Science & Technology
Science and Technology
Science and Technology
Wed, May 19, 2010
Tue, May 18, 2010 Sona Releases Blackdome-Elizabeth Preliminary Economic Assessment
VANCOUVER, BRITISH COLUMBIA--(Marketwire - May 18, 2010) - Sona Resources Corp. (the "Company" or "Sona") (TSX VENTURE:SYS)(FRANKFURT:QS7) is pleased to announce that it has received the Preliminary Economic Assessment evaluation from Micon International Ltd. ("Micon") of mining the known mineral resources at the Blackdome Gold Mine ("Blackdome") and the Elizabeth Gold Property ("Elizabeth") and processing them at the former-producing Blackdome mill.
The economic review contemplates underground mining at Blackdome and Elizabeth with a 200 tonne per day mill throughput over an eight-year mine life, to recover 183,600 ounces of gold and 62,500 ounces of silver. Operating cash costs are projected to average $686 per ounce or $208 per tonne milled over the life of the project. Pre-production capital costs at Blackdome and Elizabeth are estimated at $11.4 million and $9.4 million, respectively, with a combined sustaining capital of $9.45 million. The pre-tax cash flow is estimated to be a positive $27 million, and the after-tax cash flow $20 million.
"We're very pleased with the results of the Preliminary Assessment," says John P. Thompson, Sona's President and CEO. "The report shows a very positive economic projection for mining operations at Blackdome and Elizabeth with processing at the Blackdome mill. This analysis is a baseline scenario. The project is sensitive to the price of gold and a 15% increase in the price to $1,093 generates an increase in pre-tax cash flow to about $54 million. We also see a great deal of upside through increasing the Elizabeth gold resource and an increased mill throughput."
Highlights of the Preliminary Assessment (base case using US$950 per ounce gold price)
- Estimated recovery of indicated resources of 48,673 tonnes grading 12.9g Au/t and 46.1g Ag/t (total 13.5g Au/t equivalent) for the Blackdome deposit with mine recovery of 95% and dilution of 8%.
- Estimated recovery of inferred resources of 23,478 tonnes grading 13.3g Au/t and 16.0g Ag/t (total 13.5g Au/t equivalent) for the Blackdome deposit with mine recovery of 95% and dilution of 8%.
- Estimated recovery of inferred resources of 526,089 tonnes at 10.19g Au/t for the Elizabeth deposit with mine recovery of 100% and dilution of 10%.
- A target production rate of 200 dry metric tonnes per day (dmt/d), or 73,000 dry metric tonnes per year, to match previous Blackdome mill production levels, which will help simplify the permitting process.
- A mine life of some eight years for the combined project (Elizabeth and Blackdome), with mining beginning at the Blackdome deposit and subsequently at the Elizabeth deposit. All run of mine ore will be processed at the refurbished Blackdome processing plant.
- Total recovery of 94.5 percent gold and 77.6 percent silver from Blackdome ore, and 92.5 percent gold from Elizabeth ore. The processing plant will recover gold and silver from both Elizabeth and Blackdome using gravity separation and flotation, producing dore and concentrate.
- Average annual gold production of approximately 23,505 ounces.
- Average life of mine cash operating costs of $686 per ounce.
- At US$950 per ounce of gold, US$15 per ounce of silver, and a 1.08 Canadian to US dollar exchange rate, pre-tax net present value (NPV) of $11,459,000 at a 10 percent discount rate, generating an internal rate of return (IRR) of 31 percent.
- Estimated start-up capital costs at Blackdome and Elizabeth of $11.4 million and $9.4 million, respectively, with a combined sustaining capital of $9.45 million for the following six years.
The Preliminary Economic Assessment is preliminary in nature. It includes inferred mineral resources considered to be too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves, and there is no certainty that the preliminary assessment will be realized. The Preliminary Economic Assessment is based predominantly on inferred resources, and the assumptions for the assessment are presented further in this release and in the technical report.
Blackdome mineral resources
Estimated mineral resources for the Blackdome deposit are presented in the table below.
