Gold Mountain Updates Project Economics at the Elk Gold Project

Date/time : 2021-05-27 07:00 AM
Symbol :

GMTN

Company : Gold Mountain Mining Corp.
Price : -
Market cap : -
O/S : -
Exchange :

TSX

Industry :

Other Industrial Metals & Mining

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Gold Mountain Updates Project Economics at the Elk Gold Project

VANCOUVER, BC / ACCESSWIRE / May 27, 2021 / Gold Mountain Mining Corp. ("Gold Mountain" or the "Company") (TSXV:GMTN)(OTCQB:GMTNF)(FRA:5XFA) is pleased to announce an updated preliminary economic analysis of the Elk Gold Project. The update is based on the increased Mineral Resource Estimate announced on May 14, 2021, the Ore Purchase Agreement with New Gold Inc. ("New Gold") announced on January 26, 2021 (the "Ore Purchase Agreement") and the Mining Contract with Nhwelmen-Lake LP announced on January 19, 2021 (the "Mining Contract"). An updated preliminary economic assessment (the "PEA") will be filed on the Company's website and SEDAR within 45 calendar days of May 14, 2021.

Highlights:

  • Updated PEA with an After-tax NPV5% of C$231M
  • 19,000oz annual production (Years 1-3) expanding to 65,000oz annual production (Years 4-11)
  • Increased cost certainty over September 2020 PEA through executed:
    • Construction and Mining Contract with Nhwelmen-Lake LP
    • Ore Purchase Agreement with New Gold Inc.
  • Revised mine plan eliminates construction of an onsite mill and incorporates underground mining

Elk Gold Project PEA Summary

The PEA contemplates an initial 19,000 ounce per year mine that ramps up to 65,000 ounces of annual production by Year 4. The pre and post tax NPV (5% discount) are $395M and $231M, respectively. The PEA contemplates that for the life of mine, the mineralized material from the Elk Gold Project will be mined by the Company's contract mining partner, Nwhelmen-Lake LP ("Nwhelmen-Lake") and then delivered to New Gold's New Afton Mine located approximately 130km from the Elk Gold Project (the "New Afton Mine").

The PEA is preliminary in nature and includes 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. There is no certainty that the PEA will be realized. Mineral resources that are not mineral reserves do not have demonstrated economic viability.

Elk Gold Resource Update - Summary

On May 14, 2021 the Company announced the following updated resource estimate at the Elk Gold Project:

Classification
Tonnes
AuEq (g/t)
Au Capped g/t
Ag Capped g/t
AuEq (Oz)
Measured
196,000
9.9
9.8
9.9
63,000
Indicated
3,148,000
5.8
5.7
11.2
589,000
Measured + Indicated
3,344,000
6.1
5.9
11.1
651,000
Inferred
1,029,000
4.8
4.7
10.9
159,000

CIM definitions were followed for classification of Mineral Resources.

Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability.

Results are presented in-situ and undiluted.

Mineral resources are reported at a cut-off grade of 0.3 g/t Au for pit-constrained resources and 3.0 g/t for underground resources.

The number of tonnes and metal ounces are rounded to the nearest thousand.

The Resource Estimate includes both gold and silver assays. The formula used to combine the metals is:

AuEq = ((Au_Cap*55.81*0.96) + (Ag_Cap*0.76*0.86))/(55.81*0.96)

The Resource Estimate is effective as of May 1, 2021.

Elk Gold Project Preliminary Economic Assessment`

Qualification and Assumptions

The following section sets out the qualifications and assumptions behind the economic analysis supporting the PEA. The PEA envisages a conventional open pit mining operation for the life of mine with underground mining is commissioned in Year 4. The first three years of operation are planned at 70,000tpa (200tpd). Starting in Year 4 of the mine plan, the mine expands to a 324,000tpa (900tpd) operation.

The PEA is preliminary in nature and includes 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. There is no certainty that the PEA will be realized. Mineral resources that are not mineral reserves do not have demonstrated economic viability.

Existing Infrastructure

The Elk Gold Project is a past-producing mine with much of the required surface infrastructure still in place that is required to re-start operations. The site is serviced by the all-season, four-lane Highway 97C connecting Kelowna and Merritt. An existing forest service road provides access to proposed open pits. Surface water management infrastructure around the proposed open pit is already in place including collection ditches and sumps. The stockpile pad where material will be placed prior to being shipped off-site for processing is in place, as well as the sample preparation plant which is required for sampling material from the mine for assay. A laydown area is already in place for mobile equipment maintenance, fuel storage and office facilities.

