TMAC Resources Inc.

TMAC Resources Inc.

November 19, 2013 10:24 ET

TMAC Announces Robust Hope Bay Preliminary Economic Assessment and Mineral Resource Estimates

TORONTO, ONTARIO--(Marketwired - Nov. 19, 2013) -

NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES

TMAC Resources Inc. (the "Company" or "TMAC"), a private Canadian mineral resources company, is pleased to announce the completion of a Preliminary Economic Assessment ("PEA") which contains updated Mineral Resource estimates (the "Resource Estimates"), effective November 18, 2013, on its 100% owned Hope Bay Project (the "Project") located approximately 650 kilometres northeast of Yellowknife in the Kitikmeot region of Nunavut, Canada. The PEA and the Mineral Resource Estimates have been prepared in accordance with National Instrument 43-101 of the Canadian Securities Administrators ("NI 43-101") by RPA Inc. ("RPA") of Toronto, Ontario, Canada, who has extensive worldwide experience with mining projects including many in the Canadian arctic.

The PEA supports a conventional high-grade underground mining operation that makes use of significant existing infrastructure and underground development on site as well as milling and mining equipment already owned by TMAC. The PEA supports the sequential development and mining of three mine environments that will result in average annual gold production of approximately 224,000 ounces. Due in part to the significant infrastructure, underground development and equipment already in place, operating and capital costs are expected be low relative to underground gold mining industry averages. Adjusted operating costs and all-in sustaining costs are expected to be $650 and $750 per ounce, respectively. With pre-production capital costs of $238 million the project generates a robust pre-tax internal rate of return (IRR) of 33%.

The PEA has the following highlights:

Mine life: 10 years
Tonnes mined: 6,674,500
Average grade of mined Mineral Resources: 11.4 g/t Au
Average recovery: 92%
Recovered Au: 2,248,751 ounces
Average mill rate: 2016 - 800 tonnes per day
2017 - 2019: 1,600 tonnes per day
2020 - 2025: 2,100 tonnes per day
Average annual production: 224,000 ounces
Peak production: 257,000 ounces
Gross revenue (@ $1,350 per Oz): $3,036 million, $455 per tonne, $1,350 per oz Au
Total operating outflows: (1) $1,461 million, $219 per tonne, $ 650 per oz Au
Total operating profit: $1,575 million, $236 per tonne, $ 700 per oz Au
Pre-tax cash flow: $961 million
After-tax cash flow: $671 million
Net pre-production cash outflow: $225 million
Pre-production capital:(2) $238 million
Production development capital: $125 million
Sustaining capital: $198 million
Pre-tax NPV @ 5%: $586 million
Pre-tax IRR: 33%
After-tax NPV @ 5%: $403 million
After-tax IRR: 28%
Notes
(1) Includes refining costs and production royalties
(2) Net of working capital adjustment and pre-production revenue.
(3) All financial amounts are in US$with C$costs having been translated to US$. The long-term exchange rate used was US$1 - C$1.07
(4) All financial figures used a base case price of US$1,350 per ounce Au

Terry MacGibbon, Executive Chairman of TMAC stated, "This robust PEA provides the catalyst for TMAC and its supportive Inuit partners to put the hope back in Hope Bay. The TMAC senior management team, which consists of many former FNX Mining Company Inc. executives, intends to advance Hope Bay in a manner similar to how FNX Mining successfully explored and put into production five mines on three former producing Inco properties in Sudbury. Our focus will be to piggyback on the extensive existing infrastructure and mineral resources in order to quickly and profitably "bootstrap" three mines into production. Pending further studies, we intend to very selectively mine high-grade zones using a variety of mining methods to minimize dilution. For example, the PEA contemplates that initial production in 2016 from Doris will be 18.6 grams per tonne gold ("g/t Au"). We intend to use cash flows from early mining to increase production and support exploration for significant additional mineralization along the 80 kilometre long Hope Bay greenstone belt." He added, "The PEA contemplates the maximum net cash outflow is expected to be approximately $225 million. Pending further economic analysis $235 million (C$250 million) of additional capital along with the C$15 million TMAC expects to have available at year-end there should be sufficient funds to put the Project into commercial production and to fund corporate costs for over two years".

