Prodigy Gold Incorporated (TSX VENTURE: PDG) is pleased to announce
the results from a NI 43-101 compliant Preliminary Economic
Assessment (PEA) of its 100% owned Magino mine gold project in
northern Ontario. The PEA, completed by CWA Engineers Inc., in a
consortium including Snowden Mining Industry Consultants Inc.
(Snowden) and Knight Piesold Canada, has established strong
economics for the proposed open pit gold mining project at Magino.
(All figures are in Canadian dollars except where noted).
Highlights of the PEA (base case using US$1,000/oz gold):
-- Pre-tax Net Present Value (NPV) of $351 million at a 5% discount rate
generating an Internal Rate of Return (IRR) of 49%; payback period is
1.8 years
-- At a US$1,300/oz gold price, the project generates a pre-tax NPV of $691
million and an IRR of 80%
-- Pre-tax cash flow from operations over the proposed Life of Mine (LOM)
is estimated to be $796 million, net cash is projected to be $520
million LOM
-- Start-up capital costs are estimated to be $242 million with an
additional $34 million in sustaining capital
-- Average annual gold production is estimated to be 166,500 ounces per
year over a nine year operating life producing 1.50 million ounces of
gold, recovery is estimated to be 95%
-- Average LOM cash operating costs (exclusive of sustaining capital) are
estimated to be US$496 (Cdn$521) per ounce
-- During the first two years of proposed mine operations, the average
grade processed will be 1.60 gpt gold
-- Total minable resources of 41.8 million tonnes grading 1.18 gpt gold
with a strip ratio of 2.8:1
-- Ongoing in-fill drilling to date is targeted at increasing the gold
resource by converting internal waste to resources; the PEA to be
updated upon completion of the drilling
Brian Maher, President and CEO of Prodigy Gold stated: "The
completion of the Magino mine PEA by the engineering consortium is
a major milestone for Prodigy Gold, demonstrating the robust
economics of our proposed open pit gold mine at Magino. With a
projected mine life of nine years, cash costs of US$496 (Cdn$521)
per ounce and rapid payback of capital, Magino is developing into
one of the leading undeveloped gold projects in eastern Canada. The
on-going in-fill drilling program, which is targeting gold
mineralization within the proposed open pit, may enhance project
economics as we convert internal waste into resources,
simultaneously increasing contained ounces and lowering costs. We
view this PEA as a first pass analysis and look forward to
fine-tuning the operating and milling plan with a focus on lowering
costs and increasing the resource base prior to completing a full
feasibility study."
Project Assumptions and Parameters:
Assumptions:
Base gold price (US$/oz) 1,000
Exchange Rate (Cdn$/US$) 1.05
Milling rate (tpd) 15,000
--No royalty
--No sunk costs
--Total capital costs include initial and sustaining capital
--100% equity financing
--Costs are estimated in 2011 first quarter dollars
Mine and Mill Parameters:
Total resource milled (million tonnes) 41.82
Waste moved (million tonnes) 115.55
LOM strip ratio 2.76:1
Average gold grade (gpt) 1.18
Total contained gold (million oz) 1.57
Estimated gold recovery (%) 95
Total recovered gold (million oz) 1.50
Project life (years) 9
Average annual production (oz) 166,500
Costs and Capital Requirements:
Mining costs ($/tonne) 2.25
Transportation costs ($/tonne) 0.50
Milling costs ($/tonne) 9.17
G and A ($/tonne) 1.13
Pre-production capital ($ million) 242
Sustaining capital ($ million) 34
Average cash cost (US$/oz) 496 (Cdn$521)
Financial Analysis:
Average annual pre-tax cash flow ($ million) 57.8
NPV 5% discount rate pre-tax ($ million) 351
NPV 5% discount rate post-tax ($ million) 259
IRR pre-tax (%) 49
IRR post-tax (%) 41
Pre-tax payback period (years) 1.8
Magino Mine Resources
The Magino mine resources used in the PEA were previously
reported in a Prodigy Gold press release dated February 28, 2011.
