Extorre Gold Mines Limited

Extorre Gold Mines Limited

October 19, 2010 09:11 ET

Extorre Announces Results for Cerro Moro Preliminary Economic Assessment

- 8 Year Mine Life - 133,500 oz/yr Gold Equivalent Average Production and US $201/oz Gold Equivalent Cash Cost/Year for First 5 Years

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Oct. 19, 2010) - Extorre Gold Mines Limited (TSX:XG) (FRANKFURT:E1R) (OTCQX:EXGMF) ("Extorre" or the "Company") is pleased to announce a favourable outcome for a Preliminary Economic Assessment ("PEA", or the "Study") for the Cerro Moro gold-silver project in Santa Cruz province, Argentina. The PEA was based on the NI 43-101 Mineral Resource Estimate released in April, 2010 and does not include potential new resources from discoveries announced after February 2010.

Highlights of the Study include the following projections:

  • Total metal production of 436,000 ounces of gold and 21,400,000 million ounces of silver over 8 years
  • For the first 5 years, gold production averages 76,400 ounces/year plus silver production of 3.4 million ounces/year, for an average gold equivalent production of 133,500 ounces* per year. Average cash costs on a gold equivalent* basis are US$ 201 per ounce.
  • Initial capital cost: US$ 109 million (plus refundable VAT of US$ 21 million).
  • Payback Period at 0% discount: 1.77 years
  • After tax IRR: 43.4%
  • Financial model expected to be enhanced by inclusion of US$ 30+ million of tax credits
  • Conceptual development plan based on a combination of open pit and underground mining at a combined peak rate of 750t ore/day

The conceptual development plan is based on an Indicated Resource of 590,000 t (metric tonnes) at 18.9 g/t gold (grams per metric tonne) and 805 g/t silver at the Escondida vein, together with additional Inferred Resource of 1.97 Mt at 3.0 g/t gold and 190 g/t silver from the Escondida, Loma Escondida, Gabriela, Esperanza, and Deborah veins. The PEA has been prepared by Santiago-based NCL Ltda ("NCL"), together with the participation of leading industry experts. 

Messrs. Yale Simpson and Bryce Roxburgh, Co-Chairmen of Extorre stated, "The Company is very pleased with the outcome for this Study. It demonstrates the capacity for Cerro Moro to produce up to 148,000 oz/yr gold equivalent*, a production rate that incorporates a silver credit equal to nearly 40% of the total metal value.

"The first 5 years of the project is designed to draw down much of the current high grade mineralization characteristic of the Escondida and Gabriela zones. Drilling on high grade discoveries/extensions such as Martina, Gabriela Southeast and Escondida Far West is ongoing, with a view to developing the resources required to maintain a 133,500 oz/yr gold equivalent* production rate through years 6-8.

"The robust economics demonstrate the value of the high grade mineralization that characterizes the Cerro Moro project."

It should be noted that this assessment is preliminary in nature as it includes 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. A NI 43-101 Technical Report for the Cerro Moro PEA will be filed on SEDAR (www.sedar.com) within 45 days and be posted on Extorre's website at www.extorre.com

*Gold equivalent ounces are calculated by dividing the silver ounces by 60 and adding it to the gold value.

PEA Parameters
Parameters utilized in the Cerro Moro PEA are indicated in the table below:

Summary of Project Parameters  
Tonnes Ore Produced - Underground 1,043,000t
Tonnes Ore Produced - Open Pits 903,000t
Tonnes Waste Moved - Open Pits 10,798,000t
Ore Processing Rate 250,000t p.a.
Mine Life 8 years
Gold Recoveries 95%
Silver Recoveries 90%
Total Gold Ounces Recovered 436,000 oz
Total Silver Ounces Recovered 21,400,000 oz
Initial Project CAPEX US$ 131M (including 21% VAT)
Sustaining Capital Life of Mine US$ 32 M (includes UG development, equipment replacement, mine closure)
Mining Costs – Open Pit US$ 3.40/t (includes tailings co-disposal)
Mining Costs – Underground US$ 50/t
Milling and Processing US$ 38/t
G+A US$ 6M/year
Cut-off Grades (Gold Equivalent*) Open Pit 1.8 g/t, Underground 3.7 g/t
Refining + Transport + Insurance US 10/oz gold, $US 0.50/oz silver
Royalties / NSR's 5% Export Tax (Dore), 3% "Boca Mina", 2% NSR (Cerro Vanguardia SA)
Corporate Tax Rate 35%

Conceptual Mine Design
Mining of the relatively narrow, near-vertical gold-silver veins is expected to utilize a combination of open pit and underground methods at a peak rate of 750 t ore/day. Production is scheduled to commence simultaneously from an underground operation at Escondida Far West - Cerro Moro's highest grade ore shoot to date - together with open pit mining from the Escondida West-Central and Loma Escondida veins.

