Western Keltic Mines Inc.
TSX VENTURE : WKM

Western Keltic Mines Inc.

September 05, 2007 06:00 ET

Western Keltic Announces Robust Pre-Feasibility Results for the Kutcho Project

Annual Metal Productions Years 1 - 5: 75.5 million lbs Cu & 93.5 million lbs Zn

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Sept. 5, 2007) - Western Keltic Mines Inc. (TSX VENTURE:WKM) announced today the results of a Pre-Feasibility study on its Kutcho Project, positioning Kutcho as Canada's next major high grade copper and zinc producing mine. The study confirmed robust project economics, further supporting management's decision to accelerate the completion of a Feasibility Study. Full commercial production of the mine is targeted for 2010.

This Pre-feasibility study was prepared by Wardrop Engineering Inc. to identify and cost a preferred mine development plan, which will be optimized in the feasibility study.

BASE CASE MODEL HIGHLIGHTS:

- Combined open pit and underground production

- Conventional 6,000 tpd flotation concentrator

- Four payable metals in copper and zinc concentrates

- Forecast average annual Metal Production Years 1-5

- 75.5 million lbs copper

- 93.5 million lbs zinc

- 753,550 oz silver

- 7,813 oz gold

- Capital Cost estimate of $299 million(1)

- Pre-Tax Internal Rate of Return (IRR) of 23%

- Net Present Value (NPV) of $154 million using an 8% discount rate

- Initial mine life of 8 years with capital recovery in 2.6 years

- Forecast production in 2010 with 250 permanent jobs

(1) All figures are in Canadian dollars unless otherwise noted.

"This is a major milestone for Western Keltic and testifies to our ability to continue to maximize shareholder value," said John McConnell, President and CEO of Western Keltic. "Over the last year, we have successfully met our objectives with respect to the environmental permitting process and partnership development with aboriginal communities. We are well positioned to maintain our project schedule and bring the mine to full production in 2010."

Financial Analysis

The Pre-Feasibility Study identified the development of the Main deposit as an open pit, followed in Year 5 by supplemental high grade underground production from the Esso deposit, as the preferred mine development plan. Daily production of mill feed is estimated at 6,000 tonnes resulting in 17.1 million tonnes mined over eight years. The economic analysis does not consider any contribution from the 11-million tonne Sumac deposit, which is currently classified as an inferred mineral resource.

The Project Base Case assumes a three-year historical average metal price and a three-year historical average exchange rate. Additional sensitivity analyses were undertaken using a two-year historical average and current metal prices and exchange rates. Capital costs of $299 million and site operating costs of $46.2 per tonne milled were used in all three cases.



Table 1 Summary of Financial Analyses
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3 Yr
Metric Units (Base Case) 2 Yr Current
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Payback period yrs 2.6 1.6 1.2
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IRR (pre-tax) % 23 37.8 48.6
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NPV at 8%
(pre-income tax) $ (Million) 154 355 522
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Prices (USD): Cu $/lb 2.39 2.85 3.53
Zn $/lb 1.09 1.36 1.55
Ag $/oz 9.86 11.27 13.10
Au $/oz 537 594 672
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Exchange Rate USD/CAD 0.85 0.88 0.95
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Project Schedule

The Pre-Feasibility Study is based on achieving the following key milestones:

To view Table 2 Project Schedule, click on the following link: http://www.ccnmatthews.com/docs/WKM_table2.jpg

Mineral Resources and Reserves

The Kutcho Project consists of three deposits; Main, Esso and Sumac with resources and reserves as summarized in the tables below.



Table 3 Mineral Resource (inclusive of Mineral Reserve figures)
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Deposit Tonnage (t) Cu (%) Zn (%) Ag (g/t) Au (g/t)
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MAIN
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Measured 2,937,507 1.83 2.65 27.98 0.39
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Indicated 12,716,725 1.60 2.04 25.69 0.31
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Measured plus Indicated 15,654,232 1.65 2.15 26.12 0.32
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Inferred 811,103 0.95 1.92 24.17 0.33
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ESSO
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Indicated 2,040,445 2.24 3.96 37.70 0.49
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Inferred 442,506 2.47 4.15 38.09 0.53
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SUMAC
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Inferred 10,614,652 0.94 1.45 13.96 0.14
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TOTAL
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Measured + Indicated
Mineral Resource 17,694,678 1.71 2.36 27.45 0.34
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Table 4 Mineral Reserve
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Cu Zn Ag Au
Deposits Tonnage (t) (%) (%) (g/t) (g/t)
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MAIN
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Probable (95% recovery,
5% dilution) 15,020,959 1.56 2.09 25.02 0.31
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ESSO
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Probable (90% recovery,
15% dilution) 2,047,009 1.97 3.50 33.21 0.43
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TOTAL
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Probable Mineral Reserve 17,067,968 1.63 2.26 26.00 0.32
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Mining

The Main deposit will be mined using an open pit method over the 8-year mine life. The pit is designed to be 1,500 meters long and 450 meters wide and will supply up to 6,000 tonnes of mill feed per day. A stripping ratio of 6:1 will result in an estimated 103 million tonnes of waste rock.

The Esso deposit will be mined underground and will produce 1,500 tonnes of mill feed per day. Development will begin in Year 3 followed by production in Years 5 through 8. Access to the deposit will be established by twin declines driven simultaneously from a portal located near the crusher station.