The resource estimate, completed by Snowden, contained Indicated
gold resources of 1,924,200 ounces grading 1.16 gpt gold (51.6
million tonnes) and 587,100 ounces of Inferred gold resources
grading 1.04 gpt gold (17.5 million tonnes) using a 0.35 gpt cut
off grade. The complete resource estimate table is included
below:
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Indicated
Cut off Grade
(gpt Gold) Tonnes (gpt Gold) Grams Gold Ounces Gold
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2.00 6,991,000 2.86 19,969,200 642,000
1.50 11,635,000 2.41 28,036,500 901,400
1.00 20,192,000 1.90 38,336,900 1,232,600
0.75 31,532,000 1.53 48,105,600 1,546,600
0.50 46,939,000 1.23 57,785,400 1,857,800
0.35 51,633,000 1.16 59,850,000 1,924,200
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Inferred
Cut off Grade
(gpt Gold) Tonnes (gpt gold) Grams Gold Ounces Gold
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2.00 1,807,000 2.79 5,043,900 162,200
1.50 2,711,000 2.43 6,599,300 212,200
1.00 5,854,000 1.77 10,343,100 332,500
0.75 10,113,000 1.39 14,017,800 450,700
0.50 15,579,000 1.12 17,422,900 560,200
0.35 17,494,000 1.04 18,260,400 587,100
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Potentially open-pit minable resources were calculated by
Snowden using Snowden's resource model (as reported in a press
release dated February 28, 2011). This resource model as well as
the cost parameters mentioned above, and an average pit wall slope
assumption of 45 degrees were used to develop an optimum final pit
shell using Whittle 4D. After determining the optimal pit shell
Snowden then used lower revenue factor shells to select appropriate
push backs to assist in scheduling the operation. Snowden then
developed a life of project schedule for the resource which
utilizes an extensive low grade stockpile to increase the average
mill feed grade, maximizing value in the early years of the
project's life. The schedule developed supports an average mill
feed rate of 15,000 tonnes per day, for about nine years. To
support this mill feed, total material movement from the open pit
peaks at about 62,500 tonnes per day in year three with a typical
material movement requirement of about 55,000 tonnes per day of
combined waste and process feed.
Using the final pit shell from Whittle, Snowden designed a
conceptual final pit design as well as associated waste dumps, low
grade stockpile, and ramps. Mining is assumed to be undertaken by a
contractor. The financial analysis includes a mobilization
allowance of $5 million for the contractor.
Mining and Production
The pit design, optimization and production schedule prepared by
Snowden resulted in a potential production schedule containing
41.82 million tonnes grading 1.18 gpt gold. Total gold recovered
over a nine year project life is 1.50 million ounces, averaging
166,500 ounces per year. The LOM average strip ratio is estimated
to be less than 2.8 to 1. A summary of the annual mine production
is outlined below.
To view summary of the annual mine production, please visit the
following link: http://media3.marketwire.com/docs/PGOLD44.pdf
Processing Facility
The PEA contemplates using a conventional carbon-in-leach (CIL)
processing facility operating at 15,000 tpd with 95% availability.
The crushing consists of a three stage crushing plant and a fine
ore stockpile. The fine ore will be reclaimed to feed two ball
mills in parallel. Each ball mill will be in a closed circuit with
cyclones.
The cyclone overflow from each ball mill will be fed to a train
of leach tanks with sodium cyanide and carbon (carbon-in-leach
process) for 48 hours to extract 95% of the contained gold. The
loaded carbon will be washed and stripped in a hot caustic solution
at an elevated temperature and pressure. The pregnant solution
exiting from the stripping circuit will be cooled and pumped to a
set of electrowinning cells where the gold will be plated out on
steel wool. The gold laden steel wool will be smelted on site to
produce dore.
