After-Tax NPV 5% of US$212 million, After-Tax IRR of 42% at $1,650/oz Gold, Average Annual Gold Production of 104,000 ounces in years 2 through 5
VANCOUVER, British Columbia, June 08, 2021 (GLOBE NEWSWIRE) --
Newcore Gold Ltd. ("Newcore" or the "Company")
(TSX-V: NCAU, OTCQX: NCAUF) is pleased to announce the positive results of an updated independent Preliminary Economic Assessment ("PEA") completed for the Company’s 100%-owned Enchi Gold Project ("Enchi" or the "Project") in Ghana. The PEA was prepared by BBA E&C Inc. ("BBA") in accordance with National Instrument 43-101 ("NI 43-101") and contemplates a technically simple, open pit mine and heap leach operation processing 6.6 million tonnes per annum ("mtpa") utilizing contract mining. The PEA also reflects an updated, pit constrained, Inferred Mineral Resource of 70.4 million tonnes ("Mt") grading 0.62 grams per tonne gold ("g/t Au") containing 1.4 million ounces gold. Only 20,195 metres of drilling from the ongoing 66,000 metre drill program was included in the updated Mineral Resource Estimate. All currencies are reported in U.S. dollars unless otherwise specified.
PEA Highlights
-
Strong Project Economics with Low Capital Intensity
- At a gold price of $1,650/oz: $333 million pre-tax net present value discounted at 5% ("NPV 5% ") and a 54% pre-tax internal rate of return ("IRR"), $212 million after-tax NPV 5% , and a 42% after-tax IRR.
-
At a gold price of $1,850/oz: $471 million pre-tax NPV
5%
and a 69% pre-tax IRR, $302 million after-tax NPV
5%,
and a 54% after-tax IRR.
- Initial capital costs estimated at $97 million, with a short after-tax payback of 2.3 years.
-
Establishing the Potential for a Robust Project with Significant Growth Potential
- Average annual gold production in years two through five of 104,171 ounces gold; 983,296 ounces gold recovered over an 11-year life of mine ("LOM").
- LOM strip ratio of 2.1 to 1, mined grade of 0.57 g/t gold and recovery of 79%.
- LOM operating costs (1) estimated at $923/oz of gold, cash costs (2) estimated at $1,043/oz of gold, LOM all-in sustaining costs (AISC) ( 3 ) estimated at $1,066/oz of gold.
-
Updated Mineral Resource Estimate, Including an Initial Resource at Kwakyekrom
- The PEA includes an updated Inferred Mineral Resource Estimate of 70.4 Mt grading 0.62 g/t Au containing 1.4 million ounces gold.
- Incorporates 20,195 metres of drilling completed at Enchi in 2020 and early 2021.
-
Additional Exploration Upside from Ongoing 66,000 Metre Drill Program at Enchi
- 46,000 metres of additional drilling was not included in the Mineral Resource Estimate.
- Exploration and drilling activities continue on the Enchi Gold Project, with drilling testing a series of highly prospective targets directed at extending the existing Mineral Resources along strike and down dip, further drilling of advanced gold targets across the 216 km 2 property, and first pass testing of multi-kilometre scale gold anomalies.
- Recent drilling results not included in the PEA Mineral Resource Estimate have intersected wide zones of oxide gold mineralization as well as high-grade core structures including 5.40 g/t Au over 9.0 m, 5.78 g/t Au over 7.0 m, 6.25 g/t Au over 6.0 m, 3.31 g/t Au over 9.0 m, and 2.95 g/t Au over 9.0 m and remain open along strike and to depth.
Note: All currencies in this news release are reported in U.S. dollars unless otherwise specified. Base case parameters assume a gold price of $1,650/oz. NPV calculated as of the commencement of construction and excludes all pre-construction costs. Cash costs and AISC are non-GAAP financial measures (see cautionary language).
(1)
Operating costs consist of mining costs, processing costs, and on-site G&A.
(2)
Cash costs consist of operating costs plus treatment and refining charges, and royalties.
(3)
AISC consists of cash costs plus sustaining capital (excluding closure costs and salvage value).
Luke Alexander, President and CEO of Newcore stated, "The updated PEA is a notable milestone for Newcore as we look to highlight the value of not only the exploration upside across the district scale property but also the economic value of the current resources that we have defined on the Project. The PEA results indicate that Enchi is an economically robust, low capital intensity, heap leach project with an after-tax NPV 5% of $212 million and after-tax IRR of 42% at a gold price of $1,650 per ounce. Importantly, the economics also highlight the quick payback of capital, approximately 2 years after first gold pour. We believe that the Project and economics have a tremendous amount of upside from resource expansion both from shallow, near surface oxide mineralisation, but also from the higher-grade structures that we are starting to define at depth. This PEA only includes 20,195 metres of drilling from our ongoing 66,000 metre drill program, and only incorporates the shallow, open pit oxide material defined to date, with the first deeper drilling on the project underway to define the potential for resource growth at depth. We are excited to continue to define the district-scale, multi-million-ounce potential at Enchi and build off the underpinning of value that the updated PEA highlights."