Open pit mine designs assume a maximum vertical depth of 50 m with mining being undertaken using a fleet of drill rigs (for grade control and blasting), backhoe excavators, front-end loaders, and conventional 25t trucks. The underground mining technique to be used at Escondida Far West (and beneath the remaining open pits) will be a Bench and Fill technique that requires a primary decline, stope access levels 12 m apart (with individual stopes 8 m high), ore removal using remote-controlled load haul dump (LHD) vehicles and stope infilling using a mixture of waste material from the open pits and cement. Geomechanical work completed to date has indicated that the host rocks are highly competent, allowing pit slope angles between 64 and 68 degrees, depending on local conditions, with crown pillars of 7 metres height being left between the base of the completed open pits and the subsequent underground mining operations.

Conceptual mine development for the Escondida vein area is shown at the following link: http://media3.marketwire.com/docs/1019xg.pdf

Mine scheduling studies completed by NCL have indicated that annual gold and silver production during years 1-5 could vary from 68,000 to 97,000 ounces (gold) and 2.8 million and 4.3 million ounces (silver)(or between 116,000 and 148,000 gold equivalent ounces* annually). From year 5 onwards, the conceptual mine plans include a significant proportion of lower grade gold-silver resources from the Gabriela, Esperanza, and Deborah veins, which results in lower metal production and higher operating cash costs. Extorre's current exploration activities are focused on bringing new areas of high grade mineralization into NI 43-101 compliant resources and then incorporating these into the Year 5+ mine plan.

Metallurgical tests completed on Cerro Moro ores to date have indicated high recoveries for both gold (95%) and silver (90%). The Cerro Moro plant flow sheet includes conventional crushing, a milling circuit incorporating flash flotation and gravity for recovery of coarse gold and silver minerals, individual cyanide leaching circuits for both the milling concentrate and tails, and a Merrill Crowe circuit to precipitate gold-silver dore. 

Financial Model
The Cerro Moro Project has been evaluated using a cash flow analysis on a 100% equity basis, on a constant US dollar basis, and the base-case assumption of long-term gold and silver prices of $US 950 and $US 16, respectively. Cash inflows consist of expected annual revenue projections, with cash outflows such as capital, operating costs, and taxes / royalties subtracted from inflows in order to calculate net annual cash flows. The after tax value includes the payment of all taxes and royalties (5% export tax on dore, 2% NSR to Cerro Vanguardia SA, 3% "boca mina" royalty, and 35% Argentina Corporate tax on earnings). Extorre will also seek to apply for tax credits of in excess of US$ 30 million that relate to pre-mining exploration expenditures, as such credits are permissible under Argentine Tax Legislation, but not included in the PEA financial model.

Financial Model Base Case: US$ 950 Gold / US$ 16 Silver
 Undiscounted pre-tax cash flow US$ 290.5 million
Undiscounted after-tax cash flow US$ 186.0 million
IRR pre-tax 57.6%
IRR Free cash flow (after tax) 43.4%
Years to payback 1.77

Environmental Impact Assessment
The Environmental Impact Assessment ("EIA") for the Cerro Moro mine development was formally presented to Santa Cruz authorities on September 16, 2010. The EIA is currently in the process of being reviewed by local authorities, with approvals expected to be received by end-Q1, 2011. 

Pre-Feasibility Study
With the positive results of the PEA in hand, Extorre will now move to the next level of confidence in the development of a mine at Cerro Moro through the completion of a Pre-Feasibility Study ("PFS"). The Cerro Moro PFS will include detailed mine design / production scheduling, process engineering and infrastructure studies, in addition to higher-precision capital (CAPEX) and operating (OPEX) cost figures, together with the reporting of a reserves estimate. In order to maximize the project NPV, additional infill drilling will also be required to upgrade our highest priority Inferred Resources to Indicated Resource category. Extorre is currently in the process of finalizing the contractual details for the PFS.