The stripped carbon will be reactivated and returned to the CIL
circuit. The residual cyanide in the tailings from the leach will
be destroyed using sulphur dioxide, copper sulphate and lime before
the tailings are pumped to the storage area. The supernatant from
the tailings will be reclaimed and re-used in the process
plant.
Operating Costs
Operating cash costs, excluding sustaining capital, over LOM are
projected to average US$496/oz (Cdn$521). Costs are summarized
below:
---------------------------------------------------------------------------
$/tonne milled $/tonne mined $/oz gold
---------------------------------------------------------------------------
Average mining costs 8.31 2.25 232 (US$221)
Stockpile reclaim 0.50 - 2 (US$2)
Processing cost 9.17 - 256 (US$244)
G and A 1.13 - 31 (US$29)
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Total: 19.11 - 521 (US$496)
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Capital Cost Estimates
The PEA is based upon capital pricing as of the first quarter of
2011. The level of accuracy of the capital cost estimate is +/- 40%
for this PEA. Pre-production capital costs are estimated at $242
million. Because mining is assumed to be undertaken by a
contractor, the mining fleet capital is limited to $5 million for
the contractor mobilization. Sustaining capital, principally staged
additions to the capacity of the tailings pond, is estimated to be
$34 million. The cost breakdown for pre-production capital
expenditures, assuming contract mining, is shown below.
---------------------------------------------------------------------------
Pre-production Capital Sustaining Capital
Description ($ million) ($ million)
---------------------------------------------------------------------------
Mining 5
Process Plant 142
Tailings 17 34
Infrastructure 4
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Total direct costs 168 34
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Other Indirect 2
EPCM 16
Contingency (30%) 56
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Total indirect costs 74
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Total 242 34
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Financial Analysis
The financial analysis for the Base Case evaluation utilizing a
gold price of US$ 1,000 per ounce indicates a pre-tax NPV at a 5%
discount rate of $351 million with an IRR of 49% and a payback
period of 1.8 years. On an after tax basis, the NPV at a 5%
discount rate is $259 million with an IRR of 41% at a gold price of
US$1000 per ounce. The project generates an undiscounted pre-tax
cash flow from operations of $796 million over the LOM. The table
below outlines NPV and IRR at a variety of gold prices and discount
rates (DR) on a pre-tax basis.
---------------------------------------------------------------------------
Gold Price (USD$) 1,000 900 1,200 1,300
---------------------------------------------------------------------------
Cash flow from operations ($ million) 796 638 1,112 1,269
NPV 0% DR ($ million) 520 362 835 993
NPV 5% DR ($ million) 351 237 578 691
NPV 7.5% DR ($million) 289 192 484 581
IRR Base Case (%) 49 38 70 80
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Note on Mineral Resources
Mineral resources that are not mineral reserves do not have
demonstrated economic viability. This assessment is preliminary in
nature as it includes inferred mineral resources that are
considered too speculative geologically to have the economic
considerations applied to them that would enable to them to be
categorized as mineral reserves. At this time there is no certainty
that the preliminary assessment and economics will be realized.
Qualified Persons for the PEA
The PEA was prepared by leading independent industry
consultants, all Qualified Persons (QP) under National Instrument
43-101. The QPs have reviewed and approved the content of this news
release. The following consultants and QPs participated in the
PEA:
-- CWA Engineers Inc, under the direction of Frank Yu, P. Eng. Mr. Frank Yu
is the Technical Director, Mining of CWA Engineers Inc. He supervised
and reviewed the process design and infrastructure update requirement,
capital and mill operating cost estimate and financial analysis of this
project.
-- Snowden Mining Industry Consultants Inc., under the direction of Anthony
Finch, MAusIMM. Mr. Anthony Finch is the Divisional Manager Mining
Engineering and Principal Consultant at Snowden Mining Industry
Consultants Inc. He supervised and reviewed all the mining design
aspects of this project.
-- Knight Piesold Canada, under the direction of Daniel Y. Yang, P. Eng.
Mr. Daniel Yang is a Senior Engineer of Knight Piesold Canada. He
supervised and reviewed the tailings storage facility for this project.
