TORONTO, ONTARIO--(Marketwired - April 9, 2013) - Sandspring Resources Ltd. (TSX VENTURE:SSP) ("Sandspring", or the "Company") is pleased to announce the completion of a robust and positive pre-feasibility study ("PFS") and initial mineral reserve estimate for its wholly-owned Toroparu Gold Project (the "Project") in the Republic of Guyana.
The PFS goes beyond the strong economics outlined in the Updated Preliminary Economic Assessment completed by the Company in 2012 (the "Updated PEA") to present a plan that provides several positive changes to the Project, including(1):
Estimated annual production of 246,000 ounces of gold at a mill head grade of 1.32 g/t produced at a cash cost of $504(2) per payable ounce of gold on average over the first four years and 228,000 ounces at a cash cost of $700 per ounce on average over the 16 year life of mine.
Proven and Probable mineral reserve of 4.1 million ounces of gold contained in 127 million tonnes of ore at a grade of 1.00 g/t Au, a 32% increase in life of mine gold grades.
A redesign of the processing flow sheet to produce 78% of gold in doré on site,
After-tax NPV of US$691 million and IRR of 23.1% with an attractive payback period of 2.6 years at a long-term gold price of $1400/ounce.(3)
"We are pleased to announce completion of the PFS for Toroparu, and are encouraged that pre-feasibility engineering confirms the robust economics of the Project," stated Yani Roditis, Sandspring's President and Chief Operating Officer. "Net of pre-production revenue, the estimated development capital expenditures total US$464 million, a reduction from the Updated PEA initial capital estimate, which we view as highly positive in the current inflationary cost environment for mining projects. Furthermore, mine plan optimization and design improvements during the PFS resulted in a life of mine capital reduction of $129 million. The PFS increases our confidence and belief that Toroparu is a project that should be built and therefore Sandspring will continue to move forward with final permitting and development of the Project."
Rich Munson, Chief Executive Officer stated, "We are delighted that the results of the PFS conducted by Yani and his team have confirmed the robust nature of the Project. We are encouraged by recent approaches from third parties expressing interest in developing Toroparu jointly with Sandspring. Despite the expressions of interest, we recognize that funding a project of this scale is challenging in the current environment. We have therefore engaged Cutfield Freeman & Co, a leading independent advisory firm in the mining sector, to conduct a process to determine the options available for financing the development of Toroparu and enhancing the value for our shareholders." Rich went on to say, "We have been in Guyana for nearly fifteen years and we have built strong relationships with Government and local stakeholders. Guyana is one of the few jurisdictions in the world welcoming responsible mining investment. The Government of Guyana has agreed to grant the Project a large-scale mining license authorizing Sandspring to commence production once economic feasibility of the project has been demonstrated. We are confident that the mine development plan outlined in this PFS is just the starting point for Sandspring not only because of the five million ounces of resource that lie just outside our current reserve pit shell and the ten promising gold anomalies within the recently identified 20 km alteration footprint around Toroparu, but also because of the pre-eminent geological team who continue to build an unequalled understanding of the potential of our extensive land position, as well as the regional potential of the large unexplored areas of northwestern Guyana and prolific western Guiana Shield greenstone belts."
Project Economics
Project economic results from the PFS Base, Downside and Upside Sensitivity Cases indicate that the Project generates a 16.1% after tax rate of return at a $1200/ounce gold prices, 23.1% at $1400/ounce, and 33.8% at $1750/ounce of gold indicating that project returns are both robust at historic gold prices and positively leveraged to higher gold prices. Project economics are detailed in Table 1:
Table 1: Project Economics
Project Economics
$M = $US Million
Unit
Downside
Sensitivity
Case
Model
Base
Case(4)
Upside
Sensitivity
Case
Gold Price
$/oz.
$1,200
$1,400
$1,750
Copper Price
$/lb.
