Northern Gold Mining Inc.
TSX VENTURE : NGM

Northern Gold Mining Inc.

June 23, 2011 07:01 ET

Northern Gold Increases Garrcon Deposit Indicated Resource Five-Fold to 720,000 ozs and Releases Preliminary Economic Assessment

- Garrcon Updated Indicated 720,000 oz, Inferred 430,000 oz

- PEA - NPV $265.9 Million

- PEA - Cash Flow $393.6 Million (8 Year Mine Life)

- PEA - Cost/oz $495

- PEA - IRR 47%

TORONTO, ONTARIO--(Marketwire - June 23, 2011) -Northern Gold Mining Inc. (TSX VENTURE:NGM) ("Northern Gold" or "the Company") announces the results of an updated National Instrument (NI) 43-101 compliant resource estimate and completes a Preliminary Economic Assessment (PEA) for its Garrcon Gold Deposit located in Garrison Township in the province of Ontario, Canada. The NI 43-101 Technical Report will be filed on SEDAR within 45 days. This NI 43-101 report which was independently prepared by A.C.A. Howe International Limited (Howe) of Toronto, Ontario, determined that the Garrcon Gold Deposit demonstrates strong economics at the PEA level. Howe concludes that the property merits the expenditure of additional funds to continue expanding, delineating, and developing the existing resource as well as the implementation of detailed metallurgical test work to confirm the concepts and assumptions used in the PEA.

"Northern Gold continues to deliver on its plan to develop its Garrison property into a producing gold mine. This NI 43-101 resource update on the Garrcon deposit increases the indicated resource by fivefold to 720,000 ozs Au from the initial Garrcon Technical Report that was posted on SEDAR November 5, 2010. The inferred resource at the Garrcon decreased slightly from 530,000 oz to 430,000 ozs, as the quality of the resource estimate was improved (moving those resources from inferred to indicated) based upon our ongoing in-fill drilling program. This brings the total NI 43-101 resource for the Garrison Property (includes both the Garrcon (updated here) and Jonpol (see October 2009 Technical Report filed on SEDAR October 21, 2009)) to 783,200 ounces of gold indicated and 676,500 ounces of gold inferred," said Martin Shefsky, President and CEO of Northern Gold Mining. "Northern Gold has already begun implementation of Howe's recommendations as presented below. We are very excited with the opportunities that the Garrison property, as well as our recent adjacent property acquisitions, present to us."

Garrcon Deposit Resources

For this NI 43-101 resource update Howe reduced the block model cut-off grade from 0.5 g/tonne to 0.3 g/tonne based on conceptual costing completed in the initial PEA. Based on metallurgical testing by Northern the specific gravity was increased slightly from 2.6 to 2.73. The new in-fill drilling confirmed the uniformity of the mineralization, with a very strongly correlated variogram at the same optimized 25 meter drill hole spacing as the initial study.

The Technical Report identifies, estimates and summarizes the Garrcon Deposit resources above and below the 150 meter elevation for both the indicated and inferred Mineral Resource categories. These resources are shown below in Table 1:

Table 1 – Summary of Mineral Resource by Category Summary

Mineral Resource
Category
Block Cut-
Off Grade
(g/tonne)

Tonnes
Above
Cut-off
Average
Gold Grade
(g/tonne)

Ounces
Indicated
Less Than 150 m Deep0.315,000,0000.9430,000
More Than 150 m Deep0.39,900,0000.9290,000
Total Indicated0.324,900,0000.9720,000
Inferred
Less Than 150 m Deep0.35,600,0000.8140,000
More Than 150 m Deep0.313,100,0000.7290,000
Total Inferred0.318,600,0000.7430,000

Notes:

