MONTREAL, July 13, 2022 (GLOBE NEWSWIRE) -- Osisko Metals Incorporated (the "
Company
" or "
Osisko
Metals
") (
TSX-V:
OM
;
OTCQX:
OMZNF
;
FRANKFURT:
0B51
) is pleased to announce the results of the Updated Preliminary Economic Assessment (the “PEA Update”) for its wholly-owned Pine Point Project (the “Project”), located near the town of Hay River in the Northwest Territories, Canada. The PEA Update was prepared in collaboration with independent engineering firms BBA Inc., WSP Canada Inc., & Hydro-Resources Inc. (“HRI”).
The objective of the 2022 PEA Update was to integrate updated long-term prices for zinc and lead, increased mined resources, cost escalations in CAPEX and OPEX as well as reduced life-of-mine water management costs that resulted from the recently completed hydrogeological model. The latter reduced the estimated dewatering volume by 30% compared to the 2020 PEA with potential for a further forecasted reduction of 15% as the project advances to feasibility.
Table 1: Updated PEA Highlight Results (all figures in CAN$ unless otherwise noted)*
| After-Tax Internal Rate of Return ("IRR") | 25 % |
| After-Tax Net Present Value ("NPV") (Discount Rate 8%) | $602M |
| After-Tax Payback Period (Years) | 3.8 |
| Pre-Production CAPEX (including $106.6M Contingency) | $653M |
| Average Annual LOM Production Zinc | 329Mlb |
| Average Annual LOM Production Lead | 141Mlb |
| Life of Mine ("LOM") | 12 Years |
| Total Mineral Resources Mined | 46.9Mt |
| Average ZnEq Diluted (12%) Grade of Mineral Resources Mined | 6.1 % |
| Gross Revenue After Royalty (LOM) | $5,625M |
| After-tax Operating Cash Flow (LOM) | $1,279M |
| C1 Costs over LOM (ZnEq)** | US$0.61/lb |
| All-In Costs (including sustaining CAPEX, ZnEq)*** | US$0.80/lb |
| LOM Zinc Price | US$1.37/lb |
| LOM Lead Price | US$0.96/lb |
| FX Rate (CAD:USD) | 1.27 |
* See Cautionary Statement below
** C1 cost includes mine site cost plus smelting, transport and royalty
*** All-in costs are C1 plus sustaining CAPEX
Robert Wares, Executive Chairman & CEO, commented: “In the current inflationary context I am very pleased that the PEA Update still shows a very robust zinc project with viable economic metrics including an after-tax IRR of 25% and after-tax NPV of C$602 M, as well as significantly increased resources. The new proposed mine plan, with 18% increased tonnage to the mill, could again make Pine Point a top-ten global zinc-lead producer with an annual average production of 329Mlb of zinc and 141Mlb of lead over a 12-year mine life. On a zinc-only basis, Pine Point could potentially become a low-cost zinc-lead producer ranking fourth largest in the Americas. I remind shareholders that the exceptionally clean and high-grade zinc concentrate from Pine Point would be sought after by any number of smelters and traders globally.”
Mr. Wares continued: “This summer we will be drill-testing the best gravity anomaly on the property that resulted from the 2018 gravimetric survey, now that this anomaly has been secured through additional staking. It is our sincere hope that this anomaly represents an undiscovered prismatic deposit of high-grade massive Zn-Pb sulfides. Furthermore, drilling will continue to upgrade the Inferred Mineral Resources on the Project and potentially yield further expansion of several known deposits. We are still very bullish on zinc, especially after seeing an all-time high in spot prices this year, and we are committed to continue developing the Pine Point Project as we launch the feasibility study this fall.”
Hydrogeology Highlights:
- This is the first time a hydrogeological Site Wide Numerical Model (“SWNM”) has been used for the Pine Point Project, providing insight into dewatering requirements.
- The new Cluster mining strategy in combination with the hydrogeological modelling reduced dewatering estimations by 30% on an annual basis for various key Operating and Sustaining Capital Expenditures directly associated to dewatering when compared to mining the open pits individually.