$3.25
$3.25
$3.50
Pre-Tax 0% NPV
$
M
$
1,093
$
1,775
$
3,013
Pre-Tax 5% NPV
$
M
$
557
$
992
$
1,782
Pre-Tax 8% NPV
$
M
$
360
$
702
$
1,325
Pre-Tax IRR
%
18.9
%
27.2
%
40.1
%
Payback Period
Years
3.58
2.42
1.37
After-Tax 0% NPV
$
M
$
791
$
1,268
$
2,135
After-Tax 5% NPV
$
M
$
384
$
691
$
1,246
After-Tax 8% NPV
$
M
$
233
$
476
$
914
After-Tax IRR
%
16.1
%
23.1
%
33.8
%
Payback Period
Years
3.66
2.63
1.57
EBTIDA 2017
$
M
$
235
$
285
$
379
Maximum Yearly EBTIDA
$
M
$
235
$
285
$
385
Total Initial Capital
$
M
$
501
Total Initial Capital (Net of Pre-Prod Margin)
$
M
$
464
Process Capacity Expansion (Year 4)
$
M
$
50
Remaining Sustaining Capital (incl Closure)
$
M
$
270
Total Capital
$
M
$
821
Mine Life
Years
16
Production Schedule
More accurate resource and geologic models produced over the course of 2011/2012 during the pre-feasibility definition drilling campaigns identified two geographically distinct populations of gold bearing saprolite and fresh rock ores, distinguishable by their copper sulphide contents, ore with recoverable copper being defined as "Au/Cu Ore" and without recoverable copper content as "Au Ore". The mine plan and production schedule defined in the PFS were optimized for higher metallurgical recovery by processing these ores separately in different circuits as they are mined from the Toroparu and SE pits.
The PFS is based on mining 127 million tonnes of saprolite and fresh rock ores containing 4.107 million ounces of gold at an average grade of 1.00 g/t Au over a two year pre-production period and 16 year mine life (Table 2). The mine plan includes:
5 million tonnes of saprolite Au Ore containing 148,000 ounces of gold at an average grade of 0.91 g/t Au that will be processed via conventional cyanide leach;
52 million tonnes of fresh rock Au/Cu Ore containing 1,953,000 ounces of gold with an average grade of 1.17g/t Au and 0.18% Cu that will be processed via flotation concentration; and
70 million tonnes of fresh rock Au Ore containing 2,006,000 ounces of gold with an average grade of 0.89 g/t Au and 0.05% Cu that will also be processed via cyanide leach.
Processing facilities will be developed in three phases (Table 2):
Phase 1 is designed to process 1.18 million tonnes per annum (Mtpa), or 3,250 tonnes per day (tpd) of saprolite Au Ore during the pre-production period
Phase 2 is designed to process 5.475 Mtpa (15,000 tpd) of fresh rock Au/Cu Ore via flotation concentration, and a combination of 1,500 tpd of saprolite Au Ore and fresh rock Au/Cu Ore flotation tailings over the first 3 years of production.
Phase 3 is designed to treat 5.745 Mtpa (15,000 tpd) of fresh rock Au Ore, saprolite Au Ore and flotation tailings via cyanide leach and 2.738 Mtpa (7,500 tpd) of Au/Cu Ore via flotation concentrate starting in the 4th year of production and continuing for the balance of the mine life.
