Timmins Gold Pre-Feasibility Study Confirms Economic Viability of the San Francisco Mine
-- Posted Tuesday, 8 April 2008 | Digg This Article | Source: GoldSeek.com
Timmins Gold Corp. ("Timmins" or the "Company") announces the completion and filing of the technical report titled NI 43-101 F1 Technical Report on the Preliminary Feasibility Study for the San Francisco Gold Project , Sonora, Mexico, dated March 31, 2008, prepared by Micon International Limited of Toronto (Micon) and Independent Mining Consultants, Inc. of Tucson, Arizona (IMC) (the Pre-Feasibility Study). Management is very pleased with the results of the study as it demonstrates the strong economics of the project. In particular the conclusions and recommendations of Micon state that:
Timmins should proceed with development of the San Francisco open pit mine, crushing, heap leaching and gold recovery plant as described in the preliminary feasibility study...Given the amount of work conducted previously at the San Francisco project on the known exploration and areas of mineralization, the property should be regarded as an advanced-stage exploration project with significant economic potential.
Mineral Reserves
Mineral Reserves of the San Francisco Project are reported to be:
Case
Reserve Class
Gold Cut-off (g/t)
Reserve (000 t)
Grade (g/t)
Gold (000 oz)
High Grade Crusher feed
Probable
0.50
12,000
1.05
403.7
Low Grade Crusher feed
Probable
0.23
4,653
0.88
132.0
Sub-total Crusher feed
Probable
16,653
1.01
535.7
Low Grade ROM leach
Probable
0.28
5,981
0.39
75.3
Grand Total
Probable
22,634
0.84
611.0
Stripping ratio (waste:ore) is estimated to be 2.0:1 on average over the life of the mine.
Capital & Operating Costs and Project Economics
Significant capital and operating costs associated with re-commissioning operations at the San Francisco Gold Property over the life of mine (LOM) are reported by Micon to be:
Initial capital costs: Sustaining capital costs: Total cash operating costs:
US$33.8 million (including a 20% (US$5.6 million) contingency); US$12.7 million; US$412 per oz gold.
Net present value and sensitivity analysis of pre-tax cash flows are reported by Micon to be:
Gold Price (US$)
Before- Tax IRR (%)
After-Tax IRR (%)
LOM* Total Undiscounted (US$ 000)
NPV 5% Discount (US$ 000)
NPV 10% Discount (US$ 000)
NPV 15% Discount (US$ 000)
LOM Net Cash Flow US$/oz
$686 (base case)
51.7%
38.5%
$61,565
$48,757
$38,538
$30,280
$152
$850
86.7%
66.2%
$127,722
$104,454
$85,981
$71,119
$315
$1,000
129.2%
97.7%
$188,467
$156,913
$131,797
$111,536
$465
* Life of Mine
Summary of Project Base Case Discounted Cash Flow and Unit Costs
IRR 38.5%
USD 000
LOM TOTAL (Undisc)
NPV disc. at 5%
NPV disc. at 10%
NPV disc. at 15%
US$ per tonne
LOM Ave. USD/oz
Revenue
Gross Sales
278,188
241,900
212,654
188,763
12.29
686.63
less
Refining charges
(709)
(613)
(536)
(473)
(0.03)
(1.75)
less
Bullion delivery
(2,334)
(2,047)
(1,818)
(1,632)
(0.10)
(5.76)
less
Royalty
-
-
-
-
-
-
Net Sales Revenue
275,145
239,240
210,300
186,658
12.16
679.12
Cash op.costs
G&A costs
6,821
5,921
5,200
4,614
0.30
16.84
Mining costs
113,070
99,032
87,640
78,273
5.00
279.08
Crushing costs
22,161
19,118
16,688
14,720
0.98
54.70
Processing costs
19,736
17,174
15,111
13,426
0.87
48.71
Laboratory costs
3,686
3,202
2,814
2,498
0.16
9.10
Social & Env.Mgt
1,677
1,456
1,278
1,134
0.07
4.14
Total cash op.costs
167,152
145,903
128,731
114,665
7.38
412.57
Net Cash Operating Margin
107,994
93,337
81,570
71,993
4.77
266.55
Capital Exp.
Initial/exp. capital
33,769
33,359
32,974
32,609
1.49
83.35
Sustaining capital
12,659
10,651
9,079
7,827
0.56
31.25
Change in Working Capital
-
569
979
1,277
-
-
Net cash flow before tax
61,565
48,757
38,538
30,280
2.72
151.96
Project Highlights, Improvements & New Developments
It is important to note that the Pre-Feasibility Study, base case economic model has been calculated on a variable gold price that averages US$686 per oz over the life of the proposed operation. This average price is 31% below the current spot price of approximately US$900 per oz gold (April 2, 2008). As a result, in addition to considering the potential for an expanded mineral resource/reserve Company management believes it is also important to consider the sensitivity analysis detailed in Section 18.8 (Economic Analysis) of the Pre-Feasibility Study in assessing the long term viability and economic potential of the San Francisco Project. As expected the project is most sensitive to revenue drivers (i.e. total reserve, reserve grade, recoveries) and operating costs, more specifically mining costs as they constitute a significant portion of cash costs. The project is less sensitive to capital costs.
