TVI Pacific Inc.
TSX : TVI

TVI Pacific Inc.

May 26, 2006 12:48 ET

TVI Pacific Inc. Receives Completed Feasibility Study on Canatuan Sulphide Project, Philippines

CALGARY, ALBERTA--(CCNMatthews - May 26, 2006) - TVI Pacific Inc. (TSX:TVI) ("TVI") announced today that it has received the completed Canatuan Sulphide Project feasibility study prepared by Norwest Corporation ("Norwest") a specialized consulting company providing services to the mining and energy industries. Significant information and assumptions set out in the Norwest feasibility study, which is effective as of May 25, 2006, include:

- PROJECTED 6.5 YEAR MINE LIFE , ASSUMING 1,300 TONNE/DAY PRODUCTION RATE

- PAYABLE METAL OVER MINE LIFE ESTIMATED AT 51,600 OZ Au, 84.4 MILLION LBS Cu, 3.0 MILLION OZ Ag, AND 21,400 TONNES Zn

- AVERAGE OPERATING COST OF US$28.52 PER TONNE OF ORE MILLED

- CAPITAL COSTS ESTIMATED AT US$23.3 MILLION

- TOTAL NET CASH FLOW (BASE CASE) AFTER CAPITAL AND BEFORE INCOME TAX ESTIMATED AT US$98.2 MILLION

- NPV @ 10% = US$60.1 MILLION, IRR = 89% UTILIZING BASE CASE ASSUMPTIONS

The Canatuan deposit is wholly owned by TVI's affiliate, TVI Resource Development (Phils) Inc. ("TVIRD"). The Canatuan Mine is the first producing foreign-financed mine in the Philippines in many years. Mining and processing operations of gossan ore started at Canatuan in May 2004. Through 2005, a series of upgrades were made to the mine and mill facilities, which resulted in increased metal production during the course of 2005 and to date in 2006.

Certain information set out in this News Release constitute forward-looking information. Readers should review the cautionary statement respecting forward-looking information that appears at the end of this News Release.

Unless otherwise noted, all dollar amounts set out in this news release are stated in US dollars.

The Norwest study addresses the copper-zinc bearing massive sulphide zone, or lower portion of the Canatuan Deposit. A separate plant will be constructed to process the sulphide ore if a determination is made to bring the Sulphide Project into production.

The Board of Directors and Management are studying the Norwest feasibility study and assessing the next steps that will be required to advance the Sulphide Project. Refinement and optimization studies have been planned, including further metallurgical test work.

"Management of TVI is very pleased with the results of the Sulphide Project Feasibility Study", said Cliff James, President and CEO of TVI Pacific. The study shows the Sulphide Project to be very robust and a positive production decision is anticipated in the near future. Since the Sulphide Project Feasibility study was conducted on a stand alone basis with no account being given for the overlying gossan deposit that is currently in production, an optimization study combining the sulphide and gossan operations is currently underway that will further improve the Project economics. We expect that both the capital and operating costs of the Sulphide Project will decrease significantly when appropriate allocation is made between the existing gossan operation and the potential sulphide operation. Once the Sulphide Project is operational, we expect the combined Canatuan Mine cash flow generated by both operations to increase substantially."

Project Description

As noted in prior news releases, TVIRD engaged Norwest to undertake an open pit sulphide feasibility study to investigate the commercial potential of the copper-zinc bearing massive sulphide zone, or lower portion of the Canatuan deposit. In mid-2004, TVIRD established commercial mining operations at Canatuan, designed to exploit the gold-silver bearing oxidized (gossan) zone, which represents the upper portion of the deposit. The gossan operation is ongoing and is presently processing ore at the rate of 1,500 tpd. TVIRD is working to further increase the throughput rate of the existing gossan mill.

The Canatuan Mine is located on the Zamboanga Peninsula at the west end of the island of Mindanao, in the southern Philippines. The property consists of five claim blocks: one of which is held under a Mineral Production Sharing Agreement (MPSA) issued in TVIRD's name by the Department of the Environment and Natural Resources, two of which are held under applications for MPSA's, and the remaining two are held as Exploration Permit Applications (EPA's) for a total land package of 37,155 ha.

