Alexis Minerals Corporation

Alexis Minerals Corporation

July 12, 2007 07:30 ET

Alexis Feasibility Confirms Strong Profitability at Lac Herbin With IRR of 48% and Cash Cost of $389/Ounce Gold


TORONTO, ONTARIO--(Marketwire - July 12, 2007) - Alexis Minerals Corporation (TSX VENTURE:AMC) is pleased to announce that independent engineering firm Golder Associates Ltd. have completed a Feasibility Study focused on the existing Measured and Indicated Resources established in January 2007 on its' Lac Herbin gold deposit. The study confirms that the deposit is economic at current gold prices and has the potential to produce up to 40,000 ounces of gold per year with an estimated cash cost of US$389 per ounce (see Table 1), well within the cost-range of vein-type gold deposits operating in the region, and with an Internal Rate of Return (IRR) of 48% over a modeled initial 18 months of production commencing in January 2008. The study results in a Net Cash Flow of $5.8 M with a Payback period of 15 months on capital costs of C$6.5M. The deposit is located 8.0 kilometers east of Val d'Or, Quebec and approximately 1.2 kilometres west of the Alexis wholly-owned, 1,400 TPD Aurbel Gold Mill.

A preliminary evaluation of a longer term mining scenario was also completed to demonstrate the significant upside potential from ongoing delineation of current Inferred Resources, partially respecting the longer term potential of the project and in keeping with similar deposits mined historically in the Val d'Or area. This "4-year Production Model" provides annual production of approximately 40,000 ounces gold at an estimated cash cost of US$394 per ounce, Net Cash Flow of $20.1 M and IRR of 78%. Sensitivity analysis on the feasibility model and the '4-year Production Model' are provided in Table 2.

Significant long-term upside impact on mine life, project economics and profitability also come from ongoing success in 2007 in the high grades/tonnage of the new Deep South area (see Press Release: April 26, 2007); the low-cost high tonnage potential of the recently delineated "Flat Swarms" (see Press Release: June 20, 2007), and, successful extensions to our other ore zones, including the S1W (see Press Release: March 22, 2007) and HW Zones (see Press Release: Appendix Table 3, October 18, 2006). These new results will be included in published Resources later in 2007.

"The Lac Herbin deposit is our first mining opportunity and allows Alexis to emerge as a gold-producing company providing cash flow to support long term operations in the region," stated David Rigg, President and C.E.O. of Alexis Minerals. "The numbers are very robust and we remain in the very early stages of understanding the true potential of this deposit. We need to 'drill for structure' and 'mine for grade' in this environment and it is essential that exploration and delineation of Resources advances ahead of, but eventually hand-in-hand with, production. Lac Herbin has potential to extend to depth and be similar to other million-ounce producers in the Camp. Exploration will continue to advance the delineation of further resources, explore our new discoveries of 2007, and confirm if mined grade improvements, identified in 2006 which were not applied in this study, will result in higher than anticipated grades through bulk sampling".

The feasibility study and the preliminary evaluation of the 18-month and 4-Year Production Model was completed under the direction of Francois Chabot, P.Eng and a Qualified Person under 43-101 guidelines, of the engineering firm Golder Associates Ltd ("Golder") with the aid of the Alexis technical team. The final report will be filed within 45 days according to NI 43-101 guidelines on The study was completed to evaluate the potential for future production on the property commencing in January 2008 after completion of the current and ongoing underground exploration program. This exploration program is focused on further confirmation of the grade characteristics of the deposit and includes a bulk sample of material obtained from development in mineralization, testing mining in selected stoping areas and further test milling of up to 50,000 tonnes in November-December 2007.

Table 1: Summary of results from Golder Feasibility study and
preliminary "4-year Production Model",
Lac Herbin Project, Val d'Or, Quebec

Feasibility 4-year Production Model
----------- -----------------------
Capital Cost (C$) C$5.6 M C$5.6 M
Cash Cost/ounce (US$/oz) US$ 389 US$ 394
Cost per tonne (C$/t) C$ 99 C$ 101
Net Cash Flow (NPV @ 0%) C$ 5.8 M C$ 20.1 M
IRR 48% 78%

Upside Potential/Sensitivity Analysis

Sensitivity analysis shows several areas where significant project optimization can be realized. For each of the following variables, the improvement of project viability over the base cases is apparent:

Table 2: Highlights of Sensitivity Analysis, Lac Herbin Project,
Val d'Or, Quebec

