Carpathian Gold Inc.

Carpathian Gold Inc.

March 23, 2010 05:59 ET

Carpathian Receives a Positive Preliminary Economic Assessment for its Rovina Valley Gold-Copper Project, Romania

TORONTO, ONTARIO--(Marketwire - March 23, 2010) - Carpathian Gold Inc. (TSX:CPN) (the "Corporation" or "Carpathian") is pleased to announce the results of the NI 43-101 compliant Preliminary Economic Assessment Study ("PEA" or the "Study") on its 100% owned Rovina Valley Gold-Copper Project ("RVP" or the "Project") located in the Golden Quadrilateral mining district of west-central Romania. The PEA was compiled by a consortium of engineering companies led by PEG Mining Consultants Inc. ("PEG") of Ontario, Canada. The Project includes three proximal gold-copper porphyries discovered and delineated by Carpathian and named from north to south, Rovina, Colnic, and Ciresata. All three porphyries occur along a north-northeast trend over a distance of 7.5 km. Since 2006 Carpathian has completed 71,375 metres of diamond drilling culminating in the discovery of the third porphyry, the 'blind' Ciresata deposit in 2008. The Ciresata deposit has the highest gold grade of the three porphyries and is presently open at depth and laterally. The PEA is based on the NI 43-101 compliant resource estimate released on November 17th, 2008, which defined a total of 193.1 Mt at 0.49 g/t Au and 0.18% Cu for 3.07 million ounces Au and 759.1 M lbs Cu (5.09 Moz Gold Equivalent ("Au-eq"*)) in the measured + indicated resource categories and 177.7 Mt at 0.68 g/t Au and 0.17% Cu for 3.89 million ounces Au and 663.1 M lbs Cu (5.66 Moz Au-eq*) in the inferred resource category.

Each of the three porphyry deposits contains higher-grade core zones which are the focus of the mining activity in the present PEA which was designed to maximize the early return on the project. The PEA utilizes conventional open-pit mining at the Rovina and Colnic deposits and bulk-underground mining at the Ciresata deposit. Ore processing utilizes an industry-standard flotation process-only at a rate of 40,000 tonnes per day to produce a gold-rich saleable copper concentrate containing 18 to 22% Cu and 50 to 60 g Au/t. This process does not require the use of cyanide.

Highlights of the Study include:

  • Average annual gold production of 238,000 ounces per annum for the first five years and averaging 196,000 ounces per annum over the mine life of 19 years, for a total of 3.72 million ounces of recoverable gold over the life-of-mine (LOM).
  • Average annual copper production of 53.5 million lbs for the first five years and averaging 49.4 million lbs per annum over the19 year mine life, totalling 938 million lbs of recoverable copper over LOM.
  • Total Gold Equivalent ounces produced over the 19 year mine life is 6.22 million.
  • Total operating cash cost of US $379 per gold ounce with copper as a by-product credit and US $483 per gold ounce on a co-product basis (Copper cash cost is US $1.05 on a co-product basis).
  • Project net present value ("NPV") of US $316 million based on an 8% discount rate at prices of US $900 per ounce for gold and US $2.25 per pound of copper.
  • At near spot metal prices of US $1,000 per oz gold and US $3.00 per lb. copper the NPV is US $731 million based on an 8% discount rate.
  • Project internal rate of return ("IRR") of 15.7%, with a 4.9 year payback on an initial Project capital expenditure of US $509.4 million, at a gold price of US $900/oz and copper price of US $2.25/lb.
  • Project internal rate of return ("IRR") of 24.2%, with a 3.3 year payback on an initial Project capital expenditure of US $509.4 million, at a gold price of US $1000/oz and copper price of US$3.00/lb.