Mineral Resource

Norwest completed a mineral resource classification (in accordance with National Instrument 43-101 -- Standards of Disclosure for Mineral Projects ("NI 43-101")) for the Canatuan Sulphide deposit in its November 23, 2004 study entitled "Independent Technical Report on the Canatuan Copper - Gold Project, Philippines". Since no material exploration has taken place from the time of the 2004 study to present, the mineral resource remains the same.

The following table presents information contained in the Norwest feasibility study respecting the estimated classified mineral resource for the Sulphide deposit at increasing incremental copper equivalent cut-off grades.



------------------------------------------------------------------------
------------------------------------------------------------------------
CuEq (%) Cut-Off Measured &
Grade Measured Indicated Inferred Indicated
------------------------------------------------------------------------
greater than = 1.0 tonnes 17,280 3,048,550 253,957 3,065,830
----------------------------------------------------
Cu, % 2.340 1.638 1.156 1.642
----------------------------------------------------
Zn, % 0.694 1.164 0.684 1.161
----------------------------------------------------
Au, gpt 0.884 0.763 0.545 0.764
----------------------------------------------------
Ag, gpt 66.8 40.6 32.6 40.7
------------------------------------------------------------------------
greater than = 1.5 tonnes 9,585 2,229,728 131,274 2,239,313
----------------------------------------------------
Cu, % 3.646 2.013 1.718 2.020
----------------------------------------------------
Zn, % 0.820 1.370 0.940 1.368
----------------------------------------------------
Au, gpt 1.206 0.896 0.674 0.897
----------------------------------------------------
Ag, gpt 110.1 49.4 42.5 49.6
------------------------------------------------------------------------
greater than = 2.0 tonnes 8,925 1,752,332 82,569 1,761,257
----------------------------------------------------
Cu, % 3.836 2.315 2.107 2.323
----------------------------------------------------
Zn, % 0.845 1.528 1.154 1.525
----------------------------------------------------
Au, gpt 1.236 0.992 0.838 0.993
----------------------------------------------------
Ag, gpt 116.9 56.5 56.8 56.8
------------------------------------------------------------------------
greater than = 2.5 tonnes 8,925 1,403,596 57,375 1,412,521
----------------------------------------------------
Cu, % 3.836 2.600 2.350 2.608
----------------------------------------------------
Zn, % 0.845 1.619 1.240 1.614
----------------------------------------------------
Au, gpt 1.236 1.069 1.037 1.070
----------------------------------------------------
Ag, gpt 116.9 63.2 71.5 63.6
------------------------------------------------------------------------
greater than = 3.0 tonnes 7,650 1,081,022 42,075 1,088,672
----------------------------------------------------
Cu, % 4.127 2.940 2.674 2.949
----------------------------------------------------
Zn, % 0.948 1.728 1.008 1.722
----------------------------------------------------
Au, gpt 1.381 1.158 1.141 1.160
----------------------------------------------------
Ag, gpt 133.6 69.4 85.0 69.9
------------------------------------------------------------------------
greater than = 3.5 tonnes 6,375 829,846 34,425 836,221
----------------------------------------------------
Cu, % 4.516 3.317 2.985 3.327
----------------------------------------------------
Zn, % 0.983 1.764 0.867 1.758
----------------------------------------------------
Au, gpt 1.511 1.248 1.206 1.250
----------------------------------------------------
Ag, gpt 156.0 74.1 83.5 74.7
------------------------------------------------------------------------
------------------------------------------------------------------------


Mining Plan and Mineral Reserves

In the Norwest feasibility study, the mineable tonnages within the Ultimate Sulphide Pit Design have been classified by Norwest based on the Canadian Institute of Mining, Metallurgy and Petroleum, CIM Standards on Mineral Resources and Reserves, Definitions and Guidelines, prepared by the CIM Standing Committee on Reserve Definitions, August 2000, as required by NI 43-101. A summary of information included in the Norwest feasibility study in that regard is presented in the following table.