Pit Optimization

A pit optimization analysis was carried out using the Lerch-Grossman algorithm which is industry standard for assessing the ultimate pit limits for an open pit mine. The parameters used in the pit optimization are detailed in the table below.

Item
Unit
Value
Au Price
US$/oz
1,600
Au Recovery
%
92
Au Selling Cost
%
2
NSR and Mill Revenue Split
%
14
Mining Cost
US$/t
3.03
Highway Haulage and G&A Cost
US$/t milled
19.46
Pit Slope Angles
Overall degrees
45
Mining Dilution
%
Internal
Mining Recovery
%
100
Strip Ratio (est.)
Waste (t): Ore (t)
20:1
Processing Rate
tpd
900

The pit shell with a revenue factor of 0.64 was selected as the ultimate pit for the PEA mine plan and it contained 1.43M tonnes of mineralized material above the cut-off grade and 28.6M tonnes of mineralized material below the cut-off grade for a strip ratio of 20.0 waste (t) : 1 ore (t). The average gold grade in mineralized material above cut-off was 4.68g/t.

Open Pit Mine Design and Pit Phasing

A detailed mine design was developed for the ultimate pit limits. The pit design was developed according to the pit design guidelines in the Health, Safety and Reclamation Code for Mines in BC. The ultimate pit design demonstrated that the material volumes from the ultimate pit shell were achievable when accounting for pit access ramps and slope configurations.

Interior pit phases were developed using optimized pit shells which used lower gold prices and therefore only targeted higher value areas of the deposit. Targeting higher value areas of the deposit allows for the operation to increase revenue and reduce costs early in the mine life, which can improve the discounted cash flow and net present value of the project. The open pit used a cut-off grade of 0.5g/t Au. The ultimate pit design includes 1.16M tonnes of mineralized material above cut-off grade and 22.8M tonnes of rock below cut-off.

Underground Stope Design

The underground mining is contemplated to be in operation from Years 4 to Year 11 concurrently with open pit operations. Stopes for underground mine development were established by generating grade shells from the resource block model at a diluted cut-off grade of 4.2g/t Au. Only large continuous sections of the resulting grade shells which represent practical stope development dimensions were selected for mining. The selected stopes for the underground mine plan are limited to the 1300, 2500, 2600 and 2800 veins. The mineral resource above cut-off was diluted to reflect 1.4m wide stopes which was an external dilution of 40%.

Decline access was designed along the footwall of each of the underground stope solids and that development length was scheduled to ensure access to the stopes as required by the production schedule. The mine design includes dewatering and refurbishing the existing historical decline on site. An additional 10% was added to the development distance to capture cross-cuts and pull-outs resulting in a total development of 8,360m over the life of mine.

Rock Storage Facility Design

Rock below the cut-off grade of the operation will be stockpiled in a rock storage facility which has been designed west of the open pit. The facility is designed on a gentle sloping area within an existing forestry cut-block to minimize impact on intact ecosystems. The facility is designed in 20m lifts with 37° faces. The overall slope of the facility is 26° and the total capacity is 23M tonnes assuming a loose density of 1.8t/m3.

Mine Schedule

The mine is scheduled to release 70,000tpa of plant feed for Years 1 to 3. In Year 4, the mine is planned to expand to 324,000tpa. The material movement that is proposed in the PEA is presented in the table below.

Total
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
Year 7
Year 8
Year 9
Year 10
Year 11
Calendar Days
(#)
3,723
365
365
365
366
365
365
365
366
365
365
189
Mineralized material Mined
dmt (000's)
2,542
70
70
70
324
324
324
325
324
324
324
63
Waste Mined
dmt (000's)
22,765
2,594
2,843
2,401
2,617
2,236
2,165
2,481
2,479
2,641
308
-
Au
(g/t)
6.8
10.4
8.4
9.2
6.3
6.3
7.2
7.0
5.9
7.8
7.2
4.9
Ag
(g/t)
11.5
9.1
9.0
8.2
10.8.
9.1
10.1
8.3
11.8
15.0
18.8
12.4
S
(%)
0.81
0.81
0.08
0.10
0.50
0.50
0.9
1.2
1.3
1.0
1.1
1.8
Strip Ratio
(w:o)
18.8
19.1
18.1
17.8
56.3
13.4
11.2
36.3
31.0
33.1
4.8
-
Au Mined
oz (000's)
570
23.3
18.8
20.8
65.6
65.2
75.3
73.5
61.7
81.0
75.4
9.8
Au Recovered
oz (000's)
525
21.5
17.3
19.1
60.3
60.0
69.3
67.6
56.7
74.5
69.3
9.1
Ag Mined
oz (000's)
958
20.4
20.3
18.5
112.5
95.1
105.2
87.0
122.6
156.3
195.5
25.0
Ag Recovered
oz (000's)
671
14.2
14.2
13.0
78.7
66.6
73.7
60.9
85.8
109.4
136.8
17.5

