Sabina's 100%-owned Back River Gold Project consists of seven properties totaling ~120,000 acres that host known or observed gold mineralization in banded iron formations. Only two of these properties have been the focus of exploration and resource development to date: Goose and George. The Project is located in southwestern Nunavut, Canada, approximately 520 km northeast of Yellowknife, NWT; 50 km southeast of Xstrata Zinc Canada's Hackett River Silver-Zinc Project; and 75 km southwest of Bathurst Inlet.
The current NI 43-101 resource (May 2012) is hosted in several deposits on two properties, Goose and George, and totals 4.2 million ounces of gold in the Indicated category (23.2 million tonnes grading 5.56 g/t Au) and an additional 1.7 million ounces in the Inferred category (9.3 million tonnes grading 5.61 g/t Au).
Sabina purchased the Project in late 2009 and, following the discovery of multiple new deposits in 2010 and 2011, made the decision to advance the Project towards development. In the fall of 2011, the Company engaged SRK Consulting (Canada) Inc. to prepare a Preliminary Economic Assessment (PEA) based on the Company's November 2011 NI 43-101 resource estimate. The positive results of the PEA were announced in May 2012 and the Project is now being advanced towards the Pre-Feasibility Study stage which is slated for completion in mid-2013.
A $60 million 2012 exploration, development and environmental baseline program is currently underway. The exploration program involves 8 drill rigs targeting infill and extensions of the known deposits and testing and developing of new targets based on Sabina's "Exploration Toolbox". The Exploration Toolbox, based on (among other things) interpreting geological and geophysical signatures used to identify areas on the iron formation that have been altered by high temperature geological events, has allowed the company to make several major new discoveries, including the Umwelt and Llama deposit which feature prominently in the PEA. Please visit the News Section for the Company's latest exploration results.
MAY 2012 NI 43-101 RESOURCE UPDATE
As part of the PEA, SRK undertook a recalculation of the resources at the George deposits. The table below incorporates the results of this recalculation. All other resources (Goose, Llama and Umwelt) are unchanged from the November 2011 NI 43-101 report. The next resource update is anticipated in late 2012 following the completion of the ongoing 2012 exploration program.
Classification Deposit Tonnes Au (g/t) Au oz
Indicated Goose OP 7,697,000 4.45 1,101,000
Llama OP 1,860,000 9.41 562,000
Umwelt OP 6,532,000 4.89 1,026,000
Umwelt UG 4,407,000 5.31 751,900
George UG 2,727,000 8.14 714,000
TOTAL INDICATED 23,223,000 5.56 4,155,000
Inferred Goose OP 436,000 3.53 50,000
Llama OP 981,000 5.71 180,000
Umwelt OP 1,160,000 4.00 149,000
Goose UG 570,000 5.81 106,000
Umwelt UG 4,328,000 4.75 665,000
George UG 1,857,000 8.92 533,000
TOTAL INFERRED 9,332,000 5.61 1,683,000
1. CIMM definition standards were followed for Mineral Resources
2. Mineral resources for Llama are reported at a 0.76 Au (g/t) cut-off within an optimized pit shell at a gold price of $1,050 Oz Au.
3. Mineral resources for George are reported at a 2.00 g/t cut-off and were comprised of information from 890 drill hole and trench records, of which 831 were considered for this mineral resource estimate.
4. The Umwelt Deposit OP mineral resources are reported at a cut-off grade of 1.00 g/t. UG resources are reported at a cut-off grade of 2.00 g/t.
5. OP mineral resources for Goose are reported at a 1.50 Au (g/t) cut-off within an optimised pit shell using a pit discard cut-off grade of 0.70 Au (g/t). UG resources are reported at a cut-off grade of 3.00 Au (g/t).
6. Numbers may not add due to rounding.
7. The Qualified Person responsible for the George and Umwelt Resource estimates is Wayne Barnett, Pr.Sci.Nat., and Marek Nowak, P.Eng., of SRK Consulting (Canada) Inc. respectively.
8. The Qualified Person responsible for the Goose and Llama Mineral Resource estimates is Patti Nakai-Lajoie, P.Geo, Roscoe Postle Associates, Inc.
MAY 2012 PRELIMINARY ECONOMIC ASSESSMENT
The PEA, prepared by leading independent consultants under the supervision of SRK, contemplates a scenario with concurrent open-pit and underground mining operations delivering mineralized material from the Llama, Umwelt, Goose and George deposits to a centralized 5,000 tonne per day processing facility located near the Umwelt deposit. Gold production is projected to average ~300,000 oz/year over 12.3 years for total production of 3,677,000 oz Au, beginning in late 2016 or early 2017.
Project Highlights (at Base Case $1,250/oz Au):
The Project generates a post-tax NPV-5% of $650 million and an IRR of 25%
Pre-tax NPV-5% and IRR of $1.1 billion and 32%;
The Project generates life-of-mine ("LOM") after-tax net cash flow of $1.1 billion on gross revenues of $4.6 billion with a payback period of 3.0 years;
Processing rate of 5,000 tpd producing an average of ~300,000 oz Au per year from open pit and underground extraction;
Pre-production capital of $450 million. Sustaining capital of $388 million for total LOM capital of $839 million including closure and contingencies;
Total cash costs of $542/oz LOM including royalties, refining and transport;
Capital and operating costs estimated using a combination of first principle calculations, experience and factored costs; experience includes actual results from comparable northern projects;
A total of 20.7 million tonnes of mineralized material to be milled over 12.3 years with a LOM average grade of 6.13 g/t gold and metallurgical recoveries of 90%;
Base case commodity assumptions of $1,250/oz gold and $1.20/litre diesel.
The study does not incorporate any results of the Company's ongoing 2012 exploration program, and is currently contemplated as a standalone project without the benefit of any regional infrastructure from Xstrata's planned Hackett River Silver-Zinc Project located 50km northwest of Back River.
Economic Sensitivities to Gold Price:
Gold Price ($/oz) $1,000 $1,100 $1,200 Base Case - $1,250 $1,300 $1,400 $1,500 $1,600
Post-Tax NPV-5% ($M) $252 $410 $570 $649 $728 $884 $1,044 $1,201
Post-Tax IRR 13.3% 18.0% 22.5% 24.5% 26.6% 30.6% 34.4% 38.0%
Payback (years) 5.0 3.8 3.2 3.0 2.8 2.5 2.2 2.0
Pre-Tax NPV-5% ($M) $460 $708 $955 $1,079 $1,202 $1,450 $1,697 $1,945
Pre-Tax IRR 17.7% 23.6% 29.0% 31.6% 34.1% 38.9% 43.6% 48.1%
For further details on the PEA please click here.