- Current data suggests that there is potentially an additional reduction of up to 15% beyond the current simulation estimates.
- Ongoing modelling will further optimize the LOM plan strategy to pump less water, use less energy, and continue to reduce dewatering costs. This also means reduced NG generated power requirements, and less GHG emissions for a smaller footprint.
-
Further optimization of the SWNM and the LOM plan will be a main objective of the feasibility study.
Updated Mineral Resource estimate (MRE) Highlights:
- Indicated Mineral Resource: 15.8Mt grading 4.17% Zn and 1.53% Pb representing approximately 25% of the declared tonnage in the updated 2022 MRE
- Inferred Mineral Resource: 47.2Mt grading 4.43% Zn and 1.68% Pb
- Indicated and Inferred Mineral Resource tonnages increased by 22% and 26%, respectively
- The differences in tonnage/grade between the 2020 and 2022 MRE are attributable to parameter changes used for the pit shells and the cut-off grade calculation.
- The feasibility study will include drilling from 2019 until the end of the drill campaign in H1 2023. This will upgrade the Inferred Resources to the Indicated category for the feasibility study Mineral Resource Estimate.
2022 PEA Update – Detailed cost breakdown
The increase in pre-production CAPEX relative to the 2020 PEA is largely due to a 12% inflation factor, nominally natural gas (“NG”), steel and concrete. Sustaining CAPEX has also increased over the LOM as the mine life was extended by two years. The Company also initiated the use of the Deswik mining software in order to facilitate running various LOM plans, The objective was to compare benefits of using the Cluster mining strategy, that grouped open pit mines in close proximity, to reduce dewatering volumes for the overall Life of Mine (“LOM”) and provide a more accurate operating cost compared to the 2020 PEA.
Using the updated cost inputs (see Table 3), LOM C1 costs (inclusive of smelting and transport) are expected to average $0.61/lb ZnEq and All-in costs (C1 plus smelting, transport and sustaining CAPEX) are estimated at $0.80/lb ZnEq.
Table 2: LOM Capital Cost Summary (in C$M)
| Cost Area |
Pre-Production
Capital Costs ($M) |
Sustaining
Capital Costs ($M) |
Total Capital
Costs ($M) |
| General Administration (Owner's costs) | 22.8 | 0.0 | 19.1 |
| Underground Mine | 0.0 | 118.3 | 118.3 |
| Open-pit Mine | 15.7 | 80.6 | 96.3 |
| Electricity and Communications | 45.7 | 19.3 | 64.9 |
| Site Infrastructure | 59.7 | 11.8 | 71.5 |
| Process Plant | 297.3 | 0.0 | 297.3 |
| Tailings, Mine Waste and Water Management | 47.7 | 123.6 | 171.3 |
| Indirect Costs | 76.6 | 0.0 | 76.6 |
| Contingency | 87.8 | 18.8 | 106.6 |
| Capitalized Operating Costs | 0.0 | 174.5 | 178.3 |
| Tota l | 653.3 | 546.8 | 1200.1 |
| Site Reclamation and Closure | 0.0 | 68.0 | 68.0 |
| Salvage Value | 0.0 | -19.6 | -19.6 |
| Total - Forecast to spend (CAPEX + SCAPEX) | 653.3 | 595.2 | 1248.5 |
Table 3: Operating Costs
| Mining Costs (per) | |||
| Surface* | $/Tonne Mined | $3.36 | |
| Underground - West Zone** | $/Tonne Mined | $40.01 | |
| Underground - Central Zone** | $/Tonne Mined | $52.07 | |
| Processing Costs | $/Tonne Milled | $12.27 | |
| Power Operating Cost | $/Tonne Milled | $4.61 | |
| Waste rock, Tailings and Water Management Costs*** | $/Tonne Milled | $1.63 | |
| G&A Costs | $/Tonne Milled | $8.11 | |
*LOM Average and inclusive of ore, overburden and waste rock
**Inclusive of transport to the mill
***Previously included in Mining and Processing Cost in the 2020 PEA
Sensitivity
The Pine Point Project is expected to be a robust, profitable operation at a variety of prices and assumptions. Metal prices used in the 2022 PEA Update study are based on weighted two-year moving averages, hence $1.37/lb zinc and $0.96/lb lead.
