Montage Announces Koné Gold Project DFS with After-Tax NPV of $746M and 35% IRR
Vancouver, British Columbia — February 14, 2022 — Montage Gold Corp. (“Montage” or the “Company”) (TSXV: MAU) (OTCPK: MAUTF) is pleased to announce the results of the Definitive Feasibility Study (the “DFS” or the “Study”) for the Koné Gold Project (“Koné Gold Project”, “Project”, or “KGP”) in Côte d’Ivoire. The DFS was prepared by Lycopodium Minerals Pty Ltd. in accordance with Canadian Securities Administrators’ National Instrument 43-101 Standards of Disclosure for Mineral Projects (“NI 43-101”). Please note that all financial figures in this press release are in United States dollars, unless otherwise noted.
HIGHLIGHTS
- Significant Gold Reserves and Production – A Strategic Asset in Côte d’Ivoire
- 3.42Moz of Probable Mineral Reserves
- 3.06Moz of gold produced over a 14.8-year Life-of-Mine (“LOM”)
- Average annual gold production of 257koz in first 9 years; 207koz/year LOM
- Peak production 320koz in year 2
- Strong Financial Metrics with Improved Capital Efficiency
- $746M after-tax NPV5% and 35% IRR at base case $1,600 gold price
- $1,043M after-tax NPV5% and 47% IRR at $1,800 gold price
- LOM AISC1 of $933/payable oz
- All production from open pits with LOM strip ratio of 0.90:1
- Pre-production capital requirement of $544M
- Optimizations Improve Economics and Streamline Operations
- $153M reduction in sustaining capital vs. PEA
- 40% reduction in TSF surface area
- No road diversion
- Moving Forward to Unlock Value
- Permitting process well underway; all requisite approvals expected in Q3 2022
- Project financing process to commence soon
- Aggressive satellite pit exploration ongoing
- Well-funded with ~C$10M for permitting and exploration
Hugh Stuart, Montage CEO commented,
“The completion of the DFS for the Koné Gold Project is a tremendous milestone for Montage and is demonstrative of the hard work, dedication and expertise of our team. In the 15 months since our IPO, we have transformed Montage from an exploration company with a 1.5Moz Inferred Mineral Resource, into a development company with Probable Reserves of over 3.4Moz with anticipated average gold production of 257koz/year in the first 9 years, peaking at 320koz.
“We are clearly extremely pleased at how well the DFS compares to the May 2021 Preliminary Economic Assessment (“PEA”), with nearly all metrics improving, under the same base case gold price of $1,600/oz. Critical to these improvements are the numerous optimizations that were undertaken as part of the feasibility process, the most significant of which is the change in tailings management which has reduced our sustaining capital requirements by $146 million. We have also optimized the front-end of the mill through the use of High-Pressure Grinding Rolls instead of a SAG Mill, driving a 19% reduction in unit power requirements, a direct benefit to the operating cost profile. In addition, we have revised the mine plan to avoid diverting the newly asphalted road without any material impact to the production profile of the project.
“We will continue to move forward advancing the KGP to add value. We plan to engage project finance advisors in the near-term to solicit the market for capital for construction finance. Discussions thus far show strong support for the project from numerous potential funding partners, and we are excited to start that process. Permitting efforts continue and we are on pace to submit the ESIA at the end of this month to begin the government review process. Our balance sheet remains strong, with available liquidity of approximately C$10 million, which will provide us ample budget for regional exploration and the permitting process.”
Summary operating and financial metrics from the DFS are presented in Table 1 below along with a comparison to the PEA. A summary model with annual projections over the project life has been included as Appendix 1 to this release.