Qualified Persons Statement
Mr. Carlos Guzman, Principal Mining Engineer of NCL Ltda., Santiago, Chile, is a qualified person as defined in NI 43-101 and has read and approved the technical portions of this release.

Mr. Eric Roth, President and CEO of Extorre Gold Mines Ltd, is a qualified person as defined in NI 43-101 and is responsible for preparing the information contained in this news release.

Mine production plans calculated by NCL Ltda are attached below:

  Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8    
Waste Escondida ton 1,981,000 1,982,157               3,963,157
Gabriela ton     2,166,175 435,686           2,601,861
Esperanza ton       661,270 1,108,878 1,043,368       2,813,517
Deborah ton             953,671 466,654   1,420,326
Total ton 1,981,000 1,982,157 2,166,175 1,096,956 1,108,878 1,043,368 953,671 466,654   10,798,861
Open Pit Ore Escondida ton 64,878 178,272               243,150
  Au g/t 14.70 15.10               14.99
  Ag g/t 401.86 425.62               419.28
Gabriela ton     151,833 96,638           248,471
  Au g/t     1.91 2.12           1.99
  Ag g/t     257.55 292.84           271.27
Esperanza ton       43,500 66,685 115,702       225,889
  Au g/t       3.59 2.36 1.93       2.37
  Ag g/t       121.13 170.37 173.00       162.23
Deborah ton             124,816 61,464   186,280
  Au g/t             2.80 2.88   2.83
  Ag g/t             67.18 60.24   64.89
TOTAL ton 64,878 178,272 151,833 140,139 66,686 115,702 124,816 61,464   903,790
  Au g/t 14.70 15.10 1.91 2.57 2.36 1.93 2.80 2.88   5.76
  Ag g/t 401.86 425.62 257.55 239.54 170.37 173.00 67.18 60.24   241.30
Underground Ore Escondida ton 61,122 23,328 118,168 129,862 203,314 38,601       574,394
  Au g/t 21.75 21.75 17.99 15.58 10.20 5.48       14.40
  Ag g/t 1,278.12 1,278.12 941.54 760.60 434.14 119.57       715.28
Gabriela ton           115,697 145,184 130,963   391,844
  Au g/t           1.65 1.65 1.65   1.65
  Ag g/t           258.09 258.09 258.09   258.09
Esperanza ton               77,572   77,572
  Au g/t               2.26   2.26
  Ag g/t               134.79   134.79
TOTAL ton 61.122 23.328 118.168 129.862 203.314 154.298 145.184 208.536   1.043.810
  Au g/t 21,75 21,75 17,99 15,58 10,20 2,61 1,65 1,88   8.70
  Ag g/t 1.278,12 1.278,12 941,54 760,60 434,14 223,44 258,09 212,23   500.55
Total Material Escondida ton 2.107.000 2.183.757 118.168 129.862 203.314 38.601       4.780.702
Gabriela ton     2.318.008 532.324   115.697 145.184 130.963   3.242.176
Esperanza ton       704.771 1.175.564 1.159.071   77.572   3,116,978
Deborah ton             1.078.487 528.119   1,606,606
Total ton 2.107.000 2.183.757 2.436.176 1.366.957 1.378.878 1.313.368 1.223.671 736.654   12,746,462

About Extorre
Extorre is a Canadian public company listed on the Toronto Stock Exchange (symbol XG) and on the OTCQX (symbol EXGMF). Extorre's assets comprise approximately $51 million in cash, the Cerro Morro and Don Sixto projects, and other mineral exploration properties in Argentina.

On April 19, 2010, Extorre announced an updated National Instrument 43-101 compliant mineral resource estimate for Cerro Moro:

Indicated Category: 357,000 oz. gold + 15.3 million oz. silver (612,000 oz. gold equivalent*), plus
 Inferred Category: 190,000 oz. gold + 12.0 million oz. silver (390,000 oz. gold equivalent*)

The 612,000 ounce gold equivalent* indicated resource, has an average grade of 32.3 g/t gold equivalent*, a grade considered exceptional by industry standards. The silver contribution is high, accounting for over 40% of the metal value. Additional inferred resources of 390,000 ounces gold equivalent* are also reported from Cerro Moro.