Catharine Farrow, TMAC's CEO stated, "We believe that the Hope Bay PEA clearly demonstrates the Project has robust economic potential. We are very fortunate to have the territorial and federal regulatory permits in place for Doris North production and approvals that permit underground advanced exploration (bulk sampling) at Boston and surface exploration drilling at Doris, Madrid and Boston. Since acquiring the property in March of this year the KIA and TMAC have worked together to establish a mutually beneficial relationship on which to advance the project in the best interest of all stakeholders. We look forward to working with our Inuit partners and all other stakeholders to making the development of Hope Bay a success." She added, "We are also very fortunate to have underground access at both Doris and Boston. The mining contemplated in the PEA is at shallow levels and the numerous high-grade drill intersections below and adjacent to these levels clearly demonstrate the deposits are open and have significant potential to extend at depth. There is a wealth of historical exploration data available to our exploration team who have the skills and experience to reprocess the data in order to develop a unique understanding of the controls on gold mineralization at the Hope Bay gold belt, which like many similar Archean greenstone gold belts in Canada and around the world, has excellent potential to host additional high-grade gold deposits."

The PEA is considered preliminary in nature. It includes inferred mineral resources that are considered too speculative to have the economic considerations applied that would enable classification as mineral reserves. There is no certainty that the conclusions within the PEA will be realized. Mineral resources that are not mineral reserves do not have demonstrated economic viability.

The projected mining method, potential production profile and mine plan are conceptual in nature and additional technical studies will need to be completed in order to fully assess their viability. There is no certainty that a potential mine will be realized or that a production decision will be made. A mine production decision that is made without a feasibility study carries additional potential risks which include, but are not limited to, the inclusion of 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. Mine design and mining schedules, metallurgical flow sheets and process plant designs may require additional detailed work and economic analysis and internal studies to ensure satisfactory operational conditions and decisions regarding future targeted production.

Hope Bay Project Economics

The Project leverages significant existing invested capital, resulting in an economic mine plan under the PEA (Table 1). Hope Bay logistics and associated costs are well understood given previous construction and development of the Robert's Bay port, the Doris, Madrid and Boston camps and underground development at Doris and Boston all of which help to mitigate and de-risk the Project's economics. The location of the Project on tidewater allows for efficient and relatively low cost bulk and large material marine transport to the site in the months of August and September.

The total revenue at $1,350 per ounce of gold ("oz Au") is forecast to be $3,036 million, or $455 per tonne mined. After cash operating outflow consisting of operating costs, refining, production royalties and land fees that total $1,461 million, ($219 per tonne mined or $650 per oz Au), the total operating profit would be $1,575 million, ($236 per tonne mined or $700 per oz Au).

The pre-tax NPV of the Project at a 5% discount rate is forecast in the PEA at $586 million with an IRR of 33% and the after-tax NPV at a 5% discount rate is forecast to be $403 million with an IRR of 28%. TMAC has approximately $300 million available tax attributes to shelter payable taxes. The cash income and mining taxes payable will average 30%.