Blackdome Mineral Resource Statement*, March 22, 2010
| Grade | Metal | ||||
| Resource | Quantity (tonnes) | Gold | Silver | Gold | Silver |
| category | (g/t) | (g/t) | (oz) | (oz) | |
| Indicated | 144,500 | 11.29 | 50.01 | 52,600 | 232,300 |
| Inferred | 90,600 | 8.79 | 18.61 | 25,900 | 54,400 |
| * Mineral resources are not mineral reserves and have no demonstrated economic viability. All figures are rounded to reflect the relative accuracy of the estimate. Reported at a cut-off grade of 5.0g Au/t, assuming an underground mining scenario, a gold price of US$1,000 per ounce, and 100 percent metallurgical recovery. Modelled mined-out areas removed. | |||||
Elizabeth mineral resources
Estimated mineral resources for the Elizabeth deposit are presented in the table below.
Elizabeth Mineral Resource Statement*, June 8, 2009
| Domain | Quantity (tonnes) | Grade gold (g/t) | Metal gold (oz) |
| Inferred mineral resources | |||
| Southwest Vein | 328,280 | 13.63 | 143,900 |
| West Vein | 194,563 | 9.95 | 62,239 |
| Total inferred | 522,800 | 12.3 | 206,100 |
* Mineral resources are not mineral reserves and have no demonstrated economic viability. All figures are rounded to reflect the relative accuracy of the estimate. Reported at a cut-off grade of 5.0g Au/t, assuming an underground mining scenario, a gold price of US$1,000 per ounce, and 100 percent metallurgical recovery.
Mining and production
Underground mine design for the Blackdome deposit was completed by Micon, and took into consideration historical mining to identify potentially minable resources. Twenty-three stopes have been found to be suitable for production with a mobile fleet. The following table presents the expected production from the Blackdome deposit.
| Year | –1 | 1 | Total | |
| Days per year | 120 | 365 | 485 | |
| Tonnes per day | 50 | 200 | ||
| Production (tonnes) | 4,326 | 67,944 | 72,270 | |
| Waste development (tonnes) (capital) | 14,679 | 17,786 | 32,465 | |
| Total muck (tonnes) | 19,005 | 85,729 | 104,735 | |
| Mill feed (tonnes) | 5,993 | 73,000 | 78,993 |
Underground mine design for the Elizabeth deposit was completed by JDS Energy and Mining Inc. Two mining methods are proposed: shrinkage, and sublevel long-hole stoping with unconsolidated (mined waste) fill. The following table presents the expected production profile for Elizabeth.
| Parameter | Unit | Production year | Total | ||||||||
| –1 | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | |||
| Southwest Vein production | t | – | 34,262 | 31,882 | 49,371 | 36,559 | 34,704 | 34,987 | 61,627 | 6,401 | 289,793 |
| West Vein production | t | – | 38,737 | 41,119 | 23,629 | 36,441 | 38,296 | 38,013 | 11,373 | 8,688 | 236,296 |
| Total mine production | t (dry) | – | 73,000 | 73,000 | 73,000 | 73,000 | 73,000 | 73,000 | 73,000 | 15,089 | 526,089 |
| Daily production rate | t/d (dry) | – | 200 | 200 | 200 | 200 | 200 | 200 | 200 | 201 | 200 |
| Gold grade | g/t | – | 9.51 | 10.41 | 11.83 | 10.37 | 10.91 | 9.36 | 9.26 | 8.75 | 10.19 |
| Capital development | m | 2,173 | 856 | 405 | 211 | – | – | – | – | – | 3,645 |
| Sustaining development | m | 799 | 988 | 678 | 533 | 183 | 100 | 100 | – | – | 3,381 |
| Total lateral development | m | 2,972 | 1,844 | 1,083 | 744 | 183 | 100 | 100 | – | – | 7,026 |
| m/d | 8.1 | 5.1 | 3.0 | 2.0 | 0.5 | 0.3 | 0.3 | – | – | 2.3 | |
| Capital raise development | m | 289 | 85 | 74 | 25 | 161 | – | – | – | – | 634 |
| Mined underground waste | t | 76,745 | 46,140 | 27,476 | 18,471 | 6,968 | 2,430 | 2,430 | – | – | 180,660 |
| Waste fill placed | t | – | 48,097 | 27,505 | 29,401 | 35,409 | 15,581 | 23,366 | – | – | 173,967 |
The Preliminary Assessment contemplates developing the Blackdome mine first, then transferring the necessary mining equipment for subsequent development and production at the Elizabeth deposit. Ore from the Elizabeth deposit would be hauled by truck on forestry roads to the Blackdome plant for processing. This assessment assumes that the mine will be operated by Sona Resources.
