Skyline Gold Corporation
TSX VENTURE : SK

Skyline Gold Corporation

September 23, 2010 09:00 ET

Skyline Gold Announces Positive Preliminary Assessment Report Update for Bronson Slope Gold-Copper-Silver-Magnetite Deposit

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Sept. 23, 2010) - Skyline Gold Corporation (TSX VENTURE:SK) ('the Company') is pleased to announce the results of an update of the Preliminary Assessment ('PA') technical report on its Bronson Slope deposit in north western British Columbia's 'golden triangle'. The Bronson deposit is located approximately 500 meters from the historic Snip Gold Mine that produced 1.03 million ounces of gold with an average recovery of 24.5 grams/tonne gold through 1999.

The new PA technical report is prepared by Moose Mountain Technical Services ('MMTS') and updates a PA prepared by Leighton Asia Ltd. ('Leighton'), a division of The Leighton Group. The Leighton PA was previously released by the Company in February 2009.

The report provides an update of the economic analysis of the deposit and includes a mine plan and project cost estimate showing positive economics and a basis for further advancement of the project.

Project Economics

The PA projects a 38 year life-of-mine ('LOM') with production of 1.757 million oz. of gold, 383.624 million pounds of copper, 6.8 million ounces of silver and 9.66 million tonnes of high purity magnetite powder. Economic evaluation of the Project is based on a pre-tax financial model. For the project as defined in this update of a 38 year LOM project with 191 million tonnes of mill feed, the financial results using base case inputs as above are:

  Internal Rate of Return   21.5%
  NPV (7.5% discount rate)   CAD 330.2 million
  Initial Capital   CAD 257.6 million
  Pay Back Period   3.8 operating years (from mill start up)
  NPV (0% discount rate)   CAD 1.406 billion

The project economic model utilizes base case LOM average metal prices of (USD) $950/oz. gold, $2.50/lb. copper, $15/oz. silver, $90/tonne (FOB Bronson Slope) for high purity magnetite powder and an exchange rate of 0.90 USD/CAD.

The production of high purity magnetite powder uses data from the N.I. 43-101 compliant magnetite resource that the Company announced in January 2010. The Bronson Slope mine is projected to produce this magnetite powder to meet specifications required for specialty applications including cleaning of metallurgical coal using a dense media separation process.

The financial model base case initial capital cost of CAD 257.6 million (USD 231.8 million) includes contingencies and sustaining capital of CAD 38.5 million (USD 34.7 million) over the life of project. No allowance is made for working capital, salvage value or reclamation and closure costs in the financial model.

David Jensen, P.Eng., President of Skyline Gold comments: "These excellent results are very encouraging for Skyline Gold and provide a positive assessment of the potential for development of an economic project at Bronson Slope. We look forward to continuing to develop this core asset toward production as well as exploring our increasing tenure position in the Iskut region with a goal of expanding Skyline's Iskut gold resources as initial high grade and further mill feed for the existing project."

Further Preliminary Assessment Technical Report Details:

The PA provides an economic analysis of the Bronson Slope project based upon an open pit operation with in-pit crushing and an electrically powered conveyor system descending approximately 400 m from the pit to a 15,000 tonne per day copper flotation and gravity gold separation processing plant. Tailings will be carried to the tailings facility by pipeline.

A sensitivity analysis of the inputs to the PA was completed by MMTS with pre-tax results as follow:

  Internal Rate of Return (IRR) Net Present Value (NPV) (CAD Million)
Base Case (7.5% discount rate) 21.5% 330.2
Metal Price    
Current Prices (Sept, 2010)¹ 35.2% 684.2
     
10% Decrease from Base Case 16.2% 199.7
10% Increase from Base Case 26.5% 460.8
Recovery    
10% Decrease from Base Case 17.6% 232.5
OPEX    
20% Increase from Base Case 16.4% 198.6
10% Decrease from Base Case 23.8% 396.1
CAPEX    
20% Increase from Base Case 17.4% 280.9
10% Decrease from Base Case 24.2% 354.9
Exchange Rate (1 CAD = 0.90USD)    
1 CAD = 0.95 USD 18.9% 264.6
1 CAD = 0.85 USD 24.3% 403.5
Discount Rate (Base Case 7.5%)    
5% 21.5% 514.2
10% 21.5% 215.2
¹Current prices used are (USD) $1,250/oz. Gold; $3.50/lb. Copper; $20/oz. Silver; $90/tonne Magnetite

Life of mine average operating costs are:

  CAD/tonne Milled USD/tonne Milled
Direct Mining Costs $3.21 $2.89
Overhead and Administration $0.98 $0.88
Processing Costs $6.33 $5.70
Total: $10.52 $9.47

The three phase mine plan includes a total mined resource as follows:

Phase 1, 2 & 3 (Total) - Tonnes and Grades ($9/t NSR Cut-off)
Category Metric tonnes (000) Copper (%) Gold (g/t) Silver (g/t) Magnetite (%)
Measured 84,153 0.151 0.420 2.221 5.9
Indicated 102,738 0.098 0.310 2.168 4.8
Total Measured and Indicated 186,891 0.122 0.360 2.192 5.3
Inferred 4,944 0.074 0.321 2.187 3.7
    Strip Ratio: 0.77
Total Waste 147,499 (Waste tonnes/Mill Feed tonnes)