Table 1: Hope Bay Project Economics

Total Pre-
Production
Production
Project life 2014 - 2015 2016 - 2025
Description US$/oz US$/tonne US$000s US$000s US$000s
Revenue 1,350 455 3,035,814 13,556 3,022,258
Refining 2 1 4,209 19 4,190
Production royalties 23 8 52,411 271 52,140
Operating costs 615 207 1,382,449 - 1,382,449
Land and mineral fees 10 3 21,876 - 21,876
Adjusted operating costs 650 219 1,460,945 290 1,460,656
Sustaining capital 88 30 198,278 - 198,278
Closure costs (2026) 12 4 28,037 - 28,037
All in sustaining costs 750 253 1,687,261 290 1,686,971
Development capital 172 58 387,882 263,273 124,609
Working capital adjustments - - (138) (25,707) 25,569
All in costs 923 311 2,075,005 237,856 1,837,149
Income and mining taxes 129 43 289,370 244 289,126
Net cash flows 299 101 671,440 (224,544) 895,983
Pre-tax NPV US$000s 585,668
IRR 33%
NPV US$000s 403,181
IRR 28%
Au US$/oz 1,350
Initial two years FX C$/US$
Long term FX C$/US$
1.05
1.07

Mining

The PEA proposes that the Project consist of three underground mine environments (Doris, Madrid and Boston) with a single, sulphide flotation, cyanide leach/Merrill Crowe processing plant located at the Doris mine site that will produce doré bars. The PEA mine plan has a 10-year mine life starting in 2016 with about 53% of the total Measured, Indicated and Inferred Mineral Resources being mined during the 10-year period. Mining is expected to start at Doris in 2016, at Madrid in 2017 and at Boston in 2020. A total of 6,674,500 tonnes grading an average of 11.4 grams per tonne gold ("g/t Au") and containing 2,448,013 ounces of gold will be mined over the initial 10 years (Table 2). At an expected average recovery of 92%, a total of 2,248,751 oz Au will be recovered. All mining is planned to be by underground access, using a combination of longhole (both longitudinal and transverse), room and pillar, and mechanized cut and fill mining methods. Underground mining equipment will include single and two boom jumbos, 3.5 and 6 yard LHD and 40 tonne haul trucks. The PEA mine plan contemplates leveraging approximately 3 km of pre-existing underground infrastructure development at both Doris and Boston mine environments. In addition to the anticipated production in the PEA, high grade gold mineralization, containing an estimated 5,000 oz of Au, is already stockpiled at surface near the Doris North portal and an estimated 25,000 tonnes of high grade gold mineralization is stockpiled on surface at Boston.

Table 2: Hope Bay Project Forecast Production Statistics

Location Tonnes Grade of Mined Mineral
Resources
(1) g/t
Contained
Au Oz
Recoverable
Au Oz
Doris 1,698,500 10.7 583,134 542,349
Madrid 3,529,000 10.5 1,196,401 1,084,638
Boston 1,447,000 14.4 668,478 621,764
Total 6,674,500 11.4 2,448,013 2,248,751
Note:
(1) The grade for the production schedule has been determined from the Mineral Resource grade with the application of mining extraction and dilution factors appropriate to the mining method and ground conditions.

Processing

The Doris mill components are currently stored in South Africa with some front-end grinding components stored in the USA and Canada, are intended to be shipped to the Hope Bay site during the August 2014 sealift for assembly. TMAC plans to construct the mill during the fall of 2014 and all of 2015 with commissioning scheduled for January 2016. The mill is planned to be commissioned in 2016 and operate at an average throughput of 800 tonnes per day ("tpd") of high grade, 18.6 g/t Au, feed from Doris for the first year. The throughput is expected to increase to 1,600 tpd in 2017 with feed from both Doris and Madrid, and is expected to reach its nameplate capacity of 2,100 tpd in 2020 with feed from Madrid and Boston. The PEA contemplates Boston having an average head grade of 14.4 g/t Au and that Boston feed would be trucked 65 kilometres via an all-weather haulage road to the Doris mill. The tailings facility constructed near the site of the Doris processing plant is currently permitted for the first 18 months of production. TMAC plans to expand that the tailings facility, which was previously designed to be expandable to 100 million tonnes, to accept all production anticipated in the PEA.