Greg Smith, Vice President of Exploration of Newcore stated, "The PEA includes an updated Mineral Resource Estimate which has increased the pit constrained Inferred Mineral Resource to 70.4 Mt grading 0.62 g/t Au and containing 1.4 million ounces gold. The expansion was accomplished by extending the existing resources along strike and down dip, along with the inclusion of an initial resource estimate at Kwakyekrom which is interpreted to be an extension of the same structure hosting the Nyam Gold Deposit three kilometres to the north. All mineral resources remain open along strike and in all cases are defined by kilometre-scale gold-in-soil anomalies on surface and geophysical anomalies which characterize the structural trends. The inclusion of a shallow oxide resource at Kwakyekrom highlights the potential to discover additional deposits across the Project. We will continue to work towards defining the district scale potential of the Enchi Gold Project through our ongoing 66,000 metre drill program."
This updated PEA for the Enchi Gold Project was prepared by BBA, in accordance with NI 43-101 Standards of Disclosure for Mineral Projects , and a technical report for the PEA will be filed by Newcore on SEDAR within 45 days of this news release.
The PEA is preliminary in nature, 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, and there is no certainty that PEA results will be realized. Mineral resources are not mineral reserves and do not have demonstrated economic viability.
PEA Overview and Financial Analysis
The Enchi Gold Project is located in southwest Ghana, with the Project’s 216 km 2 land package covering approximately 40 kms of Ghana’s prolific Bibiani Shear Zone, a gold belt which hosts several multi-million-ounce gold deposits. Enchi is located 50 km to the south of Kinross’ Chirano gold mine which produced approximately 165,000 ounces of gold in 2020.
The updated PEA contemplates an open pit, heap leach operation with a low strip ratio using contract mining and processing 6.6 mtpa (approximately 18,000 tonnes per day). The heap leach facility will be built in three phases, with excess capacity available. Heap leach feed material will be trucked from four deposits (Sewum, Boin, Nyam, Kwakyekrom) to a central crushing and heap leach facility which will be located near Sewum, the largest currently defined deposit at Enchi.
Table 1 - Important Parameters of the Updated PEA
| Key Assumptions | |
| Base Case Gold Price | $1,650/oz |
| Production Profile | |
| Total Tonnes Processed (mt) | 68.6 |
| Total Tonnes Waste (mt) | 143.5 |
| Strip Ratio | 2.1 |
| Heap Leach Feed Grade | 0.57 g/t Au |
| Mine Life | 11 years |
| Throughput (mtpa) | 6.6 |
| Gold Recovery | 79% |
| LOM Gold Production (ounces) | 983,296 |
| LOM Average Annual Gold Production (ounces) | 89,391 |
| Peak Gold Production in Year 10 (ounces) | 121,387 |
| Average Annual Gold Production Years 2 to 5 (ounces) | 104,171 |
| Unit Operating Costs | |
| LOM Average Operating Cost (1) | $923/oz gold |
| LOM Average Cash Cost ( 2 ) | $1,043/oz gold |
| LOM AISC (Cash Cost plus Sustaining Cost) ( 3 ) | $1,066/oz gold |
| Capital Costs | |
| Initial Capital Cost | $97 million |
| Sustaining Capital Cost (4) | $23 million |
| Reclamation Cost | $22 million |
(1)
Operating costs consist of mining costs, processing costs, and on-site G&A.
(2)
Cash costs consist of operating costs plus treatment and refining charges, and royalties.
(3)
AISC consists of cash costs plus sustaining capital (excluding closure costs and salvage value).
(4)
Sustaining Capital Cost excludes closure costs and salvage value. Includes $6.7 million in each of years three and six for heap leach pad expansion.
Table 2 - Project Economics Summary
| $1,650/oz Gold Price | $1,850/oz Gold Price | |||
| Pre-Tax | After-Tax | Pre-Tax | After-Tax | |
| NPV 5% | $333 million | $212 million | $471 million | $302 million |
| IRR | 54 % | 42 % | 69% | 54% |
| Payback | 2.1 years | 2.3 years | 1.7 years | 1.9 years |
| LOM Cash Flow | $469 million | $304 million | $652 million | $423 million |
Chart 1 - Production and Cost Profile by Year is available at
https://newcoregold.com/site/assets/files/5703/2021_06-ncau-pea-chart1.png
The financial model was completed on a 100% project basis and includes a 5% gross royalty to the Ghanaian Government and a 2% net smelter return ("NSR") royalty to Maverix Metals Inc. The economic analysis carried out for the Project uses a cash flow model at a base price of $1,650 per ounce gold and a 5% discount rate. The financial assessment of the Project was carried out on a 100% equity basis, not accounting for potential sources of funding which may include debt. No provisions were made for the effects of inflation, and current Ghana tax regulations were applied to assess the tax liabilities. The Government of Ghana has the right to a 10% free carried interest in the Project.