Under more bullish scenarios, especially when considering record low inventory levels and continued lack of investment in the mining industry, the Project demonstrates even stronger economic returns and is well-positioned to benefit from a higher long-term zinc price. At US$1.50/lb zinc, $1.00/lb lead and FX 1.25, the Project returns an NPV of C$787M with an IRR of 29% on an after-tax basis.
A lower commodity pricing scenario was also modeled using US$1.30/lb zinc, $0.95/lb lead and FX 1.29. Even at lower prices, Pine Point would still generate a robust NPV of C$526M and IRR of 23% on an after-tax basis.
Hydrogeological Modelling
The current dewatering plan was updated for the Project’s PEA Update by HRI using the FeFlow V7 software. This is an important step in the process of better estimating dewatering volumes as it utilizes the Pine Point Project 3D Geological model and GIS Database and is corroborated with Profile Tracer Tests (“PTT”) in 23 holes that were tested until the cutoff date of December 2021. Additional testing is ongoing and will be used to calibrate future simulations.
For the North, Central and East Mill Zones, open pit mines were grouped into clusters measuring 3 kilometers long and 1 kilometer wide. Generally, pits located within a cluster are mined in sequence to reduce dewatering requirements. Utilizing this type of dewatering strategy will help to optimize overall pumping rates and power requirements.
To reduce water management in underground mines in the West Zone, grouting was selected as the preferred water inflow restriction methodology. Discussions with experts and previous employees of Pine Point Mines during the Cominco Ltd. era benefitted the analysis and grouting (till injection) was chosen as the preferred method to reduce water inflow.
Using contemporaneous measurement systems, and dewatering management techniques the Company will continue to optimize mine sequencing, and the overall LOM plan to better manage water. One strategy being used is to evaluate if dewatering the deepest pit within a Cluster area reduces the dewatering of adjacent open pits. The ultimate objective is to focus on each Cluster to maximize mining efficiency and reduce dewatering volumes to manage. This will help to focus on reducing production timelines per open pit and per Cluster, potentially further reducing dewatering volume estimates.
The strategic placement of water wells targeting structures and discontinuities will be an innovative approach never previously applied to Pine Point.
Mining
In the 2022 PEA Update the Pine Point Project LOM plan would still consist of simultaneously mining open pit deposits in the East Mill, Central, North and N204 Zones concurrent with underground operations in the West and Central Zones as in the 2020 PEA.
The overall schedule has changed using the Deswik software platform but the general strategy is the same with an average LOM production rate of 11,250 tonnes per day mined.
The open pit LOM plan is still proposing to mine 47 open pits and 9 underground deposits over a strike length of 50 kilometres, mainly located above 125 metres depth from surface. Most of the deposits are characterized by multiple shallow tabular panels dipping approximately 2-5 degrees towards the West.
The open pit mining method is essentially the same as in the 2020 PEA, incorporating five metre benches in mineralized material, ten metre benches in waste with an overall open pit wall angle of 45 degrees. The mining fleet would include long-haul trucks with a payload of 90 tonnes. The production rate would vary between 8,000 tpd and 11,250 tpd. The strip ratio is lower due to the inclusion of more mineralization and is expected to average 5.6 to 1.
Underground operations would still use 45 tonne haul trucks with ramp access and would produce at a rate of 4,000 tpd in the West Zone and 2,000 tpd in the Central Zone. The mining methods used are a mixture of Long Hole Stoping (85%) combined with Room and Pillar (15%).