Item Change Feasibility Production Model
Net Cash IRR Net Cash IRR
Flow Flow
Base Case US$625/oz. Au C$ 5.8 M 48% C$ 20.1 M 78%
Operating cost Decrease 5% C$ 6.9 M 58% C$ 23.5 M 90%
Increase 5% C$ 4.6 M 38% C$ 16.8 M 66%
Grade Decrease 0.5 g Au/t C$ 3.3 M 27% C$ 13.3 M 53%
Increase 0.5 g Au/t C$ 8.2 M 70% C$ 27.0 M 103%
Resources Increase 10% (25,000 T) C$ 7.6 M 66%
Gold Price US$550 C$ 1.4 M 11% C$ 7.9 M 32%
US$600 C$ 4.3 M 35% C$ 16.0 M 63%
US$650 C$ 7.2 M 61% C$ 24.1 M 93%
US$750 C$ 13 M 114% C$ 40.3 M 151%

Feasibility Study Parameters: Resource Base

The study is based on the resource estimate of January 2007 completed on results of drilling up to December 11, 2006 and prepared by Carl Pelletier, P.Geo., of Innovexplo Inc., Independent Qualified Person as defined under NI 43-101 guidelines (see Press Release: January 11, 2007). The Resource base is summarized in Table 3.

Table 3: Gold Resource Inventory of Lac Herbin Project, Val d'Or, Quebec,
C. Pelletier, P.Geo., 43-101 prepared by Innovexplo Inc., January 2007.

Measured (M) Indicated (I) Total M+I Inferred(Inf) Total Inf
Grade Grade Grade
Tonnes (gAu/t) Tonnes (gAu/t) (ounces gold) Tonnes (gAu/t) (ounces gold)
34,600 8.02 460,300 7.81 124,572 678,000 7.69 167,600

Previous underground exploration concluded in 2006 with a bulk sampling program in two selected areas and milling of the development ore. Mill-reconciled grades of mineralization increase in mined areas relative to initial drill indicated grades with net increases to drill indicated grades of between 51 and 244%. (see Press Release: January 16, 2007). The feasibility study uses drill indicated grades only with an additional 10-15% mining dilution at nil grade, perhaps an underestimation of the grade characteristics of the deposit.

"Based on historical production from similar deposits on the Aurbel property, the diluted mined grade should approximate undiluted drill indicated grades", stated Richard Roy, P.Geol. and QP for Lac Herbin. The increased mined tonnage, due to mining dilution, will probably be offset by the grade improvement from mining and sampling the whole vein. The mining of ore blocks should result in more tonnes due to dilution, but the overall mined grade should remain at the undiluted drill indicated grade. Resources below feasibility mine cut-off grades may also be significantly upgraded during mine development."

The ongoing underground exploration program is focused at confirming grade relationships. Grade improvement would result in an increased number of production-ounces from the deposit with obvious economic impact on costs, production and economics.

Feasibility Study Parameters

The feasibility study is based on published diluted Measured and Indicated Resources only with production rates, development quantities and costs calculated by Golder. Potential "mineable" tonnes were estimated using the gold resource inventory below a recommended 30-meter crown pillar and with detailed mine planning and scheduling. Golder assessed the deposit using blasthole mining and room and pillar methods.

Table 4: Parameters of selected Mining Methods, La Herbin, Val d'Or

Mining Approach Blasthole Mining Room and Pillar
---------------- ---------------
Proportion of production 90% 10%
Minimum Zone Thickness 2.0 metres 2.0 metres
Mining Recovery 85% 85%
Dilution (@Nil grade) 15% 10%
Mine Cut-off grade 5.7 gAu/t 6.84 gAu/t

The evaluation assumes the operating costs for processing of the mined ore by custom milling in the region. Capital costs to refurbish the Aurbel Mill and lower anticipated operating milling and shipping costs from this refurbishment have not been included with the evaluation. Cost estimates and recoveries were developed from recent bulk sampling and test-milling, historical records, and by comparison with other similar operations where costs are known.

Input parameters for the 18 month feasibility period include:

- Diluted Measured and Indicated Resources only and accessible from immediate mine development, less provision for a crown pillar, with a mining recovery factor of 85%

- Production rate of 640 tonnes per day over a 5 day work week, providing production of approximately 160,000 tonnes of ore and 40,000 ounces of gold per annum.

- Gold price of US$625 per ounce

- US$/C$ Exchange rate of 1.10

- Gold recovery of 98% using total cyanidation during milling

- Mining costs of C$99.0 per tonne (includes services, stoping, delineation drilling, ore transportation to surface stockpile, transport to mill and milling)

- Capital costs of C$6.5 million which includes $5.6M to provide mobile mining equipment for Alexis mining operations

- Ongoing underground development costs of C$2.2 million per year for extended operations

- Provision for environmental reclamation of $140,000

- Calculated as a Pre-tax evaluation. Alexis has a large prior reserve of Canadian Exploration and Development Expenses of approximately C$11.7M and C$2.5M of non-capital losses.

- No provision for Quebec Tax Refunds (Estimated: 2006 - $4.6M; 2007 - C$7.2M) from eligible exploration expenses in 2006 and 2007 and directly attributable to the Lac Herbin project.