Leveraging Significant Infrastructure

The Project has benefitted from over $1 billion in previous exploration, development and infrastructure expenditures and already has on site much of the surface and underground infrastructure anticipated to be required to initiate production at Doris North. In addition to the extensive underground development at Doris and Boston, and the tailings impoundment facility, the infrastructure includes gravel air strips (915 metre all-weather, gravel IFR air strip at the Doris camp), a multi-helicopter landing site, extensive all-weather gravel roads including a 10 kilometre all-weather gravel road that connects the port facility at Robert's Bay to the Doris camp and the north end of the Madrid mine environment. The Project also has a 40 kilometre ice road from Madrid to Boston, 21 million litres of fuel storage capacity, an 8.7 megawatt power plant (expandable to 11.6 megawatt) capable of running the Doris mine, mill, and camp, (and several portable generators capable of generating power with which to operate the Madrid and Boston camps), numerous buildings and facilities (administration, engineering/geology, mechanical shops, core processing facilities and warehouses), modern, fully self-contained camps (180 person at Doris Camp, 65 person at Boston and a 100 person modular camp ready to be shipped from Quebec to the Madrid site), a port facility at Robert's Bay with a large laydown area, a large fleet of trucks and heavy surface equipment and extensive consumables.

Permitting

TMAC is in possession of all federal and territorial approvals required to commence production at the Doris North mine. The Doris, Madrid and Boston deposits are permitted for continued exploration. Since acquisition in March 2013, TMAC has operated in material compliance with its environmental approvals and has successfully administered a rigorous environmental monitoring and reporting program. TMAC also has maintained the rigorous baseline data collection programs required to support the future permitting of additional mining areas, including those at Madrid and Boston. TMAC continues to ensure that federal, territorial and Inuit permit and lease processes and procedures are fully integrated with the Project execution plan.

The Doris North mine has been issued a project certificate by the Nunavut Impact Review Board (NIRB), a Type A water licence issued by the Nunavut Water Board (NWB) renewed September, 2013; a Commercial Lease and Inuit Impact Benefits Agreement with the Kitikmeot Inuit Association (KIA) renewed September, 2013; and subsurface exploration agreements administered by Nunavut Tunngavik Inc. (NTI) convertible to production agreements. TMAC holds exploration approvals from KIA, NTI and federal authorities which permit surface exploration drilling at Madrid and Boston, and underground advanced exploration (bulk sampling) at Boston. TMAC intends to submit an application to amend its current regulatory permits in November 2013 to facilitate the planned mining of up to 1.4 million tonnes of mineral resources accessible from the current Doris North portal until the Madrid and Boston mining projects have been permitted.

TMAC intends to proceed with the preparation of a draft Environmental Impact Statement for the Madrid and Boston mining projects in January 2014.

Mineral Resource Estimate

The Mineral Resource Estimates being reported today consider only Measured, Indicated and Inferred Mineral Resources extractable by underground mining and do not include resources potentially extractable from open pit mining. The three mine environments contain 2.8 million oz Au grading 10.6 g/t Au in the Measured and Indicated Mineral Resource categories and 1.8 million oz Au grading 10.9 g/t Au in the Inferred Mineral Resource category (Table 2).