Processing and Smelting
The Pine Point processing plant is still designed to treat up to 11,250 tpd Run of Mine (“ROM”) material. The processing plant would consist of a three-stage crushing circuit as well as an XRT-based mineral sorting system that would reject approx. 40% waste material. The sorted concentrate would be blended with the primary crushing circuit fines to feed a ball mill (6,700 tpd) followed by conventional lead and zinc flotation circuits.
Overall zinc and lead recoveries, inclusive of material sorting, over the LOM, are expected to be approximately 87% and 93%, respectively. Flotation tailings would be thickened and pumped for disposal within mined out pits. The flotation concentrates would be filtered and trucked to Hay River for transloading into rail cars for shipment to smelters.
Pine Point zinc and lead concentrates are not encumbered by any offtake agreements. It is expected that this type of high-quality material would be sought after by most smelters. The forecasted future zinc supply will be dominated by concentrates with high impurities which will require blending with concentrates similar to that of Pine Point.
The Pine Point zinc concentrates are expected to be predominantly smelted in North America using long-term benchmark contract prices with positive adjustments to account for its high-quality. The remaining portion is expected to be sold into both the Asian spot and benchmark contract markets.
Lead concentrates would be mainly sold into the Asian spot and benchmark contract markets with only a minor North American component.
Table 4: Processing Overview
| Crushing and Pre-Concentration Circuit Throughput | 11,250tpd | |
| Coarse Fraction | 70% | |
| Fine Fraction | 30% | |
| XRT Mass Recovery | 42% | |
| Total Mass Recovery (including crusher fines) | 59% | |
| Grinding and Flotation Circuit Throughput | 6,700tpd | |
| XRT LOM Recoveries | ||
| Zinc | 93.4% | |
| Lead | 99.0% | |
| Flotation LOM Recoveries | ||
| Zinc | 92.9% | |
| Lead | 94.1% | |
| Overall LOM Recoveries | ||
| Zinc | 87.0% | |
| Lead | 92.9% | |
Proposed Infrastructure Upgrades and Indirect Costs
The Project is located 60 km east of the town of Hay River in the Northwest Territories, on the south side of Great Slave Lake. Established infrastructure consists of an active power substation, paved GNWT highway access and one hundred kilometres of 25-metre-wide haul roads from the original Cominco era mining operation that provide access to all major deposit areas.
The town of Hay River is serviced by an airport and a paved road from Alberta. The town is also host to a railway head operated by the Canadian National Railway.
The proposed Project would be comprised of 55 mining sites (47 open pits and 8 underground deposits), one central concentrator plant site, and a main electrical substation. The power requirements could also be provided in part by the Northwest Territories Power Corporation through the Taltson hydro-electric grid.
The Project’s power sources are assembled into 3 regional complexes (East-West-Central). This strategy plays an important role in getting the best rates from energy suppliers, maximizing energy efficiency, and helping secure a green and stable electricity feed to the process plant.
The central complex represents about 96% of the total site load and is directly connected to the local power grid that would provide an average 8,300kW of green hydro powered electricity. An extra 2,600kW would be provided by a solar farm installed on site. Having the solar station connected to the local electrical distribution will also add more capacity to the local grid and will increase the reliability of the region’s power supply. Over the LOM, these two energy generation systems will cut the NG consumption by 79% compared to all fossil fuel based solution. The remaining capacity will be provided by a fleet of NG generators.
Overburden stockpiles and waste rock stockpiles would be located nearby planned open pit mines where necessary and waste rock would also be deposited in former historical open pit mines. Overburden and waste rock would also be used for progressive reclamation where appropriate.
There would be no Tailings Management Facility (“TMF”) as certain designated former open pits from the Cominco Ltd. era and future proposed open pits for tailings disposal and then the tailings would be covered by Pre-concentrator reject waste rock material and finally capped with coarser sterile waste rock and then overburden before re-regeneration of vegetation.
Indirect costs such as engineering, procurement and construction management, temporary facilities for construction, and other related items are estimated at $76.6 million. An additional $106.6 million has been budgeted over the LOM as a contingency for specific costs.
