Banks Island Gold Ltd.

Banks Island Gold Ltd.

November 23, 2011 11:21 ET

Banks Island Gold Ltd. Reports NPV(8%) of $26.4M and IRR of 414% From PEA

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Nov. 23, 2011) - Banks Island Gold Ltd. (the "Company") (TSX VENTURE:BOZ) announces results of a Preliminary Economic Assessment (PEA) for a small scale underground mining operation on Banks Island.

The 43-101 compliant PEA study, dated November 23rd 2011, was prepared by Mr. Robert Baldwin, P.Eng, an independent consultant. The study considers a 75,000 tonne per year operation based on the current Inferred Mineral Resource at the Yellow Giant Gold Property. Underground mining methods are proposed with the utilization of a Dense Media Plant for the production of a gravity gold/sulphide concentrate for shipment to an offsite facility for further processing.

Pretax Financial Summary

The base case scenario, using the 2 year rolling average price of gold of $CDN 1,360 per troy oz, resulted in a pretax NPV(8%) of $CDN 26.4M, an IRR of 414%, and a payback of initial capital of 1.2 months.

A scenario using the current price of gold of $CDN 1,700 per troy oz was also considered. The financial summary for the base case and current price scenario is presented Table 1.

Table 1 - Pretax Financial Summary
PRICE OF GOLD 1,360 1,700 $CDN/oz
TOTAL ORE MINED 152,000 152,000 tonnes
MINE LIFE 25 25 months
TOTAL REVENUE 74,900,000 94,200,000 $CDN
TOTAL OPERATING COST 36,600,000 36,600,000 $CDN
OPERATING CASH FLOW 37,300,000 57,600,000 $CDN
INITIAL CAPITAL COST 6,800,000 6,800,000 $CDN
SUSTAINING CAPITAL COST 2,300,000 2,300,000 $CDN
INCOME AFTER CAPITAL 28,200,000 48,500,000 $CDN
WORKING CAPITAL $1,200,000 $1,200,000
NPV(8%) $26,400,000 $45,000,000
IRR 414% 633%

The minable resource used in preparation of the preliminary assessment is based on an Inferred Resource. The preliminary assessment is preliminary in nature and includes inferred mineral resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves. Mineral resources that are not mineral reserves do not have demonstrated economic viability. There is no certainty that the results and conclusions presented in this preliminary assessment will be realized.

Mr. Mossman, President of the Company stated; "Our primary focus is on the discovery of a major gold deposit on Banks Island. The results of the Preliminary Economic Assessment indicate that a concurrent and lucrative small scale "pilot" mining operation may be possible. Such an operation would increase the chances of success in our primary exploration efforts by allowing a permanent presence on Banks Island, advancing the property in terms of infrastructure and knowledge, and generating cash flow to fund large scale exploration activities."

Life of Mine Parameters

Key parameters used in the PEA study are displayed in Table 2.

Table 2 - Life of Mine Parameters
Diluted Minable Resource 152,000 tonnes
15.8 gpt Au
53 gpt Ag
Mining Recovery 95%
Mining Dilution 40%
Overall Gold Recovery 85%
Overall Silver Recovery 58%
Gravity Concentrate Grade 55 gpt Au
Concentration Ratio 4.0
Net Revenue per Tonne (Base Case) 491 $CDN
Operating Cost 242 $CDN/tonne
Cost of lateral development 4900 $CDN/m

Resource Estimate

Mr. Baldwin updated the current Inferred Resource, which was disclosed in the Technical Report on the Banks Island Mineral Property on September 1st 2011, to include a silver resource for the Yellow Giant zones and incorporated three of the eight diamond drill holes completed by Banks Island Gold in 2011. The current Inferred Resource is displayed in Table 3 and is effective as of November 23rd 2011.

Table 3 - Yellow Giant Inferred Resource
Zone Tonnes Au Grade (g/t) Ag Grade (g/t)
Tel 47,000 22.9 50.6
Bob 55,000 20.9 98.7
Discovery 13,000 25.3 50.6
Total 114,000 22.2 73.7

Based on this current resource, a diluted minable resource was calculated for the purposes of the PEA study. The Bob and Tel Zones were broken into distinct areas for the purposes of mine planning. The estimated diluted minable resource is presented in Table 4.