Table 3: Hope Bay Project Mineral Resource Estimate - November 18, 2013

Category/Deposit Tonnes Grade Contained Au
(000s) (g/t Au) (oz 000s)
Measured
Boston 1,776 12.08 690
Total Measured 1,776 12.08 690
Indicated
Doris 335 24.56 265
Madrid 4,989 9.34 1,498
Boston 1,115 9.37 336
Total Indicated 6,439 10.14 2,098
Measured +Indicated
Doris 335 24.56 265
Madrid 4,989 9.34 1,498
Boston 2,891 11.03 1,026
Total Measured + Indicated 8,215 10.56 2,788
Inferred
Doris 1,296 9.72 405
Madrid 2,974 12.14 1,160
Boston 806 8.50 220
Total Inferred 5,076 10.94 1,786
Notes:
1. CIM Definition Standards were followed for Mineral Resources
2. Mineral Resources are estimated at a cut-off grade of 5.0 g/t Au.
3. Mineral resources are estimated using an average long-term forecast, gold price of US$1,500 per ounce and an exchange rate of C$:US$of 1:1.
4. Totals may not add correctly due to rounding.
5. Mineral resources that are not mineral reserves do not have demonstrated economic viability. There is no assurance that mineral resources will be converted into mineral reserves. The mineral resource estimate includes inferred mineral resources that are considered too speculative geologically to have economic considerations applied to them that would enable them to be categorized as mineral reserves. There is also no certainty that these inferred mineral resources will be converted to the measured and indicated categories through further drilling, or into mineral reserves, once economic considerations are applied. The available Project information is currently not sufficient to convert the estimated mineral resources to mineral reserves.
6. Estimation Parameters: Block models were run using Vulcan software. Grade interpolation used Ordinary Kriging or the Inverse Distance cubed method as appropriate to the grade distribution. Sub-blocking was applied to allow definition of narrow veins and to maintain volume integrity with the geology solids. Search distances and directions were consistent with the variography. Where scarcity of data precluded using variogram models anisotropic models were based on geologic observation. Capping of high grade outliers was achieved using statistical techniques including histograms and cumulative probability analysis.
7. Data Verification: The quality assurance/quality control (QA/QC) program for gold analyses included, blank and standard samples routinely inserted into the sample stream. Screen metallic fire assays were performed on samples returning higher than 20 g/t Au on fire assay with a gravimetric finish, and approximately 4% of the samples were re-assayed by an external laboratory throughout the duration of the drilling program. Sample preparation and analyses were done using industry accepted practices at laboratories including TSL Laboratories Inc. (TSL) in Saskatoon, ALS Chemex in North Vancouver and ACME Analytical Labs (ACME) in Vancouver. RPA has reviewed the QA/QC program and the data and considers the database suitable for Mineral Resource estimation.
8. Mineral Resource Classification: Resource classification was based on the minimum distance from block centroids to the nearest drill hole data point and varied for each deposit and classification category.
9. RPA is not aware of any known environmental, permitting, legal, title-related, taxation, socio-political, marketing or other relevant issue that could materially affect the mineral resource estimate

Geology and Exploration Potential

The Project is a gold exploration and development project that comprises over 1,000 km2 of land east of Bathurst inlet in the Slave Structural Province of the Canadian Shield. The Hope Bay Greenstone Belt is similar in age (Archean-age), rock types and relationships, structural setting and alteration styles as some of the world's largest orogenic gold-bearing greenstone belts, like the Abitibi of Ontario and Quebec that is host to the classic Kirkland Lake, Val D'Or and Timmins camps. TMAC plans to continue to explore the belt and leverage existing infrastructure while bootstrapping production in the rest of the belt. Gold mineralization in the 3 known trends is typically high-grade and quartz+carbonate vein-hosted.

The Doris trend is typical of Archean lode gold mineralization and is characterized by steeply dipping, quartz+carbonate-rich, gold-bearing vein systems that locally are oriented sub-horizontally north of Doris Lake in the 'Hinge' Zone. The Doris trend is commonly hosted in metamorphosed, iron-carbonate and sericite altered, and variably folded mafic pillow metabasaltic rocks, locally with well-developed variolites. The known strike extent of the Doris trend is approximately 3 km.

The Madrid trend is hosted within a north-south-striking package of mafic and locally ultramafic metavolcanic rocks with less common metasedimentary rocks, and is approximately 6 km in strike length. The structural elements that define the Madrid trend are oriented north-south in its southern extent in the vicinity of the Patch and Wolverine mineralization. In its northern extent, which includes the Naartok mineralization, the Madrid trend strikes east-west.