You are invited to visit the Extorre web site at www.extorre.com.

Safe Harbour Statement – This news release contains "forward-looking information" and "forward-looking statements" (together, the "forward-looking statements") within the meaning of applicable securities laws and the United States Private Securities Litigation Reform Act of 1995. All projections and estimates contained in the PEA, including, without limitation, estimates related to future metal prices, exchange rates, expenses, production, rates of return and net present value, as well as statements regarding the timing of its drilling programs, various studies including the PFS and the approval of the Environmental Impact Assessment and exploration results, the potential tonnage, grades and content of deposits, timing, establishment and extent of resources estimates, potential production from and viability of its properties, and permitting submission and timing constitute forward-looking statements. These forward-looking statements are made as of the date of this news release. Readers are cautioned not to place undue reliance on forward-looking statements, as there can be no assurance that the future circumstances, outcomes or results anticipated in or implied by such forward-looking statements will occur or that plans, intentions or expectations upon which the forward-looking statements are based will occur. While we have based these forward-looking statements on our expectations about future events as at the date that such statements were prepared, the statements are not a guarantee that such future events will occur and are subject to risks, uncertainties, assumptions and other factors which could cause events or outcomes to differ materially from those expressed or implied by such forward-looking statements. Such factors and assumptions include, among others, the effects of general economic conditions, the price of gold and silver, changing foreign exchange rates and actions by government authorities, uncertainties associated with legal proceedings and negotiations and misjudgments in the course of preparing forward-looking information. In addition, there are known and unknown risk factors which could cause our actual results, performance or achievements to differ materially from any future results, performance or achievements expressed or implied by the forward-looking statements. Known risk factors include the preliminary nature of the PEA, risks associated with project development; lack of mine development and operating experience, the need for additional financing; operational risks associated with mining and mineral processing; fluctuations in metal prices; title matters; uncertainties and risks related to carrying on business in foreign countries; environmental liability claims and insurance; reliance on key personnel; the potential for conflicts of interest among certain of our officers, directors or promoters of with certain other projects; the absence of dividends; currency fluctuations; competition; dilution; the volatility of the our common share price and volume; tax consequences to U.S. investors; and other risks and uncertainties, including those relating to the Cerro Moro project and general risks associated with the mineral exploration and development industry described in our interim financial statements and MD&A for the fiscal period ended March 31, 2010 filed with the Canadian Securities Administrators and available at www.sedar.com. Although we have attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. We are under no obligation to update or alter any forward-looking statements except as required under applicable securities laws.

Cautionary Note to United States Investors - The information contained herein and incorporated by reference herein has been prepared in accordance with the requirements of Canadian securities laws, which differ from the requirements of United States securities laws. In particular, the term "resource" does not equate to the term "reserve". The Securities Exchange Commission's (the "SEC") disclosure standards normally do not permit the inclusion of information concerning "measured mineral resources", "indicated mineral resources" or "inferred mineral resources" or other descriptions of the amount of mineralization in mineral deposits that do not constitute "reserves" by SEC standards, unless such information is required to be disclosed by the law of the Company's jurisdiction of incorporation or of a jurisdiction in which its securities are traded. U.S. investors should also understand that "inferred mineral resources" have a great amount of uncertainty as to their existence and great uncertainty as to their economic and legal feasibility. Disclosure of "contained ounces" is permitted disclosure under Canadian regulations; however, the SEC normally only permits issuers to report mineralization that does not constitute "reserves" by SEC standards as in place tonnage and grade without reference to unit measures.


Contact Information

  • Extorre Gold Mines Limited
    Eric Roth
    President and CEO
    604.681.9512 or Toll-free: 1.888.688.9512
    604.688.9532 (FAX)
    Extorre Gold Mines Limited
    Rob Grey
    VP Corporate Communications
    604.681.9512 or Toll-free: 1.888.688.9512
    604.688.9532 (FAX)
    Extorre Gold Mines Limited
    Suite 1260, 999 West Hastings St.
    Vancouver, BC Canada V6C 2W2