Table 2: Production Schedule(5)
Saprolite Au Ore
Fresh Au/Cu Ore
Fresh Au Ore
All Ore Types
Dev
Phase
Years
Ore
Processed
(ktpy)
Mill Au
Grade
(g/t)
Gold
Contained
(kozpy)
Ore
Processed
(ktpy)
Mill Au
Grade
(g/t)
Gold
Contained
(kozpy)
Ore
Processed
(ktpy)
Mill Au
Grade
(g/t)
Gold
Contained
(kozpy)
Ore
Processed
(ktpy)
Mill Au
Grade
(g/t)
Gold
Contained
(kozpy)
Gold
Produced
(kozpy)
1
PY-2
1,186
1.25
48
0
0.00
0
0
0.00
0
1,186
1.25
48
47
PY-1
1,186
0.95
36
0
0.00
0
0
0.00
0
1,186
0.95
36
36
2
Year 1
548
0.74
13
5,475
1.74
306
0
0.00
0
6,023
1.65
319
275
Year 2
548
0.61
11
5,475
1.34
236
0
0.00
0
6,023
1.27
246
212
Year 3
517
0.65
11
5,475
1.24
218
0
0.00
0
5,992
1.19
228
197
3
Year 4
64
1.89
4
2,738
0.98
87
5,475
1.32
232
8,276
1.21
322
300
Year 5
64
1.54
3
2,738
1.63
143
5,475
0.78
138
8,276
1.07
285
258
Year 6
64
1.85
4
2,738
1.01
89
5,475
0.77
135
8,276
0.86
228
209
Year 7
64
0.92
2
2,738
1.63
143
5,475
0.77
136
8,276
1.06
281
255
Year 8
64
1.48
3
2,738
1.73
153
5,475
1.31
231
8,276
1.45
387
354
Year 9
64
0.76
2
2,738
0.80
70
5,475
0.71
125
8,276
0.74
197
181
Year 10
64
0.77
2
2,738
1.03
91
5,475
1.13
199
8,276
1.10
292
270
Year 11
64
0.80
2
2,738
1.32
116
5,475
1.39
244
8,276
1.36
362
335
Year 12
64
0.76
2
2,738
0.51
45
5,475
0.78
137
8,276
0.69
184
171
Year 13
64
0.48
1
2,738
0.98
86
5,475
0.66
115
8,276
0.76
203
185
Year 14
64
0.48
1
2,738
0.99
87
5,475
0.89
157
8,276
0.92
245
226
Year 15
64
0.48
1
2,738
0.49
43
5,475
0.48
85
8,276
0.49
129
119
Year 16
271
0.48
4
2,505
0.49
40
4,609
0.48
71
7,385
0.49
115
106
Totals
5,022
0.91
148
51,780
1.17
1,953
70,309
0.89
2,006
127,111
1.00
4,107
3,735
Total gold recovered from the redesigned flowsheet includes 2.914 million ounces of gold in doré bars and 820 thousand ounces in concentrate for a total of 3.735 million recovered ounces. Average annual gold production is 228,000 ounces over the 16 year mine life. Peak production is 354,000 ounces in the 8th year of production.
By-product copper will be produced at an average rate of 25.7 million pounds per year at a grade of 0.23% Cu over the first three years of production (in Phase 2). This copper will be contained in 55,000 metric tonnes of copper concentrates per year on average over this period. The concentrates will be shipped to an offshore smelter for refining. PFS metallurgical test work resulted in copper concentrates produced from lock-cycle tests with indicative grades of 21% copper, 62 g/t gold, and 180 g/t silver(6). Annual by-product copper production is 8.8 million pounds per year during Phase 3, resulting in a life of mine average of 12.0 million pounds per year.
Development Schedule & Capital Costs
The PFS stages the construction of the process facility over a three-year period from anticipated commencement in 2014, subject to financing (Table 3). The first year of construction incorporates the Phase 1 3,250 tpd cyanide leach plant to recover gold from saprolite Au Ore. Construction of the Phase 2 flotation concentrator continues over the next two years of construction to bring the overall process design capacity to 16,500 tpd and the commencement of full scale commercial production. In the 4th year, the process is expanded to accept a throughput of 22,500 tpd of ore, with 15,000 tpd dedicated to processing Au Ore and 7,500 tpd for processing Au/Cu Ore (Phase 3).
To view Table 3, the Development Schedule, please visit the following link: http://media3.marketwire.com/docs/SSP49tab3.png.
The capital requirement to build Phase 1 of the Project is estimated to be $152 million. The saprolite Au Ore processing operation is expected to provide a $37.0 million operating margin during the pre-production period which can be used to offset Phase 2 capital costs. The capital required to build Phase 2 is an additional $312 million (net of the contribution from saprolite Au Ore operating margin). The Phase 3 22,500 tpd expansion is scheduled for construction in year 3 of production at an estimated cost of $50 million. It is anticipated that the operating cash flow will be sufficient to finance the cost of expansion, along with the remaining sustaining capital costs, which are estimated at $17 million per year on average for a total of $270 million over the 16 year mine life. Table 4 summarizes the capital expenditure estimates before and after commencement of production.