"We are pleased with the positive results from the PEA" said Dino Titaro, President and CEO, "especially with the potential to grow the resource base at the gold-rich Ciresata porphyry which is a covered deposit discovered during the 2008 drilling campaign". Mr. Titaro added "we believe that with additional deep-drilling at Ciresata, where many of the drill holes ended in mineralization, and additional step out drilling to test lateral extensions and nearby porphyry targets, the demonstrated economic viability of the RVP Au-Cu project could be further enhanced. The lack of legacy mining issues and sensitive archaeological sites, the use of a flotation process for Au-Cu recovery, which does not require the use of cyanide, and strong community-based stakeholder relations have provided Carpathian with good support from the local communities. For Carpathian, this PEA study which demonstrates economic viability of a large long life deposit with approximately 200,000 gold only ounces per annum production (+325,000 Au-eq ounces), combined with our near term production potential from the Riacho Dos Machodos gold project in Brazil, which is in the feasibility stage with +100,000 ounces gold per annum production as demonstrated in its PEA study, puts Carpathian's future production profile within the mid-tier gold producer ranks".

The following table presents a list of the Project parameters and assumptions derived from the PEA and cash flow model. While the cost assumptions and mining plan are considered to be at a very high confidence level, the Study includes inferred resources as part of the assessment and as such is classified as a PEA. 

Project Parameters Base Case using open pit design for Rovina & Colnic and bulk underground mining for Ciresata
Total Tonnes Ore Produced 265,000,000
Open Pit Ore Production Rate 20,000 t/d
Underground Ore Production Rate 20,000 t/d
Average Ore Processing Rate 14.4 million t/yr
Average mill/flotation concentrator feed grade LOM 0.66 g/t Au; 0.18% Cu
Concentrate production (wet metric tonnes) 122,000 t/yr
Concentrate grade (dry) 50 – 60 g Au/t; 18 – 22% Cu
Gold Recovery (average) 68%
Copper Recovery (average) 91%
Total Recoverable Gold Production LOM 3.72 million oz
Total Recoverable Copper Production LOM 938 million lbs
Total Gold equivalent oz Production LOM 6.22 million oz Au-eq*
Exchange Rate RON:US$ 3.35
Exchange Rate Euro:US$ 1.44
Mine life 19 years
Average Annual Gold Production  
  First 5 years 238,000 oz
  LOM 196,000 oz
Average Annual Copper Production  
  First 5 years 53.5 million lbs
  LOM 49.4 million lbs
Average Annual Gold Equivalent Ounces Produced  
  First 5 years 380,000 oz Au-eq*
  LOM 327,000 oz Au-eq.*
Initial Capital US $509.4 million
Total Capital (Including Sustaining Capital) US $786.4 million
Total Mining Operating Cost Open Pit LOM US $3.60/t milled
Total Mining Operating Costs Underground LOM US $6.62/t milled
Processing Cost US 4.44/t milled
G&A US $0.45/t milled
Smelter and Refinery Terms  
  Copper Minimum deduction 1.0% of delivered copper
  Base Charge US $60/dmt
  Refinery Charge US $0.06/lb payable
  Gold Refining Charge $10/ounce
  Gold Payable 98.5%
Corporate Tax Rate (PEA financials done pre-tax) 16%
Royalty to Government 4%
Cash Operating Cost Per Ounce Au with Cu by-product credit US $379 per ounce
Cash Operating Cost Per Ounce Au as a co-product US $483 per ounce
Cut-Off grade Open Pit 0.31 g/t Au-eq*
Cut-off grade underground 0.61 g/t Au-eq*
Open-pit Strip Ratio LOM  
  Rovina Porphyry 2.4:1
  Colnic Porphyry 1.6:1
Underground mining method Sublevel panel retreat + induced block cave
* To estimate Au-eq (Gold Equivalent) a gold price of US $675 and a copper price of US $1.80 was used. This is consistent with the Au-eq. calculations the Corporation has used in its previous press releases since 2006.

The project mine design uses a conservative gold price of US $750 per ounce and a copper price of US $1.75 per pound. For the base case financial model a gold price of US $900 and copper price of US $2.25/lb was used.

The sensitivity table below shows various NPV results for the base case as well as for a financial model at near spot metal prices of US $1,000 per ounce and copper prices of US $3.00/lb.

Financial Model Base Case
US $900/oz Au
US $2.25/lb Cu
Near Spot
US $1,000/oz Au
US $3.00/lb Cu
NPVpre-tax US $1,357 million US $2,351 million
NPVpre-tax US $569 million US $1,130 million
NPVpre-tax US $316 million US $731 million
IRR pre-tax 15.7% 24.2%
Years to payback from start of production 4.9 years 3.3 years

Sensitivity charts using a broader range of gold and copper prices are shown at the end of this press release.