Mine Development Schedule

Year 1

The first year of mining includes two months of site preparation. The current year activities include developing the new water settling pond below the Rock Storage Facility ("RSF"), and associated collection ditches. It also includes stripping organic material, topsoil, and till from the initial footprint of the RSF and open pit Phase 1 as well as mobilizing the initial fleet of mobile equipment, modular office facilities, and explosives storage.

The remainder of Year 1 will be the initial year of mining production, including 70,000 tonnes of mineralized material shipped to the New Afton Mine.

Years 2 and 3

The mine will continue to operate the initial phases of the open pit and transport 70,000 tpa of mineralized material to the New Afton Mine. The mine will also initiate an Environmental Assessment process which is required to expand mine production in subsequent years, as well as apply for a mine permit amendment for the expanded mining rate. The increase in production in Year 4 assumes all permits are in hand. In Year 3, the existing underground decline will be rehabilitated and extended in preparation for underground mining activities.

Years 4 to 10

Upon receipt of an Environmental Assessment Certificate, the mining rate will increase deliveries to the New Afton Mine to 324,000 tpa. The open pit mining rate will increase to an average rate of 150,000 tonnes of mineralized material per year. Underground mining activities will commence on the 1300 vein system to supplement the open pit plant feed, followed by the 2500, 2600 and 2800 veins later in the mine life. The combined open pit and underground plant feed will total 324,000 tonnes per year sold to the New Afton Mine.

Year 11

The final year of production mining will also include the initiation of major reclamation activities. The mine will prepare ahead of time for the ultimate reclamation and closure of the facility.

Year 12

Major mine site reclamation activities will be completed.

Mineral Processing

The PEA does not contemplate any mineral processing on site.

On January 26th 2021, the Company entered into the Ore Purchase Agreement whereby the Company will deliver mineralized material to the New Afton Mine. Under the terms of the Ore Purchase Agreement, Gold Mountain will deliver 70,000 tonnes of mineralized material per annum or approximately 200 tonnes per day. The Ore Purchase Agreement has a term of three years. On May 7, 2021 the Company and New Gold entered into a non-binding Letter of Intent whereby New Gold agreed to purchase up to 350,000 tonnes per year of mineralized material from the Elk Gold Project.

The mineralized material will be sampled and weighed at the Elk Gold Project site to determine the contained ounces of gold and silver being delivered to the New Afton Mine. The Company and New Gold are in the process of finalizing the sampling procedure. Following delivery of the mineralized material, New Gold will pay Gold Mountain at the end of each calendar month based on the value of the gold and silver in the mineralized material, net of the agreed metallurgical recovery and concentrate selling costs.

A copy of the Ore Purchase Agreement was filed on the Company's SEDAR profile on February 3, 2021 and is available to view at www.sedar.com.

Infrastructure Construction Requirements

The infrastructure required for Years 1 to 3 of the mine plan is limited to a modular office facility, surface water management facilities, fuel storage, explosive storage and a pad for vehicle maintenance which will be constructed with run-of-mine rock. Initial power supply requirements are limited to generators already owned by the Company and potable water will be delivered to site by a local supplier. Sewage from on-site facilities will be collected by a contractor for disposal. Mine emergency response will have a dedicated vehicle equipped to respond to any incidents in the operation. Upon inclusion of underground mining in Year 4, infrastructure will expand to include increased power generation, ventilation and utilities for the underground workings. No processing facility is being contemplated which significantly reduces the on-site infrastructure requirements of the project and eliminates the need for a tailings storage facility.