A NI 43-101 compliant technical report will be filed on SEDAR
within 45 days of the date of this press release.
About Prodigy Gold: Prodigy Gold Inc. (TSX VENTURE: PDG) is
currently evaluating the development of the Magino mine gold
project in Ontario as an open-pit mining opportunity with the
potential for deeper, higher grade gold production. The Magino
project contains Indicated gold resources of 1,924,200 ounces
grading 1.16 gpt gold (51.6 million tonnes), and 587,100 ounces of
Inferred gold resources grading 1.04 gpt gold (17.5 million tonnes)
(please see Prodigy press release dated February 28, 2011). A
Preliminary Economic Assessment (PEA) of the project shows a
pre-tax NPV of $351million and an IRR of 49% using a 5% discount
rate (please see Prodigy press release dated April 4, 2011). The
proposed operation would have an average annual gold output of over
166,000 ounces a year during a nine year project life. Total gold
production is estimated to be 1.50 million ounces at cash costs of
approximately US$496 (Cdn$521) per ounce. A full feasibility study
for the proposed open pit mining project is scheduled for early
2012. Bringing the Magino mine project through the feasibility
process and towards production, coupled with the exploration
potential of our Beardmore-Geraldton exploration properties, are
the catalysts to growing Prodigy Gold and building substantial
value for Prodigy shareholders: Today's Discovery, Tomorrow's
Future.
All scientific and technical information in this news release,
except as noted above, has been reviewed and approved by Tom
Pollock, P.Geo., Prodigy Gold's Vice President - Exploration, who
is a qualified person under the definitions established by National
Instrument 43-101. Drill core at Magino is boxed, covered, and
sealed at the drill rig and moved to the Prodigy logging and sample
preparation facilities by Prodigy Gold personnel. The core is then
split down the centre using a typical table fed circular rock saw
normally at one metre intervals. One half of the core is sent for
assay to ALS Chemex, 2090 Riverside Dr., Timmins, ON, P4R 0A2,
while the other half is returned to the core box and stored at
Prodigy's sampling facility in a secure, fenced off, area. Prodigy
QA/QC procedures include the regular use of blanks, standards and
duplicate samples in addition to sending 10% of the samples off to
a second lab for check assays. Samples assaying greater than 3.0
gpt gold are automatically re-assayed by the metallic screen
method. Drill holes are directed as much as possible perpendicular
to the strike and dip of the mineralization at Magino.
On behalf of the Board of Directors
Brian J. Maher, President and Chief Executive Officer
This news release includes certain forward-looking statements or
information. All statements other than statements of historical
fact included in this release, including, without limitation,
statements relating to the potential mineralization and geological
merits of the Magino mine property and other future plans,
objectives or expectations of Prodigy Gold Incorporated (the
"Company") are forward-looking statements that involve various
risks and uncertainties. There can be no assurance that such
statements will prove to be accurate and actual results and future
events could differ materially from those anticipated in such
statements. Important factors that could cause actual results to
differ materially from the Company's plans or expectations include
risks relating to the actual results of current exploration
activities, fluctuating gold prices, possibility of equipment
breakdowns and delays, cost overruns, availability of capital and
financing, general economic, market or business conditions,
regulatory changes, timeliness of government or regulatory
approvals and other risks detailed herein and from time to time in
the filings made by the Company with securities regulators. The
Company expressly disclaims any intention or obligation to update
or revise any forward-looking statements whether as a result of new
information, future events or otherwise except as otherwise
required by applicable securities legislation.
Neither TSX Venture Exchange nor its Regulation Services
Provider (as that term is defined in the policies of the TSX
Venture Exchange) accepts responsibility for the adequacy or
accuracy of this release.
Contacts: Prodigy Gold Incorporated Brian J. Maher President and
Chief Executive Officer 1-604-688-9006 1-604-688-9029 (FAX)
ir@prodigygold.com www.prodigygold.com
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