According to the cautionary statement required by NI 43-101, it should be noted that this assessment is preliminary in nature as it includes inferred mineral resources that cannot be categorized as reserves at this time and as such there is no certainty that the preliminary assessment and economics will be realized. The full Study will be available at the Company's website and on within 45 days.

Proposed Mining Plan and Processing

The PEA study was completed by PEG, which led a consortium of specialists assembled for the Study. PEG was responsible for the preparation of the overall study as well as the mineral resource estimate, open pit mine design, metallurgical test work, and economic models. The underground design was developed by Python Mining Consultants as part of PEG's mining team. Other members of the consortium included Porcupine Engineering Services Inc. who was responsible for the surface infrastructure including tailings management facility. BGC Engineering Inc. was responsible for the geotechnical aspects of the project of both the open pit and underground designs. EHA Engineering Ltd. was responsible for the ore process plant flow sheet design and costing with Mineral Services LLC responsible for the metal market information and smelter and refinery costs.

The Project will be a conventional open pit mine with down-the-hole drill blast hole, hydraulic shovels and conventional haul trucks for the Rovina and Colnic deposits located approximately 2.5 km apart. Mining production from the combined two open pits is planned at 20,000 t/d. The Ciresata deposit will be mined by a combination of a sublevel panel retreat mining in the upper levels of the deposit accessed by a decline from the surface, and an induced block cave method for the lower part of the deposit. The upper sublevel panel retreat mining will allow mining access to high-grade ore while development occurs to prepare for the induced block cave operation at depth. At full capacity, the underground operation will mine 20,000 t/d. Ore from the induced block cave operation will be fed to the centralized process plant located between the Rovina and Colnic deposits via a 6 km inclined conveyor tunnel to the surface.

The onsite metallurgical facility will process 40,000 t/d and will include conventional unit operations such as crushing, grinding, froth flotation and dewatering to produce a gold-rich flotation concentrate. Metallurgical test work has determined that good recoveries and saleable concentrate grades are attainable through flotation only, and the use of cyanide leaching is not required.

Metallurgical testing has been completed on samples of drill core from each deposit at SGS Geosol, Brazil and at SGS Minerals Services, Lakefield, Canada. The work consists of preliminary grindability testing, batch rougher and cleaner testing, mineralogy and locked cycle flotation testing. Preliminary grindability work has established that the ore is moderately hard, with a Bond work index of between 13.6 and 17.3 kWh/t. Locked cycle flotation testing has demonstrated that a simple flotation flow sheet with moderate grinds and low reagent additions is able to generate saleable copper concentrates averaging 18 to 22% copper and 50 to 60 g/t Au concentrate. In recognition of an increased gold price forecast, recent metallurgical work targeted a flotation concentrate containing higher concentrations of gold-bearing pyrite. The high gold content of this product is anticipated to attract excellent downstream processing terms.

Metallurgical predictions derived from locked cycle test data are summarized below:

Sample Head Assay Concentrate Assay Recovery to Concentrate
Cu (%) Au (g/t) Cu (%) Au (g/t) Cu (%) Au (%)
Rovina 0.26 0.27 24.3 20 93.2 69.9
Colnic 0.12 0.70 13.6 63 91.7 67.9
Ciresata 0.16 0.93 18.7 82 89.4 66.9

Concentrate will be produced at a life of mine average rate of 122,000 t/yr wet metric tonnes (115,000 t/y dry metric tonnes). Earlier analysis of flotation concentrates has highlighted no significant levels of deleterious elements.

Social-Environmental setting

The state-owned Brad-Barza underground gold mine is located approximately 7 km to the west of the RVP and closed operations in 2007. There has been no previous commercial mining activity at the RVP. There has been some limited underground exploration galleries completed by the State at the Rovina deposit, and a few underground exploration drifts at the Colnic deposit. The present mine site footprint does not include any known protected heritage sites or archaeological occurrences and has been designed to minimize impact in the nearby communities of Rovina and Bucuresci. Carpathian, through its wholly owned operating subsidiary in Romania, SAMAX Romania SRL ("SAMAX"), has maintained a proactive local stakeholder engagement program starting from the initial drilling in early 2006 to the present. The program includes local community hall public meetings, a public information centre opened in 2007, and partnership programs with local NGO's (with European Union funding) and community leaders to implement community-based projects. SAMAX's good relations with the community have allowed unhindered surface access for drilling in the project area which requires permission from landowners.