Metallurgy, processing and infrastructure
Results from metallurgical tests show that the ore at Elizabeth is amenable to processing using the Blackdome flow sheet. The Preliminary Assessment contemplates refurbishing the existing Blackdome processing plant and following the previous gravity flotation flow sheet at 200 tonnes per day. Tailings would be sent to the existing Blackdome facility and additional dam lifts constructed.
Infrastructure would include a camp at the Blackdome mine. Existing buildings at Blackdome would be used for offices, maintenance and storage. At Elizabeth, an accommodation camp and office complex would be built with modular units manufactured off site and placed on prepared foundations. A prefabricated maintenance shop and portable units for storage would be used at Elizabeth. Power at both facilities would be produced by diesel generators.
Operating costs
Operating cash costs over the life of the project are projected to average $686 per ounce or $208 per tonne milled. The following table summarizes operating costs for the Preliminary Assessment.
| $/tonne milled | |
| Blackdome mining cost Year –1 | 96.65 |
| Blackdome mining cost Year 1 | 87.91 |
| Elizabeth mining cost | 89.42 |
| Transportation cost (Elizabeth to Blackdome mill) | 10.00 |
| Processing | 80.45 |
| General and administration | 15.00 |
Capital cost estimates
Pre-production capital costs at Blackdome and Elizabeth are estimated at $11.4 million and $9.4 million, respectively, with a combined sustaining capital of $9.45 million for the following six years. The following table summarizes capital cost estimates.
| Thousand $CDN | |
| Blackdome | |
| Capital development – mining | 1,217 |
| Plant and infrastructure | 1,688 |
| Tailings and water management | 1,300 |
| Blackdome – camp | 300 |
| Mining and auxiliary equipment | 5,826 |
| Working capital (percent of EBITDA during mine start-up) | 168 |
| Elizabeth | |
| Capital development – mining | 8,634 |
| Tailings and water management | 1,480 |
| Mining equipment | 673 |
| Road construction (between Elizabeth and Blackdome) | 300 |
| Sustaining capital | 3,791 |
| Working capital (percent of EBITDA during mine start-up) | 492 |
| Closure bonding | 750 |
| Contingency | 3,666 |
| Total capital | 30,286 |
Note: The contingency was calculated on a variable basis. The following contingencies were applied: Process plan, camp and tailings facility 30 percent; Blackdome mining equipment and mining capital development 20 percent, due to variable ground conditions; Elizabeth mining equipment 15 percent; closure bond 15 percent; and road construction (between Elizabeth and Blackdome) 15 percent. No contingency has been applied to working capital estimates, nor for mining capital development at Elizabeth, as ground conditions are anticipated to be more favourable there than at Blackdome.
Financial analysis
Without provision for taxation, the Elizabeth-Blackdome project would be expected to yield a pre-tax undiscounted cash flow of $26,968,000 over an operating life of some eight years, resulting in a pre-tax IRR of 31 percent. When the base case discount rate is applied, the project could be expected to yield a pre-tax discounted cash flow of $11,459,000, resulting in an IRR of 31 percent.
Federal, provincial and British Columbia mining taxes have been estimated and applied to the Elizabeth-Blackdome project, to estimate the after-tax NPV. Including an estimate of possible taxation, the Elizabeth-Blackdome project would be expected to yield an after-tax undiscounted cash flow of $19,928,000 over an operating life of some eight years, resulting in an after-tax IRR of 25.7 percent.
The project shows positive free cash flow in each year of operation following the pre-production period, with a payback period of approximately three and a half years.
Pre-tax sensitivities on NPV are presented in the table below and are based on a discount rate of 10 percent.
| 85 percent | 90 percent | 95 percent | 100 percent (base) | 105 percent | 110 percent | 115 percent | |
| Gold price | –4.86 | 0.58 | 6.02 | 11.46 | 16.90 | 22.34 | 27.78 |
| Exchange rate | –4.53 | 0.80 | 6.13 | 11.46 | 16.80 | 22.12 | 27.45 |
| Operating costs | 22.59 | 18.88 | 15.17 | 11.46 | 7.75 | 4.04 | 0.33 |
| Capital costs | 15.14 | 13.91 | 12.69 | 11.46 | 10.23 | 9.01 | 7.78 |
Notes: 1) NPV in CDN$ millions.
2) Base case assumes US$950 gold price and 1.08:1 Canadian to US exchange rate.
3) The Preliminary Assessment is preliminary in nature. It includes inferred mineral resources considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves, and there is no certainty that the Preliminary Assessment will be realized.