Hydrogeological Work Summary
Initially, the Company and HRI compiled existing hydrogeological reports, reference papers, and used the 3D Geological model interpreted from historical and recent drill logs to define the stratigraphic boundaries, including the Sulfur Point Formation, the main host of Tabular mineralization at Pine Point.
The 23 water wells mentioned above, were surveyed using PTT, chemical profiles, slug tests, injection tests and low flow pump tests. The PTT consist of mixing a tracer in the borehole without inducing any stress, followed by the monitoring of tracer dilution over time within each hole. This allows for the accurate identification of water-bearing sources, including structural discontinuities, and allows for better flow characterization and interpretation.
The Chemical profiles that are measured in each of the tested holes give a full downhole measurement survey of water temperature, electrical conductivity, total dissolved solids and water salinity. The PTT also measures changes in water chemistry and often highlights isolated flow zones, confirming the contrast between faults and/or bedding planes when compared to low flow zones.
PTT results continue to indicate that the groundwater flow is preferentially controlled by discrete discontinuities (i.e., faults and/or fracture zones) contrasting from the historical concept of a majority of the flow originating from formational aquifers. Locally, Prismatic high-grade deposits, that were preferentially mined during the Cominco era, are also located within the porous dolomitized Sulfur Point Formation and have associated higher inflow rates since these Prismatic deposits are also associated with the same structural discontinuities discussed above.
Recent structural analyses of all available open pits, combined with 3D drone photography of pit walls, of historical Cominco Ltd. era open pits, were carried out by Terrane Geosciences in 2021. This allowed for the construction of initial structural geology models which are now being combined with the Pine Point Project drill hole database and interpreted stratigraphic off-sets from vertical sections, as well as 3D geological modeling, and the GIS database that includes regional data sources (Magnetic surveys, Gravity Surveys, LIDAR, regional maps, aerial photographs, etc) All of these datasets are used to interpret and locate specific structural features or lineaments within proposed mining areas in an attempt to correlate with regional structural discontinuities.
This will lead to a better understanding of potential water flow conduits and provide for strategically targeted placement of highly efficient water wells. To date, predictable fault trends were identified in historical open pits and correlated with stratigraphy that was off-set in drill holes. This coupled with the SWNM, illustrated that potentially regional structural faults or fault trends are present in the West Zone where proposed underground mines (G03, O556, P499, R190 and X25) are located.
This represents a significant shift from previous interpretations of underground water flow modeling at Pine Point, which was almost exclusively based on the theory that formational aquifer flow within the Sulfur Point Formation and/or the underlying stratigraphy caused the majority of inflow rates.
Site Wide Numerical Model; A Dewatering Overview
The SWNM was built using Feflow V7, a well-known simulation software, the SWNM covers a surface area of approximately 1775 km2, the project area covers 94 kilometers of strike length in an East Northeasterly direction and a 22-kilometre project width in an approximately north-south direction.
It includes all of the proposed open pits and underground mines, as well as all of the historical mines. Two regional faults and zones of hydraulic conductivities were integrated into the SWNM. Calibration of was achieved by comparing historical open pit area inflows to simulated inflows obtained using the SWNM.
Following this, the hydraulic conductivity values were compared to those obtained during recent and historical drillhole testing program. Current overall dewatering volume measurements are approximately in-line with historical dewatering records.
Table 5: Hydrogeological Model Calibration Results
|
Open Pit
(Name) |
Historical Flow
(m3/day) |
Simulated Flow
(m3/day) |
Percentage
Difference (%) |
|
| J-44 | 40197 | 41066 | 2 | % |
| N-42 | 13735 | 11352 | -21 | % |
| O-42 | 29705 | 23720 | -25 | % |
| X-15 | 26707 | 23422 | -14 | % |
| K-57 | 47353 | 52922 | 11 | % |
| R-61 | 50287 | 70487 | 29 | % |
| K-62 | 38246 |
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