  1. Cut-off grade for mineralized zone interpretation was 0.1 g/tonne.
  2. Block cut-off grade for defining Mineral Resources was 0.3 g/tonne.
  3. No top-cut grade was used. In the author's opinion, the use of a top cut would not have significantly affected the results.
  4. Gold price used was $US 1200 per troy ounce.
  5. Zones extended up to 100 meters down-dip from the last intercept. Along strike, zones extended halfway to the next cross-section.
  6. Minimum width was 5 meters, though in no place was the zone that narrow.
  7. Non-diluted.
  8. Mineral resources that are not mineral reserves do not have demonstrated economic viability.
  9. Resource estimate prepared by Doug Roy, M.A.Sc., P.Eng.
  10. A specific gravity (bulk density) value of 2.73 was applied to all blocks (a representative value based on a limited number of measurements.)
  11. Ordinary block kriging ("OBK") was used for estimating block grades.
  12. Indicated resources identified where sample intercept spacing was 50 meters or less (based on variography).
  13. No measured mineral resources or mineral reserves of any category were identified.
  14. The volume/tonnage of the historic Cominco shaft, drifts and crosscuts have not been deleted from the Howe mineral resource volume/tonnage. Howe estimates the tonnage extracted from the resource areas was less than 0.1% of the total indicated and inferred resource tonnage.

Howe also includes two tables in its report that illustrate the variations in tonnes, grade and ounces contained within the Garrcon Deposit mineralized zone at various cutoff grades, both above and below the block cutoff of 0.3 g/t gold used for this resource calculation. Table 2 contains the data for the indicated category and Table 3 the data for the inferred category.

Table 2 – Summary of Indicated Resources at Various Block Cut-off Grades
Indicated Category

Less Than 150 Meters Deep

More Than 150 Meters Deep
Cut-off
Grade
(g/tonne)
Tonnes
Above
Cut-off
Avg
Gold Grade
g/tonne


Ounces
Tonnes
Above
Cut-off
Average
Gold Grade
g/tonne


Ounces
4.00380,0008.3100,000270,0006.052,000
3.00530,0006.9120,000490,0004.977,000
2.00800,0005.4140,000860,0003.8110,000
1.501,200,0004.2160,0001,300,0003.1130,000
1.002,500,0002.6210,0002,200,0002.3160,000
0.754,400,0001.9270,0003,400,0001.8200,000
0.508,400,0001.3350,0005,900,0001.3250,000
0.411,000,0001.1390,0007,600,0001.1270,000
0.315,000,0000.9430,0009,900,0000.9290,000
0.2021,000,0000.7470,00013,000,0000.8330,000
Note: values for cut-off grades less than 0.3 g/t are not considered mineral resources and are included for information purposes only.
Table 3 - Summary of Inferred Resources at Various Block Cut-off Grades
Inferred Category

Less Than 150 Meters Deep

More Than 150 Meters Deep
Cut-off Grade
(g/tonne)
Tonnes
Above
Cut-off
Avg
Gold Grade
g/tonne


Ounces
Tonnes
Above
Cut-off
Average
Gold Grade
g/tonne


Ounces
4.0049,0004.97,700180,0005.431,000
3.00170,0004.022,000260,0004.739,000
2.00430,0003.041,000410,0003.951,000
1.50590,0002.649,000610,0003.263,000
1.001,200,0001.973,0001,200,0002.285,000
0.751,800,0001.693,0002,300,0001.5110,000
0.503,100,0001.2120,0006,700,0000.9190,000
0.404,000,0001.0130,0009,200,0000.8240,000
0.305,600,0000.8140,00013,000,0000.7290,000
0.208,000,0000.6150,00020,000,0000.5320,000
Note: values for cut-off grades less than 0.3 g/t are not considered mineral resources and are included for information purposes only.

No measured resources or reserves of any category were identified. Although a conceptual Preliminary Economic Assessment (PEA) was completed, no formal economic or engineering work that would enable identification of mineral reserves has yet been carried out. Mineral resources are not mineral reserves and by definition do not demonstrate economic viability. There is no certainty that all or any part of the mineral resources will be converted into mineral reserves.

Due to the uncertainty that may be attached to Inferred Mineral Resources, it cannot be assumed that all or any part of an Inferred Mineral Resource will be upgraded to an Indicated or Measured Mineral Resource as a result of continued exploration. Confidence in the estimate is insufficient to allow the meaningful application of technical and economic parameters or to enable an evaluation of economic viability worthy of public disclosure. Inferred Mineral Resources are excluded from estimates forming the basis of feasibility or other economic studies.

Howe's deposit model continued to identify a broad zone of mineralization that extends over an east-west distance of 800 meters which remains open to the east, to the west and to depth. The resource is contained within an area that averages approximately 275 meters wide. The Deposit is bounded on the south by the Destor-Porcupine fault system and on the north by a zone of mafic and ultra-mafic rocks. Both contact zones dip steeply to the south.

