Chesapeake Gold Corp.
TSX VENTURE : CKG

Chesapeake Gold Corp.

May 25, 2012 09:18 ET

Chesapeake Gold Corp.: New Positive Scoping Changes Delays Metates Pre-Feasibility Study Into Q3

VANCOUVER, BRITISH COLUMBIA--(Marketwire - May 25, 2012) - Chesapeake Gold Corp. ("Chesapeake") (TSX VENTURE:CKG) wishes to report on the current status of the pre-feasibility study ("PFS") of its 100% owned Metates project located in Durango State, Mexico. One of the largest undeveloped gold-silver projects in the Americas, Metates contains a NI43-101 measured and indicated resource of 1.18 billion tonnes at a grade of 0.50 g/t gold and 13.7 g/t silver containing 19.0 million ounces gold and 519 million ounces silver together with 4.2 billion pounds of zinc (see NR2-2012 dated February 16, 2012).

Subsequent to the updated preliminary economic assessment study ("PEA") (see NR1-2011 dated March 7, 2011) and the recent new resource estimate on Metates (see NR2-2012), Chesapeake and its team of prominent industry consultants have during the past few months made a number of important process and scoping changes that will positively impact the PFS in respect to the capital and operating economics, zinc production, water conservation, energy costs, environmental impact and mine closure.

Most of the key tasks integral to the PFS such as the mining plan, comminution, flotation and pressure oxidation circuits, gold and silver recovery facilities, pipelines, road construction and geotechnical studies are substantially complete. To complete and integrate the engineering and costing for the optimization work still underway, the Company's independent consultants are targeting mid third quarter for the PFS results to be available. Some of the principal changes which will impact the PFS include:

  1. Based on the new resource estimate prepared by Independent Mining Consultants ("IMC") of Tucson, Arizona (see NR2-2012), optimization studies have determined that approximately 300 million tonnes of low grade resource material (with an average grade above the mine cutoff grade of 0.35 g/t gold equivalent) which was previously treated as waste in the PEA, will now be stockpiled during active mining operations. In the PFS, it is now contemplated that the stockpiled ore will be processed at the end of active mining thereby extending the project by six years and add about four million ounces of gold-equivalent revenue. Production from the low grade stockpile will significantly lower the life-of-mine ("LOM") stripping ratio as well as fund the project's final reclamation work. Moreover, the tailings resulting from processing the stockpile will be deposited into the mined out open pit filling it to about 35% of total depth. The tailings back fill will accelerate the development of a pit lake required for final closure. Final engineering and costing of the mine plan is expected within 4-5 weeks.
  1. Separate storage facilities were designed in the PEA for the waste rock and flotation tailings at the Metates mine site. As reported after the PEA, the PFS will integrate the co-disposal of these products into a common facility. Recent optimization engineering now includes the addition of a dewatering circuit to the flotation concentrate tailings to recycle more than 80% of the process water at the mine site. The resulting water conservation will lead to major cost reductions in the water supply and distribution systems. Furthermore the filtered dry tailings enables a "cap and cover" technique whereby the benign tailings will be used to encapsulate mine waste rock during daily operations. This sustainable best practice is considered to be one of the most effective ways of limiting potential acid rock drainage conditions. Besides the footprint of the co-disposal area being appreciably reduced, the concurrent on-going reclamation will significantly reduce the closure costs and long-term environmental liability. Final engineering of the tailings dewatering and placement systems is expected to be complete within 4-5 weeks.
  1. The PEA provided for recovery of a zinc concentrate from the pressure oxidation solutions and shipment to a third party smelter for final processing. The PFS will incorporate a solvent extraction/electrowinning process ("SX/EW") to produce a high value zinc ingot onsite. Based on IMC's new mine schedule, Zincobre of Spain is engineering an 80,000 tonnes per year SX/EW plant that will produce nearly twice as much zinc over the LOM as was projected in the PEA. The process plan facilitates the production and stockpile of a zinc hydroxide product recovered from the pressure oxidation circuit that exceeds the capacity of the 80,000 tonnes per year SX/EW plant. Peak zinc grades occur early in the mine schedule and the stockpile will feed and maintain the SX/EW plant at nearly full capacity through the project life. In the PEA all of the zinc that exceeded plant capacity was lost, amounting to about 1.6 billion pounds LOM. Final engineering and costing for the SX/EW plant and stockpile location is expected in 3-4 weeks.
  1. The overall environmental impact of the project will be significantly reduced with the use of clean burning natural gas instead of coal to fuel the project's dedicated power plant. Current estimates from third party power providers indicate that the capital cost savings and long term stable supply of natural gas will reduce the cost of electrical power supplied to the project. The Mexican government has recently announced the planned construction of two natural gas pipelines that will service the area close to the project. Switching to gas from coal in the PFS has resulted in new engineering at the Ranchito metal processing site to eliminate coal handling systems and redesign for the kiln fuel source in the limestone mining and neutralization operation. Final engineering for the Ranchito metal recovery facilities should be completed within 5 weeks.

Mr. Randy Reifel, President of Chesapeake said, "The delay in issuing the PFS is unfortunate but the optimization studies using international best practices have added considerable value to the project. Compared to the PEA, we anticipate that the PFS will report significantly more gold, silver and zinc production through a longer mine life while reducing the overall environmental impacts at both the Metates and Ranchito sites. We believe that the results of the PFS will confirm that this project has the potential to be a low cash cost, long lived precious metal producer with excellent project economics."

Currently, Chesapeake has over $41 million in working capital. Chesapeake is continuing to work toward a full feasibility study during the PFS period. Management also believes the proposed waste management practice and mine closure plan will be very positive for permitting the project's development and construction.

Gary Parkison, CPG, Chesapeake Vice President Development and a Qualified Person as defined by NI43-101, has reviewed the technical information presented in this release in regards to the Metates project.

CHESAPEAKE GOLD CORP.

P. Randy Reifel, President

FORWARD LOOKING STATEMENTS

Some of the statements contained in this release are forward-looking statements, such as estimates and statements that address future events and conditions that describe the Company's future plans, objectives or goals which are subject to various risks and uncertainties in relation to the Company. The assumptions used in the preparation of such statements although considered reasonable at the time of preparation may prove to be imprecise and as such, actual results in each case could differ materially from those currently anticipated in such statements. The Company does not intend to, and does not assume any obligation to update such forward-looking statements or information, other than as required by applicable law.

Neither TSX Venture Exchange nor its Regulation Services Provider (as defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

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