SULPHIDE PIT MINERAL RESERVE

------------------------------------------------------------------------
------------------------------------------------------------------------
TONNES AU (GM) AG (GM) CU (%) ZN (%)
------------------------------------------------------------------------
Proven 25,814 1.3825 66.9222 1.5783 0.4610
------------------------------------------------------------------------
Probable 3,085,673 0.8439 43.8183 1.4933 1.1140
------------------------------------------------------------------------
Ore Reserves 3,111,487 0.8392 43.8234 1.5541 1.1566
------------------------------------------------------------------------
Waste 4,688,990
------------------------------------------------------------------------
Inferred 125,616 0.8091 43.3676 1.3536 0.8761
------------------------------------------------------------------------
Waste Total 4,814,606 Waste/Ore 1.55
Ratio
------------------------------------------------------------------------
Material Total 7,926,094
------------------------------------------------------------------------
------------------------------------------------------------------------


Metallurgy and Processing

A milling strategy has been developed that is designed to permit TVIRD to manage the amount of zinc reporting to the copper concentrate with the mill flowsheet. As a result, the Norwest feasibility study recommends that three separate campaigns, or process arrangements, be implemented in response to the Cu/Zn ratio of the expected feed. The recovery level estimated in the Norwest feasibility study for each campaign is presented in the following table, based on the Cu/Zn ratio of the feed.



PAYABLE METAL RECOVERY BY MILLING CAMPAIGN
------------------------------------------------------------------------
------------------------------------------------------------------------
METAL RECOVERY (% OF FEED)
---------------------------
CAMPAIGN NAME CU/ZN RATIO
AU AG CU ZN
------------------------------------------------------------------------
Hi-Cu greater
than 5:1 63% 88% 90% 0%
------------------------------------------------------------------------
Cu Less than
equal to
5:1 and
greater than
equal to 1:1 67% 76% 82% 70%
------------------------------------------------------------------------
Hi-Zn less than 1:1 62% 74% 78% 78%
------------------------------------------------------------------------
------------------------------------------------------------------------


Infrastructure and Transportation

A significant portion of the infrastructure required to support the Sulphide Project is already in place, due to existing gossan operations, although a new processing plant will be required to process the sulphide ore, if a determination is made to bring the sulphide project into production. It is anticipated that any concentrates produced from the sulphide project will be transported by truck to a nearby port and off-loaded to ships. A smelter/refinery contract has not yet been signed, but management believes that industry terms are well understood, and there are numerous smelter/refinery complexes that have indicated acceptance of TVIRD's concentrates.

Engineering and Construction Schedule

The project development schedule presented in the Norwest feasibility study is considered by management to be aggressive, but achievable. It is driven by the current metal pricing environment and the present availability of suitable used milling equipment. Further, the gossan mining operation at Canatuan is sufficiently advanced to allow TVIRD to establish a sustainable sulphide mining operation on the trailing side of the gossan operation. A summary of the project schedule contemplated by the Norwest feasibility study is presented in the following table.



PROJECT SCHEDULE
------------------------------------------------------------------------
------------------------------------------------------------------------
PERIOD ACTIVITY
------------------------------------------------------------------------
Q2 - 2006 Sulphide Feasibility Study delivered to TVIRD.
------------------------------------------------------------------------
Q2 - 2006 Production Decision; Secure financing; finalize necessary
permits and licenses to construct and operate the project.
------------------------------------------------------------------------
Q3 - 2006 Procure & ship major equipment; road construction; in
ground construction, mill and port.
------------------------------------------------------------------------
Q4 - 2006 Mill and port construction activities at peak;
pre-stripping; tailings system construction.
------------------------------------------------------------------------
Q1 - 2007 Mill construction reaches substantial completion; mill
commissioning; first ore and copper concentrate
production.
------------------------------------------------------------------------
Q2 - 2007 Steady-state, design basis mining/milling operations.
------------------------------------------------------------------------
------------------------------------------------------------------------


Environment and Permitting

A detailed tailings management design and costing study, dated May 5, 2006, was prepared by Smith Williams Consultants, Inc. (entitled "Canatuan Pilot Plant Copper/Zinc Tailings Storage Facility Conceptual Design Report"). The Smith Williams capital cost estimate considered TVIRD's past experience and costs associated with the construction of three similar tailings management facilities at Canatuan. The necessary applications for permits required to construct the tailings facility have either been submitted or are expected by management to be submitted in the near future. Management does not anticipate any delays in the construction schedule as a result of permitting requirements.