- Exploration and development costs to Dec 31, 2007 (C$ 12.9 M), up to the end of ongoing underground exploration are considered sunk exploration costs.

Major Conclusions of the Study

Golder concludes that the study has shown that current Measured and Indicated Resources can support an economic mining operation starting in January 2008 under current market conditions.

"The numbers for Lac Herbin are very good," stated Francois Chabot, P.Eng, and author of the study. "The average IRR for 13 recent projects covering a broad representation of projects in the mining industry is 26% and 55%. At an IRR of 48% for the base case, Lac Herbin project will clearly stand out as a mine in January 2008 and represents a major achievement for Alexis."

The mining method proposed employs a mechanized approach using a main ramp to access the levels and local smaller secondary ramps to access sub-levels. This is innovative and well suited for the deposit. It shows clear advantages in terms of safety, costs, flexibility of the operations and equipment, and long term access to mineralization. Lower anticipated mining costs should result from continuing success in delineation drilling on recent successes in the area of the infrastructure.

Recommendations from the study:

The Golder Feasibility Study recommends that Alexis:

- continues the current underground exploration program in order to complete test stoping and to enlarge Resources through delineation/exploration drilling, and underground development

- evaluates in detail the production grade of the future test stopes to allow accurate reconciliation with milling and define specific reconciliation factors for future mining.

- develops a mine plan (plan and schedule) and cost estimate conforming to NI 43-101 later in 2007 as additional Indicated and Measured Resources are established, to transfer these into profitable mine reserves

Historical Perspectives:

The Lake Herbin deposit is showing similarities with other vein type deposits of the Val-d'Or area. The deposit contains multiple mineralized zones exhibiting both strong vertical and horizontal extension. Many of the areas still remain open for lateral and vertical extension. Locally, true thickness of the zone can be in the range up to 5 meters. This type of deposit is difficult to evaluate without sufficient definition drilling and development in veins, but clearly Lac Herbin offers potential to replace resources on a multi-year's basis as experienced at the Sigma, Lamaque and Beaufor mines. The 4-year Production Model demonstrates the positive economic impact of continuing exploration and delineation drilling.

Table 5: Initial Reserves and Resources at time of Mine Production Decision
and Final Mine Production of Deposits in the Val d'Or area.

Deposit In Resources/Reserves Final or current
at Production Decision Production
Ounces Gold Ounces Gold
Sigma 63,000 4,200,000
Beaufor 114,000 750,000
Dumont & Ferdeber 327,000 600,000
From Published Quebec Government Historical Records

Quality Control

The Lac Herbin exploration program is supervised by Mr. Richard Roy, P.Geo., of NordQuest Inc., Qualified Person (QP) as defined under NI 43-101 guidelines. Engineering work is supervised by Michel Labonte and Patrick Sevigny, P.Eng. The feasibility study was completed under the direction of Francois Chabot, P.Eng and Independent QP under 43-101 guidelines, through engineering firm Golder Associates Ltd.

Mineral resources that are not mineral reserves do not have demonstrated economic viability (NI43-101/3.4(e).) The preliminary 4-year Production Model includes a portion of mineralized material (Inferred Resources) in order to demonstrate the potential of the Lac Herbin deposit to support ongoing long-term production. This material is 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 4-year Production Model assessment will be realized (NI43-101/2.3(3bi)).

About Alexis Minerals

Alexis Minerals Corporation is a Canadian exploration and development company listed on the TSX Venture Exchange. Alexis holds an outstanding portfolio of properties covering the Val-d'Or and Rouyn-Noranda Mining Camps in Quebec. Alexis is following strategic exploration approaches across these properties for both gold and base metals, with a focus on the potential for gold production from the 100%-owned Lac Herbin and Lac Pelletier deposits during 2007 - 2008. Alexis has a clear route to 100% ownership of all interests of Aur Resources on approximately 212 square kilometres of the Val-d'Or Mining Camp. Alexis has purchased the 1400 tonne per day Aurbel gold mil and holds a 100%-interest in the Aurbel property. The Company is also currently advancing towards a 50% interest in 825 square kilometres of the Rouyn-Noranda Mining Camp in JV with Xstrata Copper Canada (formerly Falconbridge Ltd.). Three (3) underground drills and five (5) surface drills are currently active on the Val-d'Or and Rouyn-Noranda properties.

Statements in this release that are not historical facts are "forward-looking statements" within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Readers are cautioned that any such statements are not guarantees of future performance and that actual developments or results may vary materially from those in these "forward looking statements".

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

Contact Information

  • Alexis Minerals Corporation
    David Rigg
    President and CEO
    (416) 861-5889
    (416) 861-8165 (FAX)
    Alexis Minerals Corporation
    Peter Cashin
    Investor & Corporate Affairs
    (416) 861-5905
    Alexis Minerals Corporation
    Louis Baribeau
    Relationiste, Quebec
    (514) 667-2304