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The Blackwater Project will comprise the construction, operation, and closure of an open pit gold and silver mine and ore processing facilities commencing with a nominal milling rate of 15,000 t/d (5.5 Mtpa).  The ore processing facilities will be expanded to achieve 33,000 tpd (12 Mt/y) starting in year 6 with a final expansion to achieve 55,000 t/d (20 Mt/y) starting in year 11 of operation.  A combined gravity circuit and whole ore leaching (WOL) will be used for recovering gold and silver.

The proposed mine plan involves mining 334 Mt of ore, 584 Mt of waste rock and 83 Mt of overburden.  The material will be sourced via conventional open pit mining methods, initially targeting high-grade, near-surface ore for processing, with lower-grade material being stockpiled for processing at the end of the mine life.

Most of the waste material sourced from the pit will be used for construction of the tailings storage facility (“TSF”) or placed in the TSF itself.  Overburden and non potentially acid generating waste rock not required for construction will be placed in stockpiles adjacent to the open pit.  Potentially acid generating waste rock, along with tailings, will be deposited into the TSF located to the north/northwest of the open pit.

At closure, all buildings will be removed, disturbed lands rehabilitated, and the property returned to otherwise functional use according to future approved reclamation plans and accepted practices at the time of closure.

In addition to the site infrastructure, it is assumed that a 134 km, 230 kV transmission line will be constructed from the BC Hydro Glenannan substation near Endako, B.C. to the site to supply power to the Project.

Mining

Mining will be based on conventional open pit methods (drill-blast-load-haul) suited for the Project location and local site requirements.  Open pit operations are anticipated to run for 18 years, excluding 15–18 months of pre-production mining.  Following mining operations, stockpiled low-grade material will be processed for an additional five years, resulting in a total life-of-mine (“LOM”) of 23 years.  The open pit will be developed with a series of pushbacks.  The first stage will target suitable waste rock for construction whilst exposing near-surface, high-grade material.  The second phase will target higher-grade, lower-strip-ratio ore providing mill feed over the initial years of the Project.  The remaining stages expand the pit to the north targeting progressively deeper ore. LOM activities are summarized in Appendix A.

Owner-managed mining and fleet maintenance operations are planned for 365 days/year, with two 12-hour shifts planned per day.  Initially, mining will be undertaken using 400 t class hydraulic shovels and 190 t payload class haul trucks.  As production requirements increase the load and haul fleet will be expanded with 550 t class hydraulic shovels and 220 t payload class haul trucks.  The initial drill and loading fleet is planned to be diesel drive, with expansion fleet requirements being electric drive.  The mine equipment fleet is planned to be purchased via lease arrangements.

Metallurgy & Process

The process flowsheet has been designed based on historical test work and more recent test work carried out in 2019 for New Gold.

The most recent metallurgical program, completed in 2019, was carried out with the primary objective of confirming and optimizing the flowsheet and design criteria using a combination of new test work, results from the historical and previous test work programs, and trade-off studies completed since the 2014 Feasibility Study.  Drill core from site was sent to Base Metallurgical Laboratories Ltd. (BaseMet) in Kamloops, BC for test work that included core splitting, sample preparation, interval assaying, mineralogy, gravity concentration, cyanide leach and cyanide destruction.

The test program included three larger composites for optimization test work and 48  samples covering the deposit to establish the variability of the ore to the chosen flow sheet.

The mineralogy indicated that the sulphur content is mainly associated with pyrite, pyrrhotite and sphalerite.  The comminution test work included semi-autogenous grind (“SAG”) mill comminution (“SMC”) on the new drill core, Bond rod mill work index (“RWi”), Bond ball mill work index (“BWi”) and abrasion index (“Ai”) tests.  The results indicate the material is hard with results ranging from 11.8 to 24.6 kWh/t and the 75th percentile of the samples tested was 21.1 kWh/t for the variability samples.  A correlation between gold extraction and head grade was not observed.  The variability composite results averaged 93.7% total gold extraction with gravity gold recovery of 34.2%.

Based on the test results, a gold doré can be produced with a primary grind size of 80% passing (“P80”) 150 μm followed by gravity concentration, 2 hour pre-oxidation, a 48 hour cyanide leach at an initial cyanide concentration of 500 ppm and a pH of 10.5, carbon-in-pulp (“CIP”) adsorption, desorption and refining process.  The weighted average of the year composites, based on the mine plan, is estimated to achieve an overall average gold recovery in the range of 93% to 94%.

The initial design daily throughput is 15,000 tonnes per day, with an availability of 75% used in designing the crushing circuit and 93% for the design of the rest of the plant. 