Future Upside

The covered Ciresata deposit was discovered near the end of the 2008 drilling campaign and remains open at depth and laterally. The present inferred resource is based on 15 drill holes, with several holes ending in mineralization and the potential for resource growth is considered very good. In addition, in the Ciresata area, satellite drill targets have been identified and provide new targets for drill testing. Carpathian has also identified other porphyry targets in the vicinity of the RVP and programs to enable testing of these targets are in-place.

In addition to the exploration potential, the present mining boundaries of the deposits as currently defined in the PEA study are by base-case economic cut-off grades with significant resource tonnage presently excluded from the mining plan. Increasing metal prices and recoveries can lower these cut-off grades and have the potential to provide more tonnage for mining, which will be reviewed as the project progresses into the feasibility study stage.

The preliminary metallurgical programs conducted to date have demonstrated that excellent copper recoveries are readily achievable using a simple flotation process. Conversely, the recovery of gold has been negatively influenced by losses to the pyrite-rich cleaner tailings stream and this is considered to be an opportunity for significant improvement. As the project progresses, metallurgical flow sheet optimisations are planned to improve flotation chemistry and thereby reduce gold losses to this stream.

Current Work Activities

Carpathian has re-commenced diamond drilling at the Ciresata porphyry. In addition, a consortium of State-recognized consulting groups have been retained and are advancing technical studies required to convert the Rovina Exploration License into a Mining License as per the norms of the National Agency of Mineral Resources ("NAMR"). These studies include preliminary evaluations of impacts, risk factors, and economic benefits to be reviewed solely by the NAMR for Mining License designation which is targeted to be completed by year-end.

RVP Background

The RVP is located in west-central Romania and lies within the historic gold producing district known as the 'Golden Quadrilateral'. The 'Golden Quadrilateral' is one of the largest gold producing areas in Europe and is estimated that more that 55 Moz of gold have been produced since the Roman period (ca 2000 yrs ago). The bulk of this historic gold production has come from low-to-intermediate sulphidation epithermal veins hosted in intermediate tertiary age volcanic and sub-volcanic complexes. Since opening-up to western exploration companies, a further 12.5 Moz of gold in the reserve category have been defined associated with these low-to-intermediate epithermal mineralization centers. Carpathian was granted the 94 square kilometre Rovina Exploration license in late 2005 though a public tender and bid process. Generative exploration work by Carpathian geologists defined the Colnic porphyry target, which was drill-tested in February 2006 and led to the discovery and delineation of the Colnic Au-Cu porphyry deposit. Later in 2006, drilling at the Rovina porphyry discovered a significant gold component to the known copper mineralization. Drilling continued through 2008 with a total of 71,375 m diamond drill core completed. Near the end of this drilling campaign, drilling at the Ciresata porphyry target discovered the blind Ciresata Au-Cu porphyry below an altered barren cover of 75 to 150 m. The Ciresata porphyry is the highest gold-grade porphyry known in the western Tethyan orogenic belt.

The RVP is located approximately 17 km northwest of European Goldfields Certej gold-silver Project which is quickly moving forward on its permitting process and construction permits as outlined in their press release dated March 16, 2010.

Qualified Persons

The following qualified persons as defined in National Instrument 43-101 has read and approved the relevant technical portions of this news release:

Mr. Gordon Zurowski, P. Eng., Principal Mining Engineer of PEG Consultants Inc., Ontario, Canada

Mr. Andy Holloway, P. Eng., Principal Process Engineer of PEG Consultants Inc., Ontario, Canada

Mr. Eric Harkonen, P. Eng, MBA, Principal Project Manager/ Mine Engineer of PEG Consultants, Inc., Ontario, Canada

Mr. Al Hayden, P. Eng., President of EHA Engineering Ltd, Ontario, Canada

Mr. Titaro, P. Geo., is the qualified person (as defined in National Instrument 43-101) responsible for preparing the information contained in this news release. 

