A Disciplined Staged Approach to The Development of the Blackwater Gold Project:
The Company’s revised development approach includes:
- A reduction in initial capital expenditures to $592 million by applying a disciplined three-stage approach to mine throughput ramp up, while remaining committed to achieving the full-scale project throughput of 20 million tonnes per annum (“Mtpa”);
- Targeting a higher-grade zone of near surface mineralization in the southern half of the pit for processing in the first seven years supporting a shorter payback period and a higher IRR;
- Improved gold and silver recoveries from metallurgical optimization work;
- Applying current consensus gold and silver price decks.
The Study was led by Moose Mountain Technical Services (“MMTS”), along with the support of Knight Piésold Ltd. (“KP”) and John A. Thomas, all of whom are independent of the Company. The Company presents two cases as part of the Study: a base case which is unlevered, and an alternate levered case which assumes 60% of the initial funding requirement is funded through project debt.
The Company set out to achieve improved economics and financeability on the Project against the previous study (refer to the Feasibility Study technical report entitled “Blackwater Gold Project, British Columbia, NI 43-101 Technical Report on Feasibility Study” with an effective date of January 14, 2014, filed on SEDAR by New Gold on January 22, 2014 (the “2014 Feasibility Study”)). Artemis’ methodology and approach to development of the Project includes the following:
- Starting at 5.5 Mtpa throughput and focusing on the near-surface, higher-grade zone of mineralization in the southern half of the deposit to minimize initial capital cost intensity, improve payback and IRR;
- Two subsequent expansion stages ramping up to the original planned capacity of approximately 20 Mtpa outlined in the 2014 Feasibility Study, with expansions funded from future operating cashflows;
Table 5 – Throughput Levels by Phase (See Appendix A for Detailed Mine Schedule)
|1||1 to 5||5.5 million tonnes|
|2||6 to 10||12 million tonnes|
|3||11 to 23||20 million tonnes|
- The smaller-scale start-up defers a substantial portion of waste pre-stripping from initial capital, as designed in the 2014 Feasibility Study, into operating costs in the PFS. While this partly contributes to the slightly higher operating costs as compared to the 2014 Feasibility Study, it substantially reduces up front funding requirements and results in a much higher IRR for the PFS;
- Cost benefits from a smaller, off-the-shelf, modular approach for buildings and crushing equipment;
- Staged installation of three similar-sized processing trains to 20 Mtpa;
- Re-designed three-stage crushing with a ball mill provides improved capacity to accommodate variability of ore hardness and maintain name-plate throughput;
- Reduced overall process footprint and laydown area requirements;
- Staged tailings capital costs, including relocation of the start-up dam site downstream to optimize initial capacity and haulage distances, improve constructability by following existing access trails in an area of gentler terrain, and simplify water management during early operations;
- Enhanced water management flexibility with planned installation of a water treatment plant at the start of operations;
- Total project indirect capital costs and owner’s costs significantly reduced as planned expansions will take advantage of an operating site with installed infrastructure and an established site management team;
Key Results of the PFS, Life of Mine (including the New Gold Inc. Stream, defined below)
*Operational strip ratio is calculated as total waste mined divided by ore mined
**Please refer to Non-IFRS measures notice at the end of this news release.
***Free Cash Flow is calculated as project operating cash flow minus sustaining/closure capital and tax
~Levered Case assumptions and parameters are disclosed below under “Economic Results”. The Leveraged Case reflects the impact of debt. Financing of the Project is not a measure of the economic viability and technical feasibility of the Project, but a measure of the Company’s ability to secure debt financing for the Project.
The base case economics have been calculated on an unlevered basis, based on a gold price of US $1,541/oz., a silver price of US $19.60/oz. and a foreign exchange rate of CAD$1 = USD$0.76. The economics include the effect of the Blackwater gold stream (the “Stream”), which was issued to finance part of the acquisition cost of Blackwater by Artemis from New Gold Inc. (“New Gold”) (refer to news release dated August 24, 2020). Under the terms of the Stream, New Gold will purchase 8.0% of the refined gold produced from the Project. Once 279,908 ounces of refined gold have been delivered to New Gold, the gold stream will reduce to 4.0%. New Gold will make payments for the gold purchased equal to 35% of the US dollar gold price quoted by the London Bullion Market Association two days prior to delivery.
The tables below show the sensitivity of after-tax NPV and IRR to changes in the US dollar gold price and the CAD/USD exchange rate.
Sensitivity on Base Case After-Tax NPV (5%) ($000) to Changes in US$ Gold Price and USD/CAD Exchange Rate (Base Case Highlighted)
Table 3 – Sensitivity on Base Case After-Tax IRR to Changes in US$ Gold Price and USD/CAD F/X