The updated resource estimate includes assay data from an additional 47 drill holes completed in 2010 and 5 completed in January 2011. Ordinary Kriging (omnidirectional) was used to estimate gold grades in a block model with blocks 10 meters wide, 10 meters long and 10 meters high, with two sub-blocks in each direction for a geologic resolution of 5x5x5 meters.

Highlights of the Preliminary Economic Assessment Base Case at $1,200 per ounce gold

This report is a Preliminary Economic Assessment (PEA) of the Garrcon deposit, meaning the report is a preliminary assessment study that includes an economic analysis of the potential viability of mineral resources taken at an early stage of the project prior to the completion of a Prefeasibility study. This PEA is conceptual in nature, a Class 1 (confidence level +/- 20-30%) review, and is worked out from first principles consisting of best available estimates for mine/mill costs and designs in conjunction with the NI 43-101 resource estimate. Because a PEA is not feasibility or formal economic study, inferred resources were utilized in the assessment. It was completed in support of the NI 43-101 resource update.

Table 2-1: Pit optimisation parameters.
ParameterValue
Mining Cost, Ore or Waste (Drilling, Blasting, Loading & Hauling)$2.34 per tonne
Rehab Cost$0.25 per tonne Milled
Dilution5%
Mining Recovery95%
Gold Price$US 1200 per ounce
Processing Cost (CIL/CIP, Heap Leach)$5.31 / $4.22, per tonne Milled
Processing Recovery98%, 65%
Specific Gravity2.73
Overall Slope Angle (rock, overburden / fault material)45°, 30°

The pit was optimized using the parameters above. The pit optimization was based on the plant milling costs from the PEA, but no revenue from heap leaching was considered during the optimisation process, as the intent for that was to process gold-bearing waste rock (below 0.30 g/t cut-off).

The resulting pit was 300 metres deep and covered 50 hectares. The pit contained 33.0 million non-diluted (Indicated plus Inferred) tonnes of mill feed with an average grade of 0.90 g/tonne. Material that must be mined that did not meet the 0.30 g/tonne cut-off grade, but met the 0.15 g/tonne heap leach cut-off grade, amounted to an additional 18.3 million tonnes with an average grade of 0.20 g/tonne. Almost 90% of the recovered gold would be recovered in the mill with 7.5% recovered using heap leaching.

Table 2-2: Summary of pit optimization results (Indicated plus Inferred mineral resources).
Pit Details
Gold Price ($US per Ounce)$1,200
Cut-off Grade (g/tonne):
CIL/CIP0.30
Heap Leach0.15
Non-Diluted Ore (tonnes)
CIL/CIP33,000,000
Heap Leach18,300,000
Total51,300,000
Non-Diluted Ounces
CIL/CIP960,000
Heap Leach120,000
Total1,080,000
Non-Diluted Grade (g/tonne)
CIL/CIP0.90
Heap Leach0.20
Average0.65
Waste Tonnes101,800,000
Pit Depth (m)300
Footprint (Hectares)50
Stripping Ratio (twaste:tore)2:1

A summary of the PEA provides the following:

  • The conceptualized processing flowsheet is a combination of:
    • A conventional milling process using a combination gravity and cyanidation flowsheet for gold recovery from mill feed above a cutoff of 0.3 g/t; and.
    • Heap leaching to process material with gold grades too low for the conventional milling process (<0.3 g/t), but above an internal heap leach cut-off grade of 0.15 g/t.
  • Mill feed tonnes are 33,000,000 at a grade of 0.90 g/t containing 955,000 ounces of gold.
  • Heap leach feed tonnes are 18,300,000 tonnes at a grade of 0.20 g/t containing 120,000 ounces of gold.
  • Project economics were determined using a gold price of US $1200 per troy ounce and the results over the projected eight year mine are robust as illustrated by:
    • Eight year project cash flow of $393.6 million.
    • Average annual cash flow of $49.2 million.
    • Cash operating costs of $495 per ounce produced.
    • Fully loaded costs, including capital, of $649 per ounce produced.
    • The Net Present Value (NPV) is $265.9 million at a 5% discount rate.
    • The after tax IRR is 47%.
    • Total project gold production is 1,012,200 ounces.
    • Average annual gold production is 126,500 ounces.
    • Capital costs are estimated to be Cdn $156.3 million including a 30% contingency.
    • Mill feed is projected to be 11,300 tonnes per day at a grade of 0.9 g/tonne with a recovery of 98%.
    • Dilution of the mill feed is estimated at 5% with zero grade.
    • Heap leach feed is projected to be 8,470 tonnes per day of the 270 day seasonal heap leach operation. Grade to the heap leach is estimated at 0.2 g/t and recovery is assumed to be 65%.
    • Life of mine (LOM) strip ratio is 1.9:1.