Table 4 - Yellow Giant "Minable Resource"
Zone Tonnes Au Grade (g/t) Ag Grade (g/t) Dilution Recovery Tonnes Au Grade (g/t) Ag Grade (g/t)
Tel Main 9,000 31.3 29 52% 95% 13,000 20.6 19
Tel Central 38,000 21.0 56 54% 95% 55,000 13.8 36
Bob Upper 14,000 44.7 160 28% 95% 17,000 34.9 125
Bob Lower 40,000 12.4 77 28% 95% 49,000 9.7 60
Discovery 13,000 25.3 51 48% 95% 18,000 17.1 34
Total 114,000 22.2 74 40% 95% 152,000 15.8 53

Mining Summary

Underground mining methods proposed at Yellow Giant are mechanized sub-level longhole/shrinkage and longhole retreat. Three separate mineral zones, Tel, Discovery, and Bob, at Yellow Giant are proposed to be mined sequentially with the highest grade areas mined preferentially. Based on the current mineral resource estimate, mine production is planned to be 75,000 tonnes per year using contracted mining crews. Following a 3 month pre-production period, the mines are projected to have a combined mine life of 25 months.

Heavy Liquid Separation Testing - November 2011

A single sample of approximately 18 kg prepared from quarter sawn drill core from the 2011 drilling program at the Tel zone was sent to SGS Lakefield site for testing with the purpose of evaluating the amenability of the sample to pre-concentration using Dense Media Separation (DMS).

From the completed testwork on the sample provided to SGS Lakefield, from the combination of the 2.9 sink and -20 mesh fines, a mass rejection of 65.5% was achieved with a crush size of -1/4" and allowed recovery of 90.3% Au, 71.6% Ag, and 95.2% Sulphur. Combining the 2.7 SG and -10 mesh fines reduced the mass rejection to 35.8% and increased recovery to 97.0% Au, 85.4% Ag and 99.1% for Sulphur.

Mineral Processing

Based on recent Heavy Liquid Separation testing and historic metallurgical testing and mineralogical studies, gold at Yellow Giant is strongly associated with sulphide mineralization. Through the use of Dense Media Separation (DMS) a gold/sulphide concentrate would be produced for shipment offsite to a custom mill. This pre-concentration method would eliminate the high capital cost of a conventional onsite concentrator and allow the use of highly efficient mechanized underground mining methods. All sulphides would be shipped offsite, with a benign coarse sized limestone material produced as rejects. Conventional tailings would not be produced or stored on Banks Island allowing a low environmental impact to be achieved.


Concentrate from the Yellow Giant Gold Property is proposed to be marketed to one of the many gold processing facilities in Nevada. Custom mills in Nevada are motivated to accept ore from outside sources in order to generate revenue from under-utilized plants or, in certain cases, to provide synergies with their own process. The PEA study contemplates shipping concentrate bags from Banks Island to Prince Rupert using 1,000 tonne barges then to Nevada via rail.

Net Revenue per Tonne

The PEA study evaluated and estimated values for process recovery, concentrate shipping and treatment charges, custom milling fees, and royalties. At the base case gold price of $CDN 1,360/oz, the net revenue per tonne mined is estimated at $491CDN/tonne. Details of the net revenue per tonne calculation are displayed in Table 5.

Table 5 - Revenue per Tonne Mined
Gravity Gold Recovery 87.6%
Pressure Oxidation Gold Recovery 97.0%
Overall Gold Recovery 85.0%
Gravity Silver Recovery 61.7%
Pressure Oxidation Silver Recovery 94.0%
Overall Silver Recovery 58.0%
Payable Gold & Silver from Custom Smelter 90.0%
Recoverable & Payable Gold 76.5%
Recoverable & Payable Silver 52.2%
Concentrate Transportation Cost $127 $/t Concentrate
Treatment Charge 50 $/t Concentrate
Total Concentrate Charges & Costs $177 $/t Concentrate
Total Concentrate Charges & Costs $45 $/t Mined
Net Smelter Return $509 $/t Mined
Royalties $18 $/t Mined
Revenue Per Tonne Mined $491 $/t Mined

Operating Costs

Based on the mine design and schedule, an estimate of operating costs was derived for the PEA study. Costs are based on productivities, labour and material costs obtained from supplier and contractor quotes, cost data from other mines, first principle calculations, and experience.

A summary of operating cost estimates for the Yellow Giant Gold Project are displayed in Table 6. Mine development accounts for 50% of all operating costs and is the most significant operating cost. A cost of $4,900 per meter is assumed for lateral development.