The process will consist of:

  • Three stage crushing, consisting of a primary jaw crusher with grizzly feeder, a secondary cone crusher and two tertiary cone crushers.  The primary jaw crusher, the three cone crushers and the three vibrating screens will each be housed in steel-framed buildings, with covered conveyors transporting material between each stage. The crushed ore stockpile will be covered to prevent freezing;  
  • Crushed ore will be conveyed from the stockpile to a single, 7.3 m x 12.5 m, 14 MW ball mill for grinding, with the circuit being closed by cyclones.  Gravity concentration will be incorporated into the grinding circuit using centrifugal concentrators and an intensive cyanide leach unit for recovering gold from the gravity concentrate;
  • The leach circuit will consist of eight tanks fitted with mechanical agitators, an initial pre-oxidation tank with cyanide being added to the second and subsequent tanks. The leach residence time will be 48 hours;
  • Carbon in pulp adsorption of gold and silver will be carried out in a “carousel” unit, with “pump cells” moving leached slurry between the six tank units while the carbon remains in the same tank until fully loaded; 
  • The loaded carbon will be treated in a Zadra elution and electrowinning circuit consisting of an acid wash column and two elution columns operating at 140 degrees Celsius.  A propane heater will provide the necessary temperature and two additional heat exchangers will control the temperature around the circuit.  A rotary kiln operating at 700 degrees Celsius will be used to maintain carbon activity.  Electrowinning will be carried out to recover gold and silver from the elution solution and the resulting metallic precipitate will be dried and smelted to doré bullion;     
  • Cyanide destruction using an SO2 air system will be carried out in the final tailings slurry, with the sulfur dioxide being produced by the combustion of elemental sulfur.

Figure 2 – Blackwater Process Flow Sheet

Blackwater Process Flow Sheet

Economic Results

Capital Cost Estimate

The Study outlines an initial capital cost estimate of $592 million for Phase 1 (5.5 Mtpa), expansion capital of $426 million for the Phase 2 expansion to 12.0 Mtpa, expansion capital of $398 million for the Phase 3 expansion to 20.0 M tpa.  Sustaining capital over the life of mine is estimated at $637 million while closure costs are estimated at $117 million, partially offset by proceeds from equipment salvage values, estimated at $42 million.  The PFS factors a 15% contingency into all capital cost estimates with the exception of reclamation costs.

Table 8 – Blackwater Initial Capital Costs

Blackwater Initial Capital Costs

The biggest drivers associated with the estimated expansion capital costs are the mobile fleet lease payments ($121 million), modular expansion of the process plant ($272 million) and indirect costs ($108 million).  Sustaining capital is estimated to average $26 million per year in phase 1, ramping up to $40 million per year in phase 2 and $23 million per year in phase 3.  Mobile fleet lease payments ($289 million) and tailings management ($190 million) are the primary drivers of sustaining capital costs. 

Operating Costs

Table 9 - Operating Cost Estimate

  Units Pre-strip Phase 1 Phase 2 Phase 3 LOM
Mining* $/t Mined 3.31 2.15 2.14 2.62 2.37
  $/t Milled - 14.61 12.12 4.98 7.03
Process $/t Milled - 9.17 8.31 8.24 8.33
G&A $/t Milled - 4.64 2.87 1.91 2.30
Total $/t Milled - 28.42 23.30 15.13 17.65

*Mining costs includes stockpile re-handle, LOM mining costs exclude pre-stripping

The LOM operating cost estimates for Blackwater peak in Phase 1 at $28.42/t, with economies of scale and driving down costs to C$23.30/t in Phase 2 and $15.13/t in Phase 3. Over the LOM, the Project has estimated average operating costs of C$17.65/t.

All-in Sustaining Cash Costs per ounce (“AISC”)

The Study outlines robust economics for the Blackwater Project during all three stages of growth with annual production of 248,000 ounces of gold at an AISC of $668/oz in Stage 1, growing to 420,000 ounces of gold per year at AISC of $696 in stage 2 and smoothing out to 316,000 ounces of gold per year at an AISC of $911 per ounce in stage 3.  The higher AISC in Phase 3 is mainly attributed to the inclusion of closure costs at the end of the life of mine.  Over the LOM, the Study estimates an AISC of $811 per (or US$616/oz) ounce on production of 7.45 million ounces of gold, which places the Project in the bottom quartile of the global cost curve for gold project (source: World Gold Council).

Selling Costs, Royalties and Taxes

Selling Costs

  • Payable factor (Au) of 99.9%
  • Payable factor (Ag) of 95.0%
  • Refining, treatment, transport, and insurance charges of $3/oz.

Royalties

The Study economics consider two private royalties at 1.0% and 1.5% over parts of the Mineral Reserve.  Estimated payments to Indigenous nations are also included in the economic cash flow model for the Project.

Taxes

Key provincial and federal tax considerations for Blackwater includes:

  • British Columbia mining tax – 2% provincial minimum tax payable on operating profits immediately upon the start of production which is creditable against the 13% effective mining tax rate which is calculated based on operating profit less  applicable capital cost deductions.  The mining tax is deductible in computing provincial and federal income tax; 
  • British Columbia provincial income tax – 12.0%, payable after applicable deductions are used;
  • Canadian federal income tax – 15.0%, payable after applicable deductions are used.

Levered Case Assumptions

In the economic results for the Project, the Company presents a base case economic analysis, being unlevered, plus an alternate levered case. The levered case is based on the following assumptions:

  • Initial capital 60% debt financed;
  • Annual interest rate of 5.5%;
  • Upfront financing fee of 3%;
  • 7-year term post commencement of commercial production with a balloon payment of 30% of the principal at maturity;
  • Expansion capital is assumed to be funded through operating cashflow.