Expansion Potential

During the preparation of the NI 43-101 three isolated, higher grade intercepts were noted to be causing large poorly supported lenses and their influence was limited in the resource update. Additional in-fill drilling and further drilling down to and beyond 300 meters may provide some additional mineral resource in addition to upgrading the resource categories. Northern Gold has focused its drilling depth to approximately 200 meters, as that had been assumed to be the optimum pit depth. The PEA implies that an optimized pit may extend down to at least 300 meters. A number of Northern Gold's holes have bottomed below 300 meters in mineralization and historic drilling shows mineralization with gold values as deep as 500 meters. The Timmins/Kirkland Lake district has operating mines down to over 5,000 feet, implying that there remains significant opportunity for additional mineralization at depth. Northern will continue to focus its resources on shallow (minable by open pit), high value mineralized targets.

The PEA proposed optimized pit design's 50 hectare size is considerably larger than the footprint of the Howe mineralized deposit model (21 hectares), because of the need to provide stable pit slopes to reach the bottom of the pit. The PEA assumes that all of the material outside of the mineralized deposit model is waste (as there is no formal data to assume otherwise).

However, while the expansion potential of the deposit appears to be limited by the Destor-Porcupine Fault to the south and possibly by a mafic and ultra-mafic rock unit to the north (there is some indication of mineralization to the north beyond the ultramafics), the deposit remains open on strike to both the west and to the east. Outcrop stripping and grab sampling to the east has found additional stockwork veining in intensely silicified meta-sediments with gold grades varying from a trace to as high as one ounce per tonne in grab samples. These new outcrop exposures and mineralization lend credence to historic drill holes for which previous operators reported both anomalous and significant gold values. So the potential exists to increase the Howe mineralized deposit model both east and west along strike and at depth, which could convert some of the PEA waste tonnes into Mineral Resources.

Mining & Production

Mining plan assumptions in the PEA call for conventional open pit mining methods, using shovels and/or wheel loaders for loading and 100 tonne trucks for hauling material to the process facilities and waste dump(s). With the exception of overburden, rock in the mine plan will be drilled and blasted before loading into haul trucks for transportation to the appropriate dumping location. Northern Gold has recently acquired adjoining property, which may be utilized to optimize mine/mill infrastructure.

Metallurgy and Processing

Scoping level testwork on two composite samples at SGS Canada Inc's. Lakefield Laboratory found that the gold in the samples tested was free milling and responded well to a combination of gravity concentration and cyanidation of gravity tails and to whole ore cyanidation. The SGS testwork was disclosed in Northern Gold's press release of February 24, 2011. Complete details of the testwork are contained in the SGS Repot which can be found posted on NGM's website.

The milling process evaluated for the Base Case assumes feeding mineralized material above a cutoff grade of 0.3 g/tonne through a mill using a combination gravity concentration and cyanidation process with an estimated recovery of 98%. The Base Case also assumes that the milling process will be combined with a conventional heap leach process, which will be fed mineralized material above a cutoff grade of 0.15 g/tonne and below the 0.3 g/tonne cutoff for mill feed. The SGS testwork demonstrates that the gold mineralization is free milling which indicates that heap leaching is possible although heap leach column testing is required to confirm that the concept is economic.

The crushing plant and gold recovery system will be sized to handle all the material for both gold recovery processes, and the economies of scale enable lower operating costs to be developed for the combined processes than for each process individually.

Opportunities and Recommendations

Howe recommends that the following work plans be incorporated into Northern Gold's ongoing project development work plans to further refine estimates of costs, recoveries, engineering and mine design to facilitate the development of a Pre-feasibility Study.

