Kaminak Gold Corporation is advancing the 100% owned, open pit, heap leach Coffee Gold Project towards production. In early 2016 Kaminak announced the results of a feasibility study which indicates that Coffee is a robust, rapid pay-back, high margin, ten year open pit mining and heap leach project that works in the current gold price environment. As such, Kaminak intends to move forward into mine permitting to support mine construction, which is planned for mid-2018.
At a gold price of US$1,150/oz and an exchange rate of C$1.00 to US$0.78, the Coffee Project base case estimate (the "Base Case") generates an after-tax net present value (NPV) at a 5% discount rate of C$455 million and an internal rate of return (IRR) of 37%. The proposed mine will operate over an initial ten year mine-life with average annual gold production in excess of 200,000 ounces for the first five years (excluding the initial 3 month ramp-up period), and average annual life-of-mine gold production of 184,000 ounces. Initial capital expenditure to fund construction and commissioning is estimated at C$317 million, with a life-of-mine capital cost of C$478 million (including C$60 million in closure costs). The all-in sustaining cash costs (as defined per World Gold Council guidelines, less corporate G&A) is estimated to be US$550 per ounce of gold produced. The project is expected to have a significant impact on Yukon's GDP, generating over $2 billion of gross revenue and contributing 435 permanent, high paying jobs.
Since making the initial discovery in 2010, Kaminak has drilled 16 separate and distinct gold discoveries and established a Probable reserve of 46.4Mt at 1.45g/t Au, containing 2,157,000oz Au. In addition the NI 43-101 Indicated resource (inclusive of reserves) comprise 63.7Mt at 1.45g/t Au for 2,968,000oz Au, including 2,170,000 ounces gold classified as Oxide, and an Inferred resource total of 52.4Mt at 1.31g/t Au for 2,212,000oz Au, including 857,000 ounces gold classified as Oxide.(See news release September 23rd, 2015). Resource cut-off grade limits are 0.3 g/t Au for Oxide and Upper Transitional, 0.4 g/t Au for Middle Transitional and 1.0 g/t Au for Lower Transitional and Sulphide resources.
Coffee Project Feasibility Study Overview
The Feasibility Study was initiated in July 2014 after the release of the Preliminary Economic Assessment in June 2014 and commenced with infill drilling, geotechnical investigations and other fieldwork to support the study. The Feasibility Study was prepared and led by JDS Energy and Mining Inc. (JDS), an established Yukon mine builder, in collaboration with a broad range of industry leading consultants.
Highlights (all currencies are reported in Canadian dollars unless otherwise specified):
- A pre-tax NPV5% and IRR of $762 million and 50% respectively;
- An after-tax NPV5% and IRR of $455 million and 37% respectively;
- A mine life of ten years with peak annual gold production of 228,000 ounces in project Year 4 and average, steady state, annual gold production of 193,000 ounces (Years 1-9);
- 2,157,000 ounces of gold mined at head grade of 1.45 g/t Au (Probable Mineral Reserve of 46.4 Mt at 1.45 g/t Au, containing 2.157 Moz Au.);
- 1,862,000 ounces of gold produced after average metallurgical gold recoveries of 86.3%;
- Total cash cost estimated at US$482 /oz Au (including royalties, refining and transport) and an all-in sustaining cost (as defined by the World Gold Council less Corporate G&A) estimated at US$550/oz Au, generating an operating margin of US$600/oz or 52%;
- Initial and sustaining capital costs, including contingency, for a 100% owner-operated mine are estimated at $317 million and $161 million (including $60 million in closure costs) respectively; and
- A payback of 1.5 years pre-tax and 2.0 years after-tax after the commencement of first commercial gold production;
The Feasibility Study proposes four open pits mined by conventional truck and shovel methods at a nominal ore mining rate of 5 million tonnes per annum for approximately ten years (with Year 1 being the first full year of commercial gold production). A total of 312 Mt of material will be mined to produce 46.4 Mt of ore (strip ratio of 5.7 : 1). Run-of-mine ore will be crushed to a 2-inch feed size and placed on a heap leach pad. Gold will be extracted from the leachate by an Adsorption-Desorption-Recovery (ADR) carbon plant.
The site will be accessed principally from Dawson City, Yukon, by a 214 km single-lane, gravel road with pullouts. The cost associated with upgrading existing road and to construct approximately 37 km of new road along the proposed route is estimated at approximately $25 million. Construction of the access road which will take approximately 9 months and will immediately precede project construction which is anticipated to take 18 months from first mobilization to first commercial gold production.
Electrical power will be generated on site by diesel-powered generators capable of running up to 70% liquefied natural gas.
The Coffee Project is located in west-central Yukon, approximately 130km south of Dawson City. The property can currently be accessed by the Yukon River, helicopter or airplane, and once on site, a 23km all-season road connects the Coffee barge landing site, airstrip, camp and gold deposits.
Comparison to the June 2014 Preliminary Economic Assessment (PEA)
The PEA presented a broadly similar operation to the Feasibility Study. The key differences from the PEA presented in the Feasibility Study include:
- Total ounces unchanged, with a shorter mine life, higher head grade, lower reserve tonnage, and higher strip ratio;
- Increased average total mining rate from approximately 64,000 tonnes per day (tpd) to approximately 92,000 tpd;
- A ridge-top heap leach pad with a shorter initial construction period and lower capital cost per tonne of ore leached than the valley-fill impounding heap leach facility proposed in the PEA;
- An access road from Dawson City utilizing a high proportion of existing gravel roads; and
- Improved economics due to a shorter construction period, shorter mine life and higher average gold grade.