Capital Costs

The Norwest feasibility study contemplates that a 1,300 tpd processing plant will be constructed on the Canatuan mine site to support the processing of sulphide ore. The capital cost estimate for the processing plant and related infrastructure was prepared by Process Machinery Company Inc., an engineering company based in the Philippines. Capital costs are estimated at US$23.3 million, as more particularly described in the following table.



CAPITAL COST SUMMARY ($USK)
------------------------------------------------------------------------
------------------------------------------------------------------------
US$-K
------------------------------------------------------------------------
ORE DEFINITION AND METALLURGICAL TESTING 475
------------------------------------------------------------------------
DETAILED ENGINEERING AND CONSULTATION 385
------------------------------------------------------------------------
PROCESSING PLANT 9,779
------------------------------------------------------------------------
TAILINGS AND WATER 2,122
------------------------------------------------------------------------
DOCKS AND LOADOUT 1,536
------------------------------------------------------------------------
POWER AND TRANSMISSION 2,250
------------------------------------------------------------------------
MISCELLANEOUS BUILDINGS 212
------------------------------------------------------------------------
MOBILE AND LAB EQUIPMENT 350
------------------------------------------------------------------------
FIRST FILL CONSUMABLES 100
------------------------------------------------------------------------
SANTA MARIAROAD UPGRADE 500
------------------------------------------------------------------------
TAILINGS POND HAULROAD 150
------------------------------------------------------------------------
TOTAL DIRECT COST 17,859
------------------------------------------------------------------------
TRANSPORT COST TO SITE (3% OF TOTAL DIRECT COST) 536
------------------------------------------------------------------------
PROJECT MANAGEMENT 300
------------------------------------------------------------------------
TOTAL CONSTRUCTION COST 18,695
------------------------------------------------------------------------
IMPORT DUTY (3% OF IMPORTED EQUIPMENT CIF PHILIPPINES COST) 207
------------------------------------------------------------------------
VAT @ 12% OF TOTAL DIRECT COST 2,143
------------------------------------------------------------------------
CONTINGENCY @ 10% OF TOTAL DIRECT COST 1,786
------------------------------------------------------------------------
COMMISSIONING AND REVOLVING CASH 500
------------------------------------------------------------------------
PROJECT TOTAL 23,331
------------------------------------------------------------------------
------------------------------------------------------------------------
NOTES:
1. All Figures In US$.
2. Thirty Percent (30%) Contractor's Mark-Up Included.
3. Grinding Circuit Rated At 1,300 tpd; Flotation Plant Rated At 1,500
tpd.
4. All Equipment Is Priced as New Except Sag and Ball Mills.


Operating Costs

The operating cost estimates used in the Norwest feasibility study include the cost of managing, mining and processing all of the Copper and Zinc concentrates and the transportation of such concentrates to a nearby port for shipping. TVIRD has retained suitably qualified consultants to prepare estimates of operating costs by area. Those cost estimates took into consideration TVIRD's local experience and understanding of costs associated with the construction and operation of the current gossan project. The operating cost estimates used for purposes of the Norwest feasibility study are presented in the following table, and are set out by type of ore (Cu to Zn ratio) to be processed. The average operating cost per tonne of ore milled over the life of the mine is assumed to be US$28.52 for purposes of the Norwest feasibility study. Those estimated costs are sulphide stand-alone costs and do not take into consideration any sharing of overheads with the current gossan operations. Management believes that there will be an opportunity for TVIRD to reduce stand-alone costs if the gossan and sulphide operations are running concurrently.



