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 $34 million.
The cost breakdown for pre-production capital expenditures, assuming contract
mining, is shown below.
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Pre-production Capital Sustaining Capital
Description ($ 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 $796 million over the LOM. The table below outlines
NPV and IRR at a variety of gold prices and discount rates (DR) on a pre-tax
basis.
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Gold Price (USD$) 1,000 900 1,200 1,300
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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.
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