Archon Announces Jay Project Pre-Feasibility Study Results
Archon Minerals Limited #2801 – 323 Jervis Street Vancouver, BC, V6C 3P8 Tel: 604-682-3303
Archon Announces Jay Project Pre-Feasibility Study Results
January 27, 2015 – Vancouver, British Columbia TSX.V: ACS
Archon Minerals Limited (“Archon” or the “Company”) is pleased to announce the results of a prefeasibility study (the “PFS”) on its Jay kimberlite pipe deposit located within the Buffer Zone joint venture property in the Northwest Territories. The Company has a 34.7% interest in the Buffer Zone joint venture, while Dominion Diamond Corporation (“Dominion”) holds the other 65.3% and is the Operator of the joint venture. Dominion Dominion compiled and prepared the PFS with the assistance of its consultants Golder Associates Ltd. and Peter Ravenscroft, FAusIMM, of Burgundy Mining Advisors Ltd.
The Jay pipe is located beneath Lac du Sauvage, approximately 1.2 km from the shoreline and approximately 7 km to the northeast of the Misery Pit and related infrastructure, and 30km to the southeast of the main Ekati mine infrastructure. The PFS evaluated the development of the Jay deposit as a stand-alone open pit operation, which would supply ore to the existing process plant at its full capacity of approximately 4.3 million dry metric tonnes per annum for approximately 11 years beyond the current projected closure of the Ekati Diamond Mine in calendar year 2020. This will require construction of a water retention dike encircling the pipe, allowing the isolated area to be dewatered ahead of the start of pre-stripping and mining operations.
Financial and Project Highlights Mined waste 182.1 million tonnes Mined ore 45.6 million tonnes Strip ratio 3.99 Recovered carats 84.6 million carats Recovered grade 1.9 carats per tonne Initial development capital US$657 million1 Pre-stripping capital US$33 million1 Sustaining capital US$148 million1 Average diamond price US$86 per carat2 Pre-tax NPV US$1,127 million Post-tax NPV US$610 million3 Real discount rate 7% Mine operational life 11 years Average total operating cost per tonne processed $75 per tonne4 Pre-tax IRR 21% Post-tax IRR 16%3
Note: All US$ figures refer to unescalated 2014 United States dollars and are on a 100% basis. All tonne totals refer to dry metric tonnes.
1. This estimate is at an assumed exchange rate of 1.135 CA$/US$ in calendar 2015 and 1.10 CA$/US$ in calendar 2016 and thereafter, and includes a US$83M contingency. The primary capital development cost is expected to be the construction of the dike and its associated infrastructure, including roads and pumping infrastructure.
2. Using the average prices from Dominion's calendar 2014 rough diamond sales and the current diamond recovery profile of the Ekati processing plant, Dominion has modeled the diamond price for Jay to be approximately US$64 per carat. Price forecasts for the PFS are inclusive of a real 2.5% annual escalation from the average 2014 price over the life of the mine. The 2.5% price escalation price forecast is based on the Dominion’s analysis of long term supply-demand balance in the diamond market.
3. After taxes/royalties and unleveraged. Taxes are calculated on a stand-alone basis. Key applicable taxes assumed include a 13% Northwest Territories royalty rate and a 26.5% statutory income tax rate.
4. Operating costs estimated at a diesel fuel price of $1.20/litre delivered to Ekati.
The timetable for the development of Jay assumes permitting in calendar year 2016, with the start of construction in the second half of 2016, dewatering of the area isolated by the dike and pre-stripping in 2019, and mining of the Jay pipe and processing of kimberlite beginning in 2020. In 2020, the project would supply approximately half the ore to the process plant as Jay mining activities ramp up and the existing ore sources are exhausted.
The current development capital schedule for the Jay Project is as follows:
Calendar Year 2015 2016 2017 2018 2019 US$ (millions) 23 134 203 229 101*
- including pre-stripping
Note: All US$ figures refer to unescalated 2014 United States Dollars and are on a 100% basis.
The primary capital development cost will be the construction of the dike and its associated infrastructure, including roads and pumping infrastructure, which amounts to US$368 million. Engineering, construction quality control and quality assurance, and construction management are estimated at 12% of this total, or an additional US$44 million.
Equipment costs are estimated to be US$96 million, which includes the purchase of 14 haul trucks, 2 hydraulic shovels, 2 front-end loaders, a dozer, and other support equipment. The maximum fleet required for construction would be 24 haul trucks, but the capital cost estimate is based on renting the 10 extra trucks that would be required for only a single construction season. To support a large truck fleet remote from the main Ekati Mine site infrastructure, a new truck shop will be required at the Misery site at a cost of US$31 million.
Ore will be transported from a stockpile adjacent to the Jay Pit using road trains. The first road train unit will be brought to the Ekati site on the 2015 winter road to haul Misery ore, with 2 more units to be purchased in 2016 assuming the first unit performs as expected. These units will transition to hauling Jay ore at the exhaustion of the other ore sources.
The estimated pre-stripping cost for the first phase of mining is US$33 million. Other capital costs include rockfill quarrying costs at US$13 million, a power line from Misery to Jay at US$9 million, construction support at US$8 million, and fish-out at US$5 million.