ON-SITE UNIT OPERATING COST ESTIMATE
------------------------------------------------------------------------
------------------------------------------------------------------------
MILL CAMPAIGN (US$/T)
---------------------------------------
COST CENTRE HI CU CU HI ZN
------------------------------------------------------------------------
Mining & Other $ 7.04 $ 7.04 $ 7.04
------------------------------------------------------------------------
Milling $ 12.98 $ 15.05 $ 14.80
------------------------------------------------------------------------
In-Direct $ 5.04 $ 5.04 $ 5.04
------------------------------------------------------------------------
Overhead $ 1.84 $ 1.84 $ 1.84
------------------------------------------------------------------------
Total $ 26.90 $ 28.97 $ 28.72
------------------------------------------------------------------------
------------------------------------------------------------------------


Financial Evaluation

The base case metal prices used in the Norwest feasibility study are as follows:

- Copper: $2.00/lb;

- Zinc: $1.04/lb;

- Gold: $550/oz; and

- Silver: $9.50/oz.

For purposes of its feasibility study, Norwest calculated annual revenue based on the mill feed tonnes, grades and mill campaign assignments as detailed in the production schedule. Revenue was determined using detailed Net Smelter Return spreadsheets. Project economics contemplated by the Norwest feasibility study are summarized in the following table.



PROJECT ECONOMIC RESULTS
------------------------------------------------------------------------
------------------------------------------------------------------------
BASE CASE
------------------------------------------------------------------------
Operating Cash Cost per lb CuEquiv. US$0.65
------------------------------------------------------------------------
Net Cash Flow Before Income Tax US$98.2 million
------------------------------------------------------------------------
Before Tax NPV @10% US$60.1 million
------------------------------------------------------------------------
Before Tax IRR 89%
------------------------------------------------------------------------
------------------------------------------------------------------------


Based on its analysis, as set out in the feasibility study, Norwest has concluded that the Canatuan Sulphide Project is both technically and economically feasible under Base Case conditions.

Sensitivity Analysis

The Norwest feasibility study includes a sensitivity analysis using metal prices that were varied between those used in a 1996 Feasibility Report on the Sulphide Project by Proton Engineering of Vancouver, and prices recently realized on the London Metal Exchange. This represents a range of about -53% to +61% from the base case values. A summary of that sensitivity analysis is presented in the following table.



SENSITIVITY ANALYSIS ON US$ NPV @ 10%

-53% -20% 0 20% 61%
Metal Price $ (23,814) $ 26,689 $ 60,083 $ 93,477 $ 161,935
Specific Gravity $ 13,641 $ 42,558 $ 60,083 $ 77,609 $ 113,536
Opex $ 90,736 $ 71,650 $ 60,083 $ 48,516 $ 24,804
Capex $ 71,559 $ 64,414 $ 60,083 $ 55,753 $ 46,875
Mill Recovery $ (15,396) $ 31,601 $ 60,083 N/A (1) N/A (1)
FX Rate (US/Php) $ (31,732) $ 39,728 $ 60,083 $ 73,654 $ 90,932

(1) Not Applicable as recoveries would approach 100% which is not
realistic


As with any mining project, the economic outcome is sensitive to different degrees to different parameters.

Mr. Ian Perry, P.Geo. of Norwest Corporation, has served as the "Qualified Person" (for purposes of NI 43-101) in respect of the mineral resource statement that appears in the Norwest feasibility study. Mr. Perry has reviewed this News Release at the request of TVI.

Mr. John Fox, P.Eng. of Laurion Consulting Inc. (Vancouver, British Columbia), has served as the Independent Qualified Person (for purposes of NI 43-101) in respect of the metallurgical portion of the Norwest feasibility study. Mr. Fox has reviewed this news release at the request of TVI.

Mr. Craig Acott, P.Eng. of Norwest Corporation, has served as the "Qualified Person" (for purposes of NI 43-101) in respect of the Norwest feasibility study and prepared or supervised the preparation of the Norwest feasibility study. Mr. Acott has reviewed this News Release at the request of TVI.

The Norwest feasibility study will be posted on SEDAR in the near future. Readers should refer to the full Norwest feasibility study for more detail concerning the information summarized in this news release.

About TVI Pacific Inc. (TSX: TVI)

TVI Pacific Inc. is a publicly-listed (TSX:TVI) mining company focused on exploring for and producing precious and base metals within district scale systems in Asia.