Table 6 - Operating Cost Summary
MINE DEVELOPMENT $18,100,000 $120
MINE PRODUCTION $1,500,000 $10
MILLING $3,200,000 $21
MINE POWER $1,200,000 $8
OWNERS STAFF $4,000,000 $24
FREIGHT & CREW MOVES $500,000 $3
COST CONTINGENCY (15%) $3,900,000 $26
$36,600,000 $242

Capital Costs

The PEA study estimated capital expenses required to prepare the mines for operations and for equipment that will not be provided by contractors. An initial capital requirement of $6.8M is required for the Yellow Giant Gold Project and sustaining capital requirements are estimated at $2.3M. Based on the production schedule and expected operating costs, a working capital requirement of $1.2M is anticipated which will cover the operating costs for one month of production.

Initial capital expenditures occur in a three month pre-production period. The estimated initial capital cost during this period is $6,800,000 inclusive of cost contingencies. Details of initial capital costs are presented in Table 7.

Table 7 - Initial Capital Cost Summary

Capital expenditures that are expected to occur after production has commenced are termed "Sustaining Capital Costs". The estimated sustaining capital costs are $2,300,000 inclusive of cost contingencies. Details of sustaining capital costs are presented in Table 8.

Table 8 - Sustaining Capital Cost Summary
TOTAL $2,290,000

Environmental and Permitting

The proposed mining operation is anticipated to have a low environmental impact. The dense media process requires no reagents and subsequently no sulphide tailings will be produced. Thus, no tailings storage facilities will be required onsite. The use of underground mining methods will create little surface disturbance.

Production in excess of 75,000 tonnes per year is the threshold that would typically trigger a required environmental review and approval under the British Columbia Environmental Assessment Act. It is not expected that the project will trigger a BC Environmental Assessment.

A Mines Act Permit, from the BC Ministry of Mines, and an Environmental Management Permit, from the BC Ministry of Environment is required to commence production. Baseline studies to support these permit application are currently being undertaken by Banks Island Gold.

Mine Life and Exploration Potential

There is potential for expansion of minable resources at Yellow Giant with a resulting increase in the mine life. Obvious targets for expansion of mineral resources are at the Tel, Bob, Kim, and Discovery Zones. Historical drilling results suggest that mineralization at Tel may continue past the current minable resource at depth and mineralized intercepts exist outside the current resource at Bob and Discovery. With a modest drill program a resource calculation at the Kim Zone may be possible.

Mr. Robert Baldwin, P.Eng is the qualified person who reviewed and approved the contents of this news release. The 43-101 Technical Report will be posted on SEDAR and will be available on the Company's website within 45 days.

The Company is a junior mining resource exploration company focused on exploring for and developing economically viable mineral resources. The Company's mineral property is located in British Columbia. For more information, please refer to the Company's website at


Benjamin W. Mossman, P.Eng, President, Director, & Chief Executive Officer

This press release contains forward-looking statements. All statements, other than statements of historical fact, constitute "forward-looking statements" and include any information that addresses activities, events or developments that the Company believes, expects or anticipates will or may occur in the future including the Company's strategy, plans or future financial or operating performance and other statements that express management's expectations or estimates of future performance.

Forward-looking statements are generally identifiable by the use of the words "may", "will", "should", "continue", "expect", "anticipate", "estimate", "believe", "intend", "plan" or "project" or the negative of these words or other variations on these words or comparable terminology. These statements, however, are subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of the Company to be materially different from those expressed, implied by or projected in the forward-looking information or statements. Important factors that could cause actual results to differ from these forward-looking statements include but are not limited to: risks related to the exploration and potential development of the Company's project, the actual results of current exploration activities, conclusions of economic evaluations, changes in project parameters as plans continue to be refined, future prices of gold, as well as those factors discussed in the sections relating to risk factors of the Company prospectus dated September 30, 2011 filed on SEDAR.

There can be no assurance that any forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, the reader should not place any undue reliance on forward-looking information or statements. Except as required by law, the Company does not intend to revise or update these forward-looking statements after the date of this document or to revise them to reflect the occurrence of future unanticipated events.

The TSX Venture Exchange has not reviewed and does not accept responsibility for the accuracy or adequacy of this release. Neither the TSX Venture Exchange nor its Regulation Service Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

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