Environmental Studies, Permitting and Social or Community Impact

Gold Mountain has carried out numerous environmental baseline studies which were completed to support the application for a 200tpd mining permit submitted in May 2020. That permitting process is ongoing and is expected to be finalized in June 2021. Gold Mountain anticipates that it will require an Environmental Assessment Certificate and Mine Permit Amendment before the operation can expand to 900tpd. The PEA assumes that the Company holds all permits necessary to increase production and that New Gold obtains all permits necessary to process an increase in mineralized material from the Elk Gold Project.

As a part of ongoing project development, exploration activities and permitting processes, Gold Mountain has been engaged with numerous First Nation Bands and Associations. The Elk Gold Project is located in the traditional territory of the Nlaka'pamux and Syilx Nations and has entered into Memorandums of Understanding with three neighbouring communities.

Economic Analysis

Nhwelmen-Lake Mining Contract

On January 19, 2021, the Company entered into the Mining Contract with Nhwelmen-Lake for construction and contract mining services at the Elk Gold Project. Nhwelmen-Lake is a majority owned, First Nations mining contractor.

Pursuant to the terms of the Mining Contract, Nhwelmen-Lake will be paid a fixed price per tonne mined over the first three years which is determined based on the planned production rate, mined volumes, haulage distances and equipment productivity. The scope of the Mining Contract includes mining of mineralized material at a rate of 70,000 tonnes per annum (200 tonnes per day), waste mining, drilling, blasting, hauling, site supervision, supply of operating personnel, road maintenance, dust suppression as well as all the site preparation activities required prior to commencing mine operations, including topsoil stockpiling and preparing surface water management structures. Nhwelmen-Lake will also provide the haulage of plant feed material from the Elk property to the New Afton mine.

The Mining Contract is for the life of mine while the price schedule carries a three-year term. The obligations of the Company under the Mining Contract begin upon the Company delivering a notice of commencement to Nhwelmen-Lake.

A copy of the Mining Contract was filed on the Company's SEDAR profile on January 22, 2021 and is available to view at www.sedar.com.

Open Pit Mine Operating Costs

The PEA operating costs reflect the life-of-mine average costs under the terms of the Mining Contract which is $4.50/t mined. As a result of commissioning the underground mine in Year 4 to operate concurrently with the open pit mine, the strip ratio was minimized which reduced the open pit operating costs.

Underground Mine Operating Costs

Underground mining costs are based on a narrow-vein long hole mining method, mining 10m high stopes. The underground mining cost, excluding transportation to New Afton and G&A, is $92/t mined and is based on the size of the stopes and estimated productivity.

Highway Haulage Costs

Haulage costs between the Elk Gold Project and the New Afton Mine are $14.50/tonne which is captured in the Mining Contract

Mineral Process Operating Costs

Under the terms of the Ore Purchase Agreement, New Gold will purchase mineralized material from the Elk Gold Project for a percentage of the net revenue from the anticipated sales of gold and silver. As such, New Gold is not charging the Company any unit processing costs.

General and Administrative Costs

General and Administrative costs were developed on an annual basis and include costs for administrative staff, supplies and mine rescue training and equipment. The total general and administrative cost is estimated to be $950,000 per year.

Mine Capital Costs

The start-up capital costs for the Elk Gold Project is $9.0M which is defined in the Mining Contract. This capital cost quote includes establishing the required site facilities such as an office/dry facility, fuel storage, explosive magazines, topsoil and overburden stockpiling, surface water management facilities and the dewatering of the historic open pits. This total also includes $2.5M in working capital and $2.8M in capitalized stripping prior to the initial mineralized material production.

There is an additional $63.5M in sustaining capital costs which includes the development of the underground mining operation starting in year 4 as well as the mine site closure and reclamation.

The mine capital costs for initial operations (Year 1) and the sustaining capital are included in the table below.

Item
Initial Capital
($ ‘000s)
Sustaining Capital
($ ‘000s)
Total Cost
($ ‘000s)
Office/Dry/Fuel Storage
387
4,261
4,648
Maintenance Facility
43
473
516
Explosives Magazines
190
440
630
Surface Water Management
930
-
930
RMSF Topsoil Salvage
394
-
394
Open Pit Topsoil Salvage
657
-
657
Access Road/Gate/Site General
1,013
-
1,013
Initial Pit Dewatering
85
-
85
Capitalize Stripping
2,849
-
2,849
Underground Development
-
41,800
41,800
Mine Closure/Reclamation
-
10,000
10,000
Working Capital
2,500
-2,500
-
Total Mine Capital
9,008
54,474
63,482