The Boston trend gold mineralization occurs as both steeply dipping quartz+carbonate-rich vein sets, and locally by steeply dipping zones of brecciated mafic metavolcanic rocks. The host rock assemblage is characterized by folded mafic metavolcanic rocks with less common metasedimentary and felsic metavolcanic rocks. Pervasive iron-carbonate and sericite alteration of the mafic metavolcanic host rocks is ubiquitous in the northern extent of the Boston trend.

The Hope Bay Greenstone Belt has excellent exploration potential at a variety of scales ranging from supporting the PEA-defined mine plan, adding Mineral Resources near existing or proposed mine infrastructure at the Doris, Madrid and Boston trends, to the discovery of new gold-mineralized trends and possibly different gold deposit types elsewhere in the Belt. TMAC's future exploration programs will be strategically developed to take advantage of all opportunities by using the extensive historical drilling, geophysical and geochemical databases. During the 2013 surface drill season from June to October, TMAC drilled almost 30,000 m of core with part of the focus on the discovery of new mineralization and part on adding to the known Doris trend mineralization. TMAC successfully completed the 2013 program under planned budget, discovered new gold mineralized environments in the Violet, Kamik and B2 areas in the central and northwestern parts of the Belt, and extended known gold-mineralized zones in the Doris North environment. TMAC plans to have an active exploration program in 2014.

Qualified Persons

Preparation of this press release was supervised by Dave King, M.Sc., P.Geo., TMAC's Vice-President, Exploration and Geoscience and a Qualified Person as defined by NI 43-101. Graham G. Clow, P.Eng., of RPA, a Qualified Person as defined by NI 43-101 and who is independent of TMAC and the lead person responsible for the PEA has reviewed this press release.

Detailed Report

A technical report for the PEA prepared in accordance with NI 43-101, will be completed and filed with the Ontario Securities Commission within 45 days and available on TMAC's website. Additional technical information on the Project can be found in the PEA.

About TMAC

TMAC is a privately held mineral exploration and development focused company comprised of many of the former senior executives of FNX Mining Company Inc. and headed by Terry MacGibbon, founder of FNX and co-founder and Chairman of Torex Gold Resources Inc. TMAC management has an exceptional track record of developing high grade, profitable underground mines.

Forward-Looking Statements

This press release is not an offer to sell, or a solicitation of an offer to purchase, any securities in the United States. The securities referred to in this press release will not be registered under the U.S. Securities Act of 1933 and may not be offered or sold in the United States except pursuant to an exemption from the registration requirements of the U.S. Securities Act of 1933 and applicable state securities laws.

This release contains "forward-looking statements" or "forward-looking information" within the meaning of applicable securities laws that are intended to be covered by the safe harbors created by those laws. "Forward-looking statements" or "forward-looking information" include statements that use forward-looking terminology such as "may", "will", "expect", "anticipate", "believe", "continue", "potential" or the negative thereof or other variations thereof or comparable terminology.

Such forward-looking statements are expressed by TMAC, as stated in this release, in good faith and believed by TMAC to have a reasonable basis as at the date of this release. However, forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of TMAC to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Such factors include, among others: the assumptions on which the PEA and Mineral Resource Estimates contained therein are based; future prices of gold; possible variations in mineralization, grade or recovery rates; actual results of exploration activities; actual results of gold production; conclusions of future economic evaluations and studies; changes in new mineral resource models and revised geological interpretations; changes in project parameters as plans continue to be refined; failure of equipment or processes to operate as anticipated; accidents, labour disputes and other risks of the mining industry; timing and receipt of regulatory approvals of operations; the ability of TMAC and other relevant parties to satisfy regulatory requirements; the availability of financing as at the date of this release; the ability of third-party service providers to deliver services on reasonable terms and in a timely manner; and delays in the completion of development or construction activities due to poor ground conditions, poor weather, lack of equipment or equipment failures or other factors.

Contact Information

  • TMAC
    Terry MacGibbon
    416-520-3516

    TMAC
    Catharine Farrow
    705-669-7900