A summary of the cash flow model can be viewed at the following link:
https://newcoregold.com/site/assets/files/5703/2021_06-ncau-pea-nr-summary-cash-flow-model-l.pdf
Table 3 - Enchi Economic Sensitivity to Gold Price
| Gold Price (US$/oz) | $1,450 | $1,550 | $ 1,650 | $1,750 | $1,850 | $1,950 |
| Pre-Tax NPV 5% | $195 M | $264 M | $333 M | $402 M | $471 M | $540 M |
| Pre-Tax IRR | 36% | 45% | 54 % | 62% | 69% | 77% |
| Pre-Tax Payback | 2.7 years | 2.3 years | 2.1 years | 1.9 years | 1.7 years | 1.6 years |
| After-Tax NPV 5% | $123 M | $168 M | $212 M | $257 M | $302 M | $347 M |
| After-Tax IRR | 29% | 36% | 42 % | 48% | 54% | 60% |
| After-Tax Payback | 3.0 years | 2.6 years | 2.3 years | 2.1 years | 1.9 years | 1.8 years |
Chart 2 - After-Tax Economic Sensitivity to Gold Price, Operating and Capital Costs is available at
https://newcoregold.com/site/assets/files/5703/2021_06-ncau-pea-chart2.png
Mineral Processing and Metallurgical Testing
The updated PEA utilized an average gold recovery of 79%, with recoveries estimated for each deposit. These recoveries are based on preliminary metallurgical testwork completed to date on the Sewum, Boin, Nyam and Kwakyekrom deposits which consisted of a series of bottle roll and preliminary column tests completed on representative samples. This initial testwork showed that cyanide leaching is a viable option for the extraction of gold from the oxide, transition and fresh domains, and this recovery rate is consistent with typical heap leaching operations with a similar type of mineralization.
A conceptual heap leaching facility has been designed, with the facility processing oxide, transition and fresh rock mineralization.
Table 4 - Average Recovery by Deposit
| Deposit | Recovery Rate |
| Sewum | 80% |
| Boin | 80% |
| Nyam | 60% |
| Kwakyekrom | 72% |
| Enchi Gold Project | 79 % |
Determination of the appropriate recovery value was based on preliminary test work carried out by Edgewater Exploration Ltd. and SGS in 2012 on samples from Sewum, Boin and Nyam, as well as additional metallurgical testwork completed by Newcore in 2020 and 2021, which included a series of bottle roll tests and four preliminary column tests by Intertek Minerals Limited, on samples from Sewum, Boin and Kwakyekrom.
Testwork completed in 2020 on the Sewum and Boin Gold Deposits consisted of a series of bottle roll tests on 49 representative oxide samples (29 from Sewum, 20 from Boin) from the ongoing 66,000 metre drill program. An average gold recovery of 89.4% was achieved from 24-hour bottle roll tests, with 43 of the 49 samples achieving a recovery greater than 75%. The samples from Sewum had an average recovery of 91.4% and the samples from Boin had an average recovery of 86.4%. Sewum and Boin are the two deposits on the Project that currently represent the majority of the Inferred Mineral Resource. Testwork completed in 2021 on the Kwakyekrom Gold Deposit consisted of a series of bottle roll tests on 25 representative oxide samples from the ongoing 66,000 metre drill program. An average gold recovery of 79.8% was achieved from 24-hour bottle roll tests, with 18 of the 25 samples achieving a recovery greater than 80% and averaging 86.9%.
Additional metallurgical test work is underway as part of the ongoing work program at Enchi, including column tests to better simulate heap leach conditions and further test for optimal crushing size, reagent consumption and leach permeability. Initial testwork supports cyanide leaching as a viable option for the extraction of gold from the three domains, but further work on the metallurgical behavior and physical constraint associated with heap leaching is still required to definitively select heap leaching as the best technical process option.
Capital Costs
An initial capital expenditure of $97 million (including 30% contingency on direct costs) has been estimated to construct the Project, with a further $23 million in sustaining capital during operations, $23 million for closure (including reclamation) and $14 million of salvage value. The capital cost estimate is based on an open pit mining and heap leach operation processing 6.6 mtpa utilizing contract mining. Capital costs are detailed in the table below.
Table 5 – Capital Cost Estimate Details
| Description | Initial ($M) | Sustaining ($M) | Closure ($M) | LOM ($M) |
| Direct Costs | ||||
| Mining | $3 | $0 | $1 | $4 |
| Processing | $55 | $13 | - | $69 |
| Environmental (1) | - | - | $15 | $15 |
| Infrastructure | $6 | $2 | - | $7 |
| Salvage Value ( 2 ) | - | - | - | ($14) |
| Total Direct Costs | $ 64 | $ 15 | $ 16 | $ 81 |
| Indirect Costs | ||||
| Engineering and Procurement | $7 | $2 | $2 | $10 |
| Construction Indirect | $5 | $1 | $1 | $7 |
| Owner’s Cost | $2 | - | - | $2 |
| Total Indirect Costs | $ 14 | $ 3 | $ 3 | $ 19 |
| Capital Costs Pre-Contingency | $ 78 |
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