About Carpathian

The Corporation is an exploration and development company whose primary business interest is developing near-term gold production on its 100% owned Riacho dos Machados Gold Project in Brazil, which is currently in the feasibility study stage, along with progressing its exploration and development plans on its 100% owned Rovina Valley Au-Cu Project located in Romania.

Forward-Looking Statements: This press release includes certain statements that may be deemed "forward-looking statements". Forward-looking statements are frequently characterized by words such as "plan", "expect", "Project", "intend", "believe", "anticipate", "estimate", and other similar words, or statements that certain events or conditions "may" or "will" occur. All statements in this release, other than statements of historical facts, that address future exploration drilling, exploration activities and events or developments that the Corporation expects, are forward-looking statements. Although the Corporation believes the expectations expressed in such forward-looking statements are based on reasonable assumptions, such statements are not guarantees of future performance and actual results or developments may differ materially from those in forward-looking statements. Factors that could cause actual results to differ materially from those in forward-looking statements include market prices, exploitation and exploration successes, continued availability of capital and financing, and general economic, market or business conditions. There can be no assurance that forward-looking statements will prove to be accurate, as results and future events could differ materially from those anticipated statements. The Corporation undertakes no obligation to update forward-looking statements if circumstances or management's estimates or opinions should change. The reader is cautioned not to place undue reliance on forward-looking statements.

Net Present Value @ 5% Discount Rate (US$ millions)

    Gold Price ($US/oz)
    $850 $875 $900 $925 $950 $975 $1,000
Copper Price ($US/lb) $1.75 $230 $282 $334 $385 $437 $489 $541
$2.00 $348 $399 $451 $503 $555 $607 $659
$2.25 $465 $517 $569 $621 $673 $725 $777
$2.50 $583 $635 $687 $739 $791 $842 $894
$2.75 $701 $753 $805 $856 $908 $960 $1,012
$3.00 $819 $870 $922 $974 $1,026 $1,078 $1,130

Net Present Value @ 8% Discount Rate (US$ millions)

    Gold Price ($US/oz)
    $850 $875 $900 $925 $950 $975 $1,000
Copper Price ($US/lb) $1.75 $66 $105 $144 $182 $221 $260 $299
$2.00 $152 $191 $230 $269 $308 $347 $386
$2.25 $239 $278 $316 $355 $394 $433 $472
$2.50 $325 $364 $403 $442 $481 $520 $559
$2.75 $412 $450 $489 $528 $567 $606 $645
$3.00 $498 $537 $576 $615 $654 $692 $731

Net Present Value @ 10% Discount Rate (US$ millions)

    Gold Price (US$/oz)
    $850 $875 $900 $925 $950 $975 $1,000
Copper Price ($US/lb) $1.75 -$9 $24 $56 $89 $122 $154 $187
$2.00 $63 $95 $128 $161 $193 $226 $258
$2.25 $134 $167 $200 $232 $265 $297 $330
$2.50 $206 $238 $271 $304 $336 $369 $401
$2.75 $277 $310 $343 $375 $408 $440 $473
$3.00 $349 $382 $414 $447 $479 $512 $544

Internal Rate of Return (IRR)

    Gold Price (US$/oz)  
    $850   $875   $900   $925   $950   $975   $1,000  
Copper Price ($US/lb) $1.75 9.7 % 10.7 % 11.7 % 12.6 % 13.6 % 14.5 % 15.4 %
$2.00 11.9 % 12.8 % 13.7 % 14.6 % 15.5 % 16.4 % 17.3 %
$2.25 13.9 % 14.8 % 15.7 % 16.5 % 17.4 % 18.2 % 19.1 %
$2.50 15.8 % 16.7 % 17.5 % 18.4 % 19.2 % 20.0 % 20.8 %
$2.75 17.6 % 18.5 % 19.3 % 20.1 % 20.9 % 21.7 % 22.5 %
$3.00 19.4 % 20.2 % 21.1 % 21.9 % 22.6 % 23.4 % 24.2 %

The TSX does not accept responsibility for the adequacy or accuracy of this news release.

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