In addition to the encouraging conclusions and recommendations detailed in the Pre-Feasibility Study, Company management believes it is important to note that the mineral reserve estimate and economic model reflected in the Pre-Feasibility Study are based upon a measured and indicated mineral resource of 716,790 oz gold, an estimate that was completed in February 2007 (measured mineral resource = 5.35 million tones grading 0.912 g/t Au + indicated mineral resource = 22.3 million tones grading 0.781 g/t Au). The inferred mineral resource totaling 63,490 oz Au (2.5 million tones grading 0.788 g/t Au) has not been included in the economic analysis. This mineral reserve and mineral resource estimate was based upon floating cone parameters using US$500 per oz gold, 64% recoveries and an internal cut-off grade of 0.23 g/t gold. Since reporting this estimate the Company has completed an additional 5,123 metres of drilling with the objective of both increasing the confidence level and expanding the mineral resource on which the final mine plan will be based. Management expects the updated mineral reserve/resource estimate, pit optimization and mine plan being completed by IMC will significantly improve the already robust economics of the San Francisco project. The updated estimate will be based upon revised parameters including a higher gold price and recovery, along with reduced internal and break even cut-off grades. Once the updated resource estimate is finalized in the second quarter 2008 an updated Pre-Feasibility Study may be commissioned. Taking into consideration sensitivity studies included in the 2007 resource estimate and the current gold market price, management expects the updated mineral resource will be appreciably greater than the resource estimate used in this study. This conclusion is supported by the following table detailing the various floating cones for resource definition (Pre-Feasibility Study -- Table 17.1.6):
Floating Cones for Resource Definition -- Measured, Indicated & Inferred Mineral Resources**
Gold Price
Gold Resource Classes**
Gold Cut-off (g/t)
Ore (x 1,000 t)
Gold (g/t)
Gold Resources (x 1,000 t)
Strip Ratio
500
MII
0.23
30,154
0.805
780.4
1.71
600
MII
0.23
36,378
0.762
891.2
1.87
650
MII
0.23
39,381
0.747
945.8
1.98
700
MII
0.23
41,803
0.738
991.9
2.13
**Cautionary Statement: Mineral resources that are not mineral reserves do not have demonstrated economic viability. The above table includes Inferred Mineral Resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves.
Other highlights of the Pre-Feasibility Study include forecast gold recoveries significantly higher than those experienced historically. Both independent and in-house column leach tests were conducted on material crushed to 100% minus ½ inch to support this parameter. Company management recognizes that the project is particularly sensitive to gold recovery, and its dependence on achieving the targeted particle size. The independent column leach tests were conducted by Process Research Associates of Richmond, B.C. using 2.5 metre columns, while in-house tests were conducted at the lab facilities at the San Francisco Mine on both 2.5 and 6.0 metre columns. The 6.0 metre columns were used to better simulate the actual height of the heaps.
Project Development
Most of the significant capital and operating costs included in the Pre-Feasibility Study are based upon firm contracts and quotations. These include but are not limited to contract mining costs, new heap leach pad construction, processing plant and primary crusher refurbishment, and new secondary and tertiary crusher acquisition costs etc. The new secondary and tertiary crushers have been purchased from Sandvik. The crushing circuit has been specifically designed to accommodate the kinetics of the San Francisco ore while producing the optimum crush size and maximize throughput capacity.
Based on results obtained from the work completed to date by Timmins, the significant amount of historical information available from previous operators and management's comfort with the detailed work, analysis, conclusions and recommendations within the Pre-Feasibility Study, the Company intends to proceed with development of the San Francisco Mine. Management expects capital expenditures will be financed through a combination of debt and equity. A team of very experienced professional and technical staff lead by Mr. Alfredo Barraza, Mine Manager, has already been assembled and is working on project implementation and will ultimately be responsible for mine operations. With many of the contracts already negotiated and capital equipment ordered, management is confident mining will be initiated prior to the year end with cash flow from operations in the second quarter 2009.
Qualified Person
Pursuant to National Instrument 43-101, Darcy Krohman, P.Geo., C.A,. Executive Vice-President and CFO of Timmins Gold Corp. is the Qualified Person (QP) responsible for the disclosure in this news release. Field work has been conducted by Timmins Gold Corp. employees and contractors. Independent QP's responsible for preparation of the Pre-Feasibility Study are William J. Lewis, P.Geo., R. James Leader, P.Eng., Christopher A. Jacobs, CEng MIMMM, and Ian R. Ward, P.Eng., all of Micon International Limited and Michael G. Hester, FAusIMM of Independent Mining Consultants Inc.
For further information, contact:
Arturo Bonillas, B.Sc.(Eng) President Hermosillo, Sonora, Mexico Tel: 011-52-662-262-1132 arturo@timminsgold.com
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on a variable gold price that averages US$686 per oz over the life of the proposed operation. This average price is 31% below the current spot price of approximately US$900 per oz gold (April 2, 2008). As a result, in addition to considering the potential for an expanded mineral resource/reserve Company management believes it is also important to consider the sensitivity analysis detailed in Section 18.8 (Economic Analysis) of the Pre-Feasibility Study in assessing the long term viability and economic potential of the San Francisco Project. As expected the project is most sensitive to revenue drivers (i.e. total reserve, reserve grade, recoveries) and operating costs, more specifically mining costs as they constitute a significant portion of cash costs. The project is less sensitive to capital costs.