The Sumac deposit was not included in the Pre-Feasibility Study because of its inferred mineral resource status. If successfully delineated during the mine life, the Sumac deposit could add another 11 million tonnes in reserves, extending the mine life by up to five years.

Mineral Processing

A 6,000 tonnes per day conventional flotation plant will operate 365 days per year at an annual rate of 2.2 million tonnes.

Ore will be crushed by a 950 X 1,250 millimeter jaw crusher to 80% passing 150 millimeters and then ground to 80% passing 74 microns in a SAG mill and ball mill grinding circuit. The ground ore will be processed using a copper-zinc bulk flotation followed by regrinding and copper-zinc separation. The copper and zinc rougher concentrates will then be upgraded by three stages of cleaner flotation. Bulk flotation tailings and zinc flotation tailings from the copper-zinc separation circuit will be sent to the tailings storage facility. The copper and zinc concentrates will be thickened and pressure-filtered before delivery to the storage shed.



Table 5 Annual Metallurgical Balance
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Tonnage Grade Recovery
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Au Ag
Product t/a Cu % Zn % g/t g/t Cu % Zn % Au % Ag %
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Feed 2,190,000 1.6 2.3 0.3 26.0 100.0 100.0 100.0 100.0
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Copper Conc. 102,012 30.6 4.2 2.2 204.0 87.2 8.6 31.0 36.5
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Zinc Conc. 71,448 0.5 54.5 0.2 21.6 1.0 78.8 2.0 2.7
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Tailings 2,016,540 0.2 0.3 0.2 17.2 11.8 12.6 67.0 60.8
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Access

The existing access from Highway 37 to the mine site will be upgraded. The road is located in an area where construction is on moderate terrain.

The 900 meter airstrip will be upgraded to facilitate a broader range of fixed wing aircraft for movement of personnel and materials during construction and emergency situations.

Infrastructure/Logistics

All surface buildings will be based on modular designs, using a combination of pre-engineered, fold-away, and tensioned-fabric covered structures. They will be located in proximity to the mine.

Electrical power will be generated on site by multiple modular diesel generator units with 18 megawatts in total generating capability.

A fuel storage and distribution system will consist of a 1 million liter tank in a bermed and lined containment area. Fuel will be supplied by B-train trucks from the Terrace fuel depot.

A tailings storage facility will be constructed to contain approximately 15.6 million tonnes of tailings over the mine life. The facility will include a dam structure which will be developed over several lifts and will include seepage and clarification ponds. Diversion channels will also be incorporated to minimize water handling requirements.

A waste rock management facility will be constructed to handle both non-acid generating and potentially-acid generating waste rock appropriately during mine operation, site reclamation and closure.

A majority of the production staff will work a two-week-on, two-week-off rotation with air transportation provided from Smithers to Dease Lake and bus transportation provided from Dease Lake to the Mine Site. Mineral concentrate will be trucked approximately 500 kilometers to the Port of Stewart for interim storage and subsequent loading on marine vessels.

Operating Costs

The Operating Costs have been allocated based on what will be mined using the Open Pit and Underground methods. Operating and capital costs are based on present-day prices for equipment, materials and supplies, and labor and salaries.



Table 6 Operating Costs
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Years 1-4 Years 5-8
(Open Pit) (Open Pit + Underground)
Area $/t milled $/t milled
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Mining 11.37 19.06
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Processing 15.18 15.18
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Power Generation 12.48 12.72
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G&A 2.68 2.68
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Total 41.71 49.64
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Capital Costs

The basis of the Capital Cost estimate is by quotation for major items, and by allowance for minor items.



Table 7 Capital Cost
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Costs $ Millions
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Direct Works 187.9
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Project Indirect(s) 68.1
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Owners Costs 3.7
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Contingencies 38.9
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Total 298.6
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Acknowledgements

This Pre-Feasibility Study has been prepared in accordance with Standards of Disclosure for Mineral Projects as defined by National Instrument 43-101 (NI 43-101). The following Qualified Persons have contributed to the Study:



Sandy McVey, P. Eng Andy Nichols, P. Eng Paul Franklin, P. Eng
Tim Carew, P. Geo Art Winckers, P. Eng Ken Deter, P. Eng
Carl Hovey, P. Eng Renata Wood, P. Eng Michael McGurk, R. P. Bio
Steve Sibbick, P. Geo


An NI 43-101 compliant Technical Report will be filed on SEDAR within the 45 days of the issuance of this news release.

On behalf of the Board of Directors

WESTERN KELTIC MINES INC.

John McConnell, President and CEO

For more information pertaining to this release, please call 1.800.501.1201.

About Western Keltic Mines Inc.:

Western Keltic Mines Inc. is focused on identifying and developing valuable base and precious metal projects. The company's efforts are supported by a management team that is highly experienced in permitting, developing and operating mines in a responsible manner. Headquartered in Vancouver, Canada, Western Keltic is a publicly traded company, listed on the TSX Venture Exchange under the symbol "WKM". Visit www.westernkeltic.com for more information.

About Wardrop Engineering Inc.:

Wardrop is an international consulting firm providing integrated engineering, environmental, information technology and management consulting services through its operations across Canada, overseas and in the U.S. Visit www.wardrop.com for more information.

The TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this release.

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