The Jay project would delay a substantial portion of the required reclamation activities at the Ekati Diamond Mine until project completion. This has a significant positive effect on the project economics, and approximately offsets the additional reclamation obligations that the project is expected to create. The tables below summarize the Mineral Reserves and Mineral Resources expressed in millions of tonnes, carats per tonne, and millions of carats. The Mineral Reserves set out below account for mining recovery and dilution. Based on improved recovery results from the process plant since 2013, diamond recovery is estimated to be at an equivalent stone size cut-off of 1.0 millimeters. Mineral Resources are reported inclusive of Mineral Reserves.
Jay Mineral Reserves at Ekati Diamond Mine (100% basis)
| Kimberlite Pipes | PROVEN RESERVES | PROBABLE RESERVES | PROVEN AND PROBABLE | |||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Zone location | Type | Mt | Ct/t | Mct | Mt | Ct/t | Mct | Mt | Ct/t | Mct |
| Jay Buffer | OP | - | - | - | 45.6 | 1.9 | 84.6 | 45.6 | 1.9 | 84.6 |
Jay Mineral Resources at Ekati Diamond Mine (100% basis)
| Kimberlite Pipes | MEASURED RESOURCES | INDICATED RESOURCES | INFERRED RESOURCES | |||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Zone location | Type | Mt | Ct/t | Mct | Mt | Ct/t | Mct | Mt | Ct/t | Mct |
| Jay Buffer | OP | - | - | - | 48.2 | 1.9 | 90.6 | 4.2 | 2.1 | 8.6 |
Notes:
1. Mineral Reserves and Resources have an effective date of November 2014.
2. Mineral Reserves and Resources are reported on a 100% basis, at a 1.0mm cut-off.
3. Mineral Resources are reported inclusive of Mineral Reserves.
4. Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability.
5. Mineral Reserves and Resources are reported in accordance with the CIM Definition Standards.
6. The reference point for the definition of Mineral Reserves is at the point of delivery to the process plant.
Qualified Person
The scientific and technical content in this news release has been approved by Peter Ravenscroft, FAusIMM of Burgundy Mining Advisors Ltd., Danny Tolmer, P.Eng. of Golder Associates Ltd. and John Cunning, P.Eng. of Golder Associates Ltd. All three are Qualified Persons within the meaning of National Instrument 43-101. Each person has reviewed and approved the information in this news release relevant to the portion of the PFS for which he is responsible.
ARCHON MINERALS LIMITED
“Stewart Blusson”
Stewart Blusson President and Director
Neither the 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.
This news release may contain “forward-looking statements”, which are statements about the future based on current expectations or beliefs. For this purpose, statements of historical fact may be deemed to be forward-looking statements. Forward-looking statements by their nature involve risks and uncertainties, and there can be no assurance that such statements will prove to be accurate or true. Investors should not place undue reliance on forward-looking statements. The Company does not undertake any obligation to update forward-looking statements except as required by law.
Information included herein that is not current or historical factual information, including information about estimated mine life and other development plans regarding mining activities at the Ekati Diamond Mine, estimated economics of the Jay pipe, estimated reserves and resources, projected capital and operating costs, and future diamond prices, constitute forward-looking information or statements within the meaning of applicable securities laws. Forward-looking information can generally be identified by the use of terms such as "may", "will", "should", "could", "expect", "plan", "anticipate", "foresee", "appears", "believe", "intend", "estimate", "predict", "potential", "continue", "objective", "modeled", "hope", "forecast" or other similar expressions concerning matters that are not historical facts. Forward-looking information is based on certain factors and assumptions regarding, among other things, mining, production, construction and exploration activities at the Ekati Diamond Mine; the timely receipt of required regulatory approvals; mining methods; currency exchange rates; estimates related to the capital expenditures required to bring the Jay pipe into production, required operating and capital costs; labour and fuel costs; world and US economic conditions; future diamond prices; and the level of worldwide diamond production. These assumptions may prove to be incorrect. Forward-looking information is subject to certain factors, including risks and uncertainties which could cause actual results to differ materially from what the Company currently expects. These factors include, among other things, the uncertain nature of mining activities, including risks associated with construction and mining operations, risks associated with joint venture operations, risks associated with the remote location of and harsh climate at the Ekati Diamond Mine, risks resulting from the Eurozone financial crisis, risks associated with regulatory requirements and any delays in receiving required regulatory approvals, the risk that diamond price assumptions may prove to be incorrect, the risk of fluctuations in diamond prices and changes in US and world economic conditions, the risk of fluctuations in the Canadian/US dollar exchange rate and cash flow and liquidity risks. Actual results may vary from the forward-looking information. Readers are cautioned not to place undue importance on forward-looking information, which speaks only as of the date of this disclosure, and should not rely upon this information as of any other date. Due to assumptions, risks and uncertainties, including the assumptions, risks and uncertainties identified above and elsewhere in this disclosure, actual events may differ materially from current expectations. The Company uses forward-looking statements because it believes such statements provide useful information with respect to the currently expected future operations and financial performance of the Company, and cautions readers that the information may not be appropriate for other purposes. Additional information concerning factors that may cause actual results to materially differ from those in such forward-looking statements is contained in the Company's filings with Canadian securities regulatory authorities.