  • Continue the advanced exploration permitting currently in progress to be followed by the work necessary for operational permitting.
  • Expand the permitting process to include potential mill sites, heap leach pads and tailings management areas using claims recently acquired by Northern.
  • Continue and expand the current drilling program to:
    • Add additional drills to increase the rate at which resources are upgraded, delineated and discovered.
    • Continue the infill drilling program to improve the quality of existing resources.
    • Increase the infill drilling rate to speed up the upgrading of resources and the delineation of additional resources within the resource footprint as identified by Howe.
    • Perform step out drilling beyond the current resource footprint to test meta-sediment outcrops and newly stripped meta-sediments hosting stockwork veining with anomalous gold mineralization.
  • Implement and complete a detailed metallurgical testwork program to better define the optimal flowsheet design for the mill, including if needed bulk sampling and pilot plant testing.
  • Implement and complete a metallurgical testwork program to determine heap leach recovery rates and percentages for the Deposit, including, if needed, long term column tests.
  • Continue testing the deposit for any potential Acid Rock Drainage (ARD) and confirmation of the relatively high calcium content, which is expected to neutralize any ARD potential.
  • Initiate a program of structural mapping.
  • Initiate a program to determine rock strengths for pit wall stability.

Technical information related to the Garrcon mineral resource update and PEA contained in this press release has been reviewed and approved by Mr. Ian Trinder, P.Geo., Mr. Doug Roy, P.Eng., Mr. Patrick Hannon, P.Eng., and Dr. Ian Flint, P. Eng., all employees or associates of A.C.A. Howe International Ltd. or Toronto, Ontario and all Independent Qualified Persons as defined under NI 43-101 regulations with the ability and authority to verify the authenticity and validity of this data.

About Northern Gold Mining

Northern Gold Mining Inc. is a TSX-V listed, publicly traded junior resource company based in Toronto, Ontario, dedicated to the discovery and development of high value mineral deposits in the proven mining camps of Kirkland Lake and Timmins in North Eastern Ontario. Northern Gold is focused on developing two advanced stage gold deposits on the Garrison Gold Property. The Property is located within the Abitibi greenstone belt along the Porcupine-Destor and the Munro Fault systems. The Property hosts several gold mineralized showings in addition to the two advanced stage exploration targets, the Jonpol and Garrcon Deposits, for each of which NI 43-101 compliant mineral resources have been calculated, and the less advanced 903 gold mineralized area. Historic diamond drilling by previous operators was completed in all three referenced areas. The Jonpol Technical Report was posted on SEDAR October 21, 2009 and the Garrcon Technical Report was posted on SEDAR November 5, 2010. The Garrison Gold Property has historic mining infrastructure at both the Jonpol and Garrcon Deposits and producing mines are located in close proximity to the property. On May 13, 2011, the Company completed its purchase of 100% ownership of the Garrison Gold Property from ValGold Resources Inc.

The technical aspects of this press release has been reviewed by Michael Gross M.S., P.Geol., Vice President Exploration for Northern Gold, who is the "Qualified Person" as defined by NI 43-101 for this project.

CAUTIONARY STATEMENT: This News Release includes certain "forward-looking statements". These statements are based on information currently available to the Company and the Company provides no assurance that actual results will meet management's expectations. Forward-looking statements include estimates and statements that describe the Company's future plans, objectives or goals, including words to the effect that the Company or management expects a stated condition or result to occur. Forward-looking statements may be identified by such terms as "believes", "anticipates", "expects", "estimates", "may", "could", "would", "will", or "plan". Since forward-looking statements are based on assumptions and address future events and conditions, by their very nature they involve inherent risks and uncertainties. Actual results relating to, among other things, results of exploration, project development, reclamation and capital costs of the Company's mineral properties, and the Company's financial condition and prospects, could differ materially from those currently anticipated in such statements for many reasons such as: changes in general economic conditions and conditions in the financial markets; changes in demand and prices for minerals; litigation, legislative, environmental and other judicial, regulatory, political and competitive developments; technological and operational difficulties encountered in connection with the activities of the Company; and other matters discussed in this news release. This list is not exhaustive of the factors that may affect any of the Company's forward-looking statements. These and other factors should be considered carefully and readers should not place undue reliance on the Company's forward-looking statements. The Company does not undertake to update any forward-looking statement that may be made from time to time by the Company or on its behalf, except in accordance with applicable securities laws.

Neither TSX Venture Exchange nor its Regulation Services 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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