In the Philippines, TVI's most advanced project, the Canatuan Mine began mining and milling operations in mid-2004, producing gold and silver dore. Mill throughput is currently over 1,500 dmtpd ( greater than 160 AuEqOz per day) from a gossan/oxide zone. Further expansion of the mill's processing capacity is underway. In addition, TVI holds a 2.5% net smelter return (NSR) royalty on the Philippine-based Rapu Rapu project (the second foreign-invested, new, mining project in the Philippines operated by Lafayette Mining Ltd.). First gold was poured in July 2005 with TVI receiving its first royalty payment in November 2005. On November 10, 2005, Lafayette announced it had suspended all activities to investigate two unauthorized discharges of process water. In Lafayette's first quarter report released April 26, 2006, Lafayette indicated that it has returned to commissioning of the Rapu Rapu plant and, with government support, will soon commence base metal production. Assuming this occurs, TVI would expect royalty payments to resume in the third quarter of 2006. Exploration in the Philippines is being conducted at Canatuan (both to expand TVI's resource base and to find new deposits), and at Balabag, Tamarok and Tapisa which management of TVI views as compelling exploration properties.

In China, TVI's wholly-owned Chinese subsidiary, Hunan Pacific Geological Exploration Inc. (HPGEI) is the first and only foreign mining company to be granted both WOFE status and a Qualified Explorer License. HPGEI has three main areas of interest in China - gold exploration in the Golden Triangle, a prospective metallogenic region in the provinces of Guizhou, Yunnan and Guangxi Autonomous Region, copper/gold exploration in Yunnan Province and copper/gold exploration in the Tibet Autonomous Region. HPGEI has 168,200 hectares of land under application in China in the Golden Triangle and in the Tibet A.R.

TVI also has a Drilling Division comprising of Exploration Drilling Corporation (EDCO), a wholly-owned subsidiary of TVI Pacific Inc. based in the Philippines, and Hunan Pacific Drilling (HPD), a division of HPGEI based in China which generates revenue from contract drilling.

The statements set out in this News Release that are not historical facts are forward-looking statements. Forward-looking statements (often, but not always, identified by the use of words such as "expect", "may", "anticipate" or "will" and similar expressions) may include plans, expectations, opinions, or guidance that are not statements of fact. Forward-looking statements are based upon the opinions, expectations and estimates of management as at the date the statements are made and are subject to a variety of risks and uncertainties and other factors that could cause actual events or outcomes to differ materially from those anticipated or implied by such forward-looking statements. These factors include such things as the volatility of prices for precious metals and base metals, commodity supply and demand, fluctuations in currency and interest rates, inherent risks associated with the exploration and development of mining properties, ultimate recoverability of reserves, timing, results and costs of exploration and development activities, availability of financial resources or third-party financing, new laws (domestic or foreign) and changes in exploration plans or budgets. Forward-looking information respecting expansion plans at the Canatuan mine, exploration throughout the Philippines, and exploration in China are based upon the current budget, development plans and overall strategy of TVI, all of which are subject to change. Forward-looking information concerning recommencement of operations by the operator of the Rapu Rapu property and timing of royalty payments to the Company in respect of production at Rapu Rapu are based upon public statements made by the operator of the Rapu Rapu property. Forward-looking information relating to the anticipated construction of a sulphide processing plant and related infrastructure at Canatuan is premised on such things as the volatility of prices for precious metals and base metals, commodity supply and demand, fluctuations in currency and interest rates, inherent risks associated with the development of mining properties, ultimate recoverability of reserves, timing, results and costs of development activities, availability of financial resources or third-party financing, new laws (domestic or foreign) and changes in plans or budgets. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. The forward-looking statements of TVI Pacific Inc. contained in this News Release are expressly qualified, in their entirety, by this cautionary statement. Various risks associated with the Company's operations are described in detail in TVI's Annual Information Form, filed by TVI on SEDAR on March 30, 2006, which is available at www.SEDAR.com.

The Toronto Stock Exchange has neither approved nor disapproved of the information contained herein.

Contact Information

  • TVI Pacific Inc.
    Clifford M. James
    President and CEO
    (403) 265-4356
    or
    TVI Pacific Inc.
    Paul Moon
    Director, Corporate Communications
    (403) 265-4356
    (403) 264-7028 (FAX)
    Email: tvi-info@tvipacific.com
    Website: www.tvipacific.com