A table comparing basic project parameters and mine production from MMTS's PA report and Leighton's 2009 PA report follows:

  MMTS 2010 PA (15,000 tonnes/day mill throughput; (USD) $950/oz. Gold; $2.50/lb. Copper; $15/oz. Silver; $90/tonne Magnetite) Leighton 2009 PA (15,000 tonnes/day mill throughput; (USD) $700/oz. Gold; $2.00/lb. Copper; $15/oz. Silver; $0.00/tonne Magnetite) Change
Mine Life (years) 38 19 +19
Mill Feed (k tonnes) 191,835 93,480 +105%
Gold (000's Oz) 1,757 1,151 +52.6%
Average Gold Grade (g/t) 0.342 0.446 -23.4%
Copper (000's lbs) 383,624 278,962 +37.5%
Average Copper Grade (%) 0.117 0.155 -24.6%
Silver (000's Oz) 6,809 4,510 +50.0%
Average Silver Grade (g/t) 2.13 2.34 -9.0%
Magnetite (million tonnes) 9.66 N/A +9.66
Average Magnetite Grade (%) 5.3 N/A N/A

LOM gold cash cost, net of byproduct credits using base case metal prices, is (USD) 98 /oz. With production costs distributed pro-rata by revenue generated by each metal produced, LOM average cash costs of production are:

  Gold [USD/oz.] Copper [USD/lb.] Silver [USD/oz.] Magnetite [USD/tonne]
Project Cash Costs $554 $1.46 $8.74 $53.9
Cash cost net of copper, silver and magnetite credits $98  

Metal recoveries from mill feed utilized in the PA are based upon prior metallurgical studies of the Bronson Slope deposit and are Gold: 85.4%, Copper: 86.6%, Silver: 63.7%.

The MMTS PA uses the same plant size and throughput rate as the prior Leighton PA and focuses on the effect of including revenues from magnetite recovery and updated costs and metals prices. An optimized through put rate is recommended for future study.

PA power costs are based on grid tariff power prices and set at CAD 0.055 per kilowatt hour. Power is assumed to be supplied at Highway 37 from the proposed Northern Transmission Line for which the environmental permitting process is underway. Skyline Gold has also submitted hydro license applications in 7 regional catchments with a total potential generation capacity of 72 MW of power. Preliminary hydro-generation studies on two sites covered by the applications, which are within 10 km of the Bronson Slope deposit, have indicated the two sites have the potential capacity to generate a combined total of 29 MW of power. These sites have been further studied to determine the potential amount of electrical generation with storage added and indicate, on a preliminary basis, an ability to provide the power required by the Bronson Slope project. Further detailed technical studies and a feasibility study are required to confirm capacity and viability of these hydro power projects.

The Bronson Slope deposit is located 500 meters from the historic Snip Gold Mine, 70 km west of Highway 37 (Stewart-Cassiar Highway), approximately 45 km west of the Eskay Creek Gold Mine along the Iskut River Valley and 80 km east of Wrangell Alaska in a moderated climate influenced by the coastal climate zone.

The site can be accessed via the 1,700 m Bronson Creek airstrip, for which Skyline Gold has a license of occupation. The airstrip is located 100 m above sea level and approximately 750 m from the Bronson Slope deposit. Access roads currently extend to within 27 km of the site and Skyline Gold has preliminary studies and cost estimates for the construction of an access road extending from a currently existing spur road which runs approximately 5 km west of the Eskay Creek Forest Service Road operated by Barrick Gold Corp.

Note that the PA is preliminary in nature, that it 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, and there is no certainty that the preliminary assessment for those tonnes of mill feed will be realized. The amount of Inferred resource is relatively small however, of more significance, the accuracy of the technical design and costing used in this report is at a scoping level and for these reasons all the resources cannot be categorized as mineral reserves, and there is no certainty that the preliminary assessment for those tonnes will be realized.

The MMTS Preliminary Assessment technical report will be filed on SEDAR when it has been received and reviewed by the Company.

Qualified Person

The PA was prepared by Qualified Person Jim Gray, P.Eng. and this news release was review for technical accuracy by Jim Gray, P.Eng.

ON BEHALF OF THE BOARD OF DIRECTORS

SKYLINE GOLD CORPORATION

David Jensen, P.Eng., President

Cautionary Statement

Statements in this release may be viewed as forward-looking statements. Such statements involve risks and uncertainties that could cause actual results to differ materially from those projected. There are no assurances the Company can fulfill such forward-statements and the Company undertakes no obligation to update statements. Such forward looking statements are only predictions; actual events or results may differ materially as a result of risks facing the Company, some of which are beyond the Company's control.

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.

Contact Information

  • Skyline Gold Corporation
    David Jensen, P.Eng.
    President
    (604) 270-3878
    (604) 270-3858 (FAX)
    www.skylinegold.com