Table 4: Capital Cost Estimates(7)
PFS Capital Cost Estimates
(million USD)
Total Initial Capital
(Pre-Prod)
Expansion and
Sustaining
CapEx
LOM
CapEx
Fresh Rock Pre-Stripping
$
24
$
24
Mining Equipment
$
71
$
168
$
239
Milling Circuit
$
75
$
75
Leaching Circuit
$
36
$
36
Flotation Circuit
$
24
$
24
Process Plant Infrastructure
$
6
$
6
Plant Expansion
$
50
$
50
Tailings Storage Facility
$
16
$
63
$
79
On-Site Infrastructure
$
11
$
11
$
22
Power Generation
$
27
$
27
Water Management
$
9
$
9
Camp and Ancillary Buildings
$
25
$
25
Port and Logistics
$
9
$
9
Access Road Upgrades
$
33
$
33
Construction Indirects (incl. EPCM)
$
79
$
79
Owner's Costs (Incl. Closure)
$
20
$
15
$
35
Sub-Total Project Capital Costs
$
464
$
307
$
771
Contingencies
$
37
$
13
$
50
Total Capital Requirement
$
501
$
320
$
821
Contribution from Saprolite Au Ore Margin
-$37
-$37
Total Project Costs w/ Contingencies
$
464
$
320
$
784
The contingency cost in the PFS is based on the total direct and/or indirect costs and are included to account for unanticipated costs within the scope of the estimate. The contingency percentage allowances vary and are individually assessed based on the accuracy of the quantity measurement, type and scope of work, and price information for the capital cost estimate.
The PFS estimate is based on the cost of new equipment supported by budget quotes from vendors which do not reflect discounts for negotiated prices, bulk purchasing, or used equipment purchases where appropriate, any of which could lead to reductions in actual capital costs relative to the prices used in the capital estimate.
Mining
The PFS mine plan provides for the excavation of 127.1 million tonnes of ore and 468.9 million tonnes of waste for a combined total of 596.0 million tonnes of material at a life of mine stripping ratio of 3.69:1. Mining will be conducted with conventional open pit mining techniques over a 16 year mine life in two pits, the Toroparu Pit which will be mined in 13 phases, and the nearby South-East Pit (1.2 km to southeast of Toroparu), which will be mined in four phases.
Mining operations are planned to commence during the second year of construction of the Project in the center of the Toroparu pit, with mining of saprolite Au Ore to support pre-production of gold in saprolite Au Ore processing. The following year mining will be expanded to include mining and stockpiling of fresh rock ore to support the start-up of fresh rock Au/Cu Ore processing in the first year of production. Total mining during the 2 pre-production years is estimated at 15.2 million tonnes at a stripping ratio of 1.05:1. From this point, the mine plan calls for 14 years of mining out of a total 16 year production life. The first five years of mining will continue in the center of the Toroparu Pit at a rate of 40 million tonnes per year, utilizing small scale mining equipment fleet based on 50 tonne capacity haul trucks at a stripping ratio of 3.29:1. Mined fresh rock Au/Cu Ore will be processed in the concentrate circuit and fresh rock Au Ore will be stockpiled for later feed into the expanded cyanide leach circuit beginning in year 4 (Phase 3). Ore loading operations will be accomplished with a fleet of hydraulic excavators (to enhance ore selectivity) and shovels, with operational flexibility provided by a wheel loader.
In the 6th year of the mine plan the annual mining rate is expected to be ramped up to an average of 50 million tonnes and the main truck fleet will be switched over to 133 tonne capacity haul trucks to support the expanded processing capacity. In year 13, the annual mining rate will reduce to 21 million tonnes. In year 14, open pit operations will be completed for the mineral reserves defined in the PFS mine plan. The processing plant will continue operating for another two years processing from low grade ore stockpiles.
Processing
Comprehensive metallurgical programs were conducted at Inspectorate Exploration & Mining Services Ltd. of Richmond, British Columbia in 2012 on saprolite Au Ore; and at SGS Canada Inc. of Lakefield, Ontario in 2012 that tested recovery and reagent consumptions separately for the two fresh rock ore types identified as Au/Cu Ore and Au Ore. The results prompted a redesign of the PEA processing circuit to enable the separate treatment of both fresh rock ore types.
Saprolite Au Ore, part of the Au Ore type, consists of 80-85% fines (
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