic ore early in the mine life with
constraints applied for the timing of in-pit tailings storage.
The open pit has been designed to be a conventional contractor truck-and-shovel operation. Average
open pit mining recovery and dilution applied were 95% and 5% respectively. Material is delive red by
haul truck to a run of mine (ROM) pad to be loaded into the primary crusher, with discharge from the
crusher conveyed to a coarse stockpile adjacent to the mill.
Mining commences in the Burke Hinge Zone pit (BHZ), a satellite pit to the main zones w hich allows
for 410 kt of sulphide and 80 kt of transition plant feed to be stockpiled on the ROM pad for start of
processing. Mining then moves to another separate pit, Main 1, followed by Main 2 and a pushback into
Main 3 to complete the locations for li fe of mine in -pit tailing storage. The largest pit has four stages
(Main 4 to 7).
The open pit contractor mining fleet includes 90 t class trucks, loaded by 200 t diesel-hydraulic shovels.
Drill and blast will be undertaken with track mounted drill rigs dr illing 150 mm holes. Explosives are
planned as down hole service by an explosives supplier. Haul roads are designed to be 23 m wide to
allow for two-way traffic at a maximum gradient of 10%. Where possible waste is also placed onto in -
pit dumps to reduce overall costs.
Over the mine life, a total of 8.9 Mt of material is sent to the mill from the open pits and a total waste
movement of 110.8 Mt, for a life of mine strip ratio of 12.5:1. Figure 1 illustrates a plan view of the
open pit areas.
The underground areas were assessed by comparing open pit value to the value generated using the
DatamineTM Mine Shape Optimizer (MSO) software. The combined value at each depth then determines
the maximum value. The underground Mineral Resources are primarily flat dipping (23° to 30°) and
vary in thickness across each zone (3 m to 12 m), lending themselves to room and pillar mining. The
more steeply dipping portions of Zone 3 are suitable for long hole open stop ing. Three separate areas
could be optimally mined from underground; one directly beneath the main pit (Zone 3A) and one to the
side of the main pit (Zone 3B), and the Bridge Zone.
A minimum 20 m crown pillar is left between the pit and stopes. For room and pillar extraction AMC
has applied a dilution factor of 10% at zero grade to the Mineral Resource and a mining recovery factor
of 86% has been applied to the stopes. For long hole mining AMC has applied a dilution factor of 12%
at zero grade to the Mineral Resource and a mining recovery factor of 95% to the s topes. Long hole
stopes are backfilled with waste rock.
Contractor mining using trackless diesel loaders and trucks and diesel -electric drilling equipment is
planned. Declines provide fresh air intake, with each panel having a ventilation shaft fitted with a
primary exhaust fan on surface.
Figure 2 shows the underground panels in relation to the open pit stages.
Open pit mining accounts for 84% or 8.9 Mt and underground for 16% or 1.7 Mt of the total 10.6 Mt of
material processed.
The Mineral Resource used for the PEA mine design does not include any of the Zone 5 resource which
is included in the Mineral Resources above (Table 6). Screening work indicated that this zone needs to
be expanded to arrive at a potential extraction strategy, with the possibility that these resource s may
ultimately be brought into a future mining plan.
Figure 1: Open Pit Areas
BHZ
Main1
Main4-7
Main2-3
Figure 2: Underground Mining Areas, view looking west
Processing
Two metallurgical test work programs have been conducted on samples from Pegmont, as reported by
the Company on March 6, 2017 and March 5, 2018 , and summarised in Table 7. The later test work
being more detailed locked cycle test work on the zones forming the basis of the mining inventory of
the PEA, and were used as the basis for developing the process design criteria for the PEA.
Table 7: Recoveries and concentrate grades by Zone mined in the PEA
Zone Test Type
Bond Ball
Mill Work
Index kWh/t
Lead Concentrate Zinc Concentrate
Pb Recovery
%
Pb
Grade %
Zn Recovery
%
Zn
Grade %
Sulphide
Zone 1 Locked Cycle 18.4 91.8 66.3 75.5 54.5
Zone 2 Locked Cycle 20.9 90.8 67.8 71.3 54.9
Zone 3 Locked Cycle 20.1 89.7 68.2 73.7 54.8
Bridge Zone Locked Cycle 19.1 92.7 68.0 70.4 52.3
BHZ Locked Cycle 16.6 91.5 70.6 61.8 50.7
Transition
Zone 1 Locked Cycle - 91.3 72.5 75.2 53.3
BHZ Open Cycle - 80.6 57.0 19.3 48.9
The process plant operating costs were developed by GRES based on a design processing rate of
3,000 tonnes per day of material for the flotation plant. The plant will normally operate 24 hours/day,
365 days/year.
A conventional sequential flotation circuit has been selected for the recovery of the lead and zinc
minerals from the Pegmont deposit.
The process plant shall consist of a conventional three stage crushing and a single stage ball mill grinding
circuit, followed by differential flotation of the lead and zinc minerals to produce separate saleable lead
and zinc concentrates. The concentrates from the lead and zinc flotation circuits will be thickened and
subsequently filtered on site for road transport to off-site smelters.
The lead concentrate will be transported by road to the Mt Isa, while the zinc concentrate will be
transported by road to a rail siding located at the nearby town of Malbon, and then transported by rail to
Townsville, Queensland. The containerised transport of concentrate and rail loading infrastructure will
allow the transport lead and / or zinc concentrate to alternative smelters out of the port of Townsville if
commercially more advantageous to do so.
Tailings from the flotation plant will be thickened to approximately 53% solids by weight. Water
recovered in the tail ings thickener will be recycled to the process plant. Tails will be disposed of in
mined out open pits.
Figure 3: View of the processing plant layout, looking east
Broken Hill type deposits typically have iron in the zinc concentrate, attracting a penalty when present
at over 9%. Iron in z inc concentrate ranges from 5.5 % to 11.0% in the zones at Pegmont. Fluorine +
chlorine attract a penalty in the lead concentrate over 500 ppm, this is below detection limits for standard
geochemical analysis for fluorine, precise fluorine analysis is pending for most of the PEA mine plan,
precise fluorine assayed 50 ppm and 147 ppm in BHZ transition and sulphide respectively. In the absence
of precise fluorine analysis in the other zones flouring levels of 500 ppm were as sumed. Cadmium is
present in the zinc concentrates at levels of between 2740 ppm and 3830 ppm in the PEA mine plan, it
attracts a penalty over 4000 ppm, hence no penalty is applied.