The overall accuracy is estimated at ± 30 percent, which is suitable for a Preliminary Assessment.
Qualified persons for Preliminary Assessment
The Preliminary Assessment was prepared by leading independent industry consultants, all qualified persons (QP) under National Instrument 43–101, with the collaboration of Sona Resources Corporation. The QPs have reviewed and approved the content of this news release. The following consultants participated in the study:
- Micon International Ltd., under the direction of Chris Lattanzi (overall report preparation, metallurgy, mineral processing, Blackdome underground mine design, capital and operating cost estimates and overall financial analysis).
- SRK Consulting ("SRK"), under the direction of Jean-François Couture, principal geologist and Dorota El-Rassi P.Eng., (geology, quality assurance, mineral resources).
- JDS Energy & Mining Inc., under the direction of Michael Makarenko, P. Eng. (Elizabeth underground mine design, mining capital and operating cost estimates).
A number of enhancements to the base case Preliminary Assessment are possible that are not included in the base case and are being evaluated, including: 1) mining the tailings resource to recover the gold; 2) recovering the gold from the sulphide concentrate on site by the use of cyanide, then pouring dore bars on site and not sending the concentrate to a smelter; and 3) doubling the size of the mill, subject to additional resources being outlined on the Elizabeth property.
The Elizabeth deposit area has six known quartz veins roughly parallel to one another, with potential lengths of 600 to 700 metres, striking in a northeasterly direction and dipping at about 80 degrees to the northwest into the hill. The veins are difficult to drill from the surface, as the topography is rugged high alpine, with the veins sub-cropping under a large talus slope. The existing inferred mineral resource has been delineated by approximately 10,000 metres of surface diamond drilling, which has targeted the veins above 200 metres elevation. The mineral resources of the Elizabeth deposit are only located on the ends of the Southwest and West veins. The strike extent and down-dip extensions of the Southwest and West veins have not been tested by drilling, nor has the bulk of the remainder of the known veins been tested. The mineralized zones are wide open for expansion. The geology and structural setting of the Elizabeth deposit has been compared to that at the Bralorne Camp, which lies about 30 kilometres to the south and has produced over four million ounces over its mine life.
A $5-million underground and surface exploration program is planned over the next year at the Elizabeth deposit, to improve confidence in the mineral resource and to expand the known resource. A 2,800-metre surface drilling program is planned, along with a program of extending existing underground drifting, collaring a new drift on the Southwest Vein, raising on the veins to define the mineralization in three dimensions, and completing approximately 4,500 metres of underground drilling.
The technical content of this news release has been reviewed and approved by John P. Thompson, P.Eng., a qualified person for the purpose of NI 43-101.
About Sona Resources Corp.
Since its inception in 1990, Sona has engaged in exploration activities at its mineral properties in Canada and the United States, as well as small-scale gold production at its flagship property, the 100 percent owned Blackdome Gold Mine, in south-central British Columbia. At Blackdome, the indicated mineral resources are estimated to be 144,500 tonnes, grading 11.29 grams gold per tonne and containing 52,600 ounces of gold, and the inferred resource is estimated to be 90,600 tonnes, grading 8.79g Au/t (news release of May 4, 2010). At its 100 percent owned Elizabeth Gold Property, 30 kilometres south of the Blackdome Gold Mine, Sona has outlined an inferred gold resource of 522,900 tonnes, grading 12.3g Au/t and containing 206,100 ounces of gold (news release of June 8, 2009). Sona aims to bring the Blackdome mill back into production over the next three years, with feed from the former-producing Blackdome Gold Mine and the Elizabeth Gold Property.
Sona holds a 100 percent interest in two other promising properties: The Callaghan Project is located in Nevada, within 80 kilometres of several producing mines, and is underlain by the Roberts Mountain Thrust, a major structural setting for gold deposits. The Montgolfier Project is located in Quebec, 40 kilometres east of the multimillion-ounce Casa Berardi Mine gold deposit.
This news release contains certain forward-looking statements, and such statements involve risks and uncertainties. The results or events predicted may differ materially from actual results or events. Any forward-looking statement speaks only as of the date of this news release. Except as may be required by applicable securities laws, the Company disclaims any intent or obligation to update any forward-looking statement, whether as a result of new information, future events or results or any other occurrence.
Neither the TSX Venture Exchange nor its regulation services provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