Table 1 – DFS Summary Metrics
| Metrics | Units | DFS | PEA | ||||
|---|---|---|---|---|---|---|---|
| Pit Optimization Gold Price Assumption | $/oz | $1,250 | $1,250 | ||||
| Financial Model Base Case Gold Price Life of Mine Total Mineralized Material Mined Contained Gold | $/oz years Mt Moz | $1,600 14.8 161.1 3.42 | $1,600 14.7 161.1 3.37 | ||||
| Strip Ratio | w:o | 0.90:1 | 0.93:1 | ||||
| Annual Mining Rate Annual Milling Rate (Mill Throughput) | Mtpa Mtpa | 35.0 11.0 | 35.0 11.0 | ||||
| Average Head Grade, first 3 years | Au g/t | 0.93 | 0.94 | ||||
| Average Head Grade, first 9 Years Average Head Grade, LOM Processing Recovery, first 3 Years Processing Recovery, first 9 Years Processing Recovery, LOM | Au g/t Au g/t % % % | 0.82 0.66 91.1% 90.2% 89.3% | 0.79 0.65 91.2% 90.2% 89.4% | ||||
| Total Gold Production, LOM | Moz | 3.06 | 3.01 | ||||
| Average Gold Production, first 3 years | koz/yr | 285 | 294 | ||||
| Average Gold Production, first 9 years | koz/yr | 257 | 249 | ||||
| Average Gold Production, LOM | koz/yr | 207 | 205 | ||||
| Mining Cost Per Tonne Mined, LOM Processing Cost, LOM (including rehandle) G&A, LOM Royalties, LOM | $/t, mined $/t, processed $/t, processed $/t, processed | $2.73 $8.04 $0.93 $1.97 | $2.90 $7.20 $0.86 $1.93 | ||||
| Total Cash Costs1, LOM | $/t, processed | $15.89 | $15.39 | ||||
| Average AISC1, LOM | $/payable oz | $933 | $975 | ||||
| Initial Capital Expenditure (including contingency) Sustaining Capital (incl. Closure) NPV , pre-tax (100%) 5% Pre-tax IRR | $M $M $M % | $543.9 $291.7 $991.7 39.6% | $489.9 $444.9 $928.7 45.1% | ||||
| NPV , after-tax (100%) 5% | $M | $746.2 | $652.2 | ||||
| After-tax IRR | % | 34.8% | 30.9% | ||||
| Payback Period | years | 2.7 | 2.8 |
DETAILS
Koné Gold Project Overview
The Koné Gold Project is located approximately 590km north-west of Abidjan (Figure 1), the commercial capital of Côte d’Ivoire. The Project comprises two exploration permits (PR262 and PR748) covering 662km2, a third exploration permit pending documentation (382km2), and two applications covering a further 398km2 all within trucking distance of Koné (Figure 1).
The communities of Fadiadougou and Batogo lie 5km east and west respectively of the resource area with the nearest major centre at Séguéla, 80km to the south. The Project area is accessible year-round with an asphalt highway within 500m of the proposed plant location.
The Project area is largely devoid of habitation with subsistence farming and cashew plantations the dominant land use.
Figure 1: Location of Koné Gold Project
Mineral Resources and Reserves Estimates
Mineral Resources were estimated for the Koné deposit by Multiple Indicator Kriging (“MIK”) by MPR Geological Consultants Pty Ltd. Based on 102,249m drilling completed up to July 31, 2021. Table 2 shows the Indicated and Inferred Mineral Resource estimates at a range of cut-off grades reported within an optimal pit shell generated at a gold price of $1,500/oz.
Table 2 – Mineral Resource Estimate
| Cut-off Grade | Indicated | Inferred | ||||
|---|---|---|---|---|---|---|
| Au g/t | Mt | Au g/t | Au Moz | Mt | Au g/t | Au Moz |
| 0.1 | 278 | 0.51 | 4.56 | 32 | 0.35 | 0.36 |
| 0.2 | 225 | 0.59 | 4.27 | 22 | 0.45 | 0.32 |
| 0.3 | 168 | 0.70 | 3.78 | 14 | 0.56 | 0.25 |
| 0.4 | 128 | 0.82 | 3.37 | 9.0 | 0.69 | 0.20 |
| 0.5 | 99.1 | 0.92 | 2.93 | 5.9 | 0.81 | 0.16 |
| 0.6 | 76.9 | 1.03 | 2.55 | 3.9 | 0.95 | 0.12 |
| 0.7 | 59.9 | 1.14 | 2.20 | 3.2 | 1.1 | 0.10 |
| 0.8 | 46.8 | 1.25 | 1.88 | 1.9 | 1.2 | 0.07 |
Notes
1. Indicated Mineral Resources and Inferred Mineral Resources are reported in accordance with NI 43-101 with an effective date of August 12, 2021, for the Koné deposit within the KGP.
2. The updated mineral resource estimate is reported on a 100% basis and is constrained within an optimal pit shell generated at a gold price of US$1,500/ounce.
3. The identified Mineral Resources are classified according to the “CIM” definitions of Indicated Mineral Resources and Inferred Mineral Resources.
4. The updated mineral resource estimate was prepared by Mr. Jonathon Abbott of MPR Geological Consultants of Perth, Australia who is a Qualified Person as defined by NI 43-101.
5. The estimates at 0.2g/t cut-off grade represent the base case or preferred scenario.
6. Mineral Resources are reported inclusive of Mineral Reserves.
7. Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability.
8. The estimates may be materially affected by environmental, permitting, legal, marketing, or other relevant issues. Please see “Forward Looking Statements” below and the technical report for the Koné Gold Project that will be prepared in accordance with National Instrument 43-101 and filed on SEDAR.
The maiden Mineral Reserve estimate was prepared by Carci Mining Consultants Ltd., dated as of February 14, 2022, and is presented below in Table 3. Only Probable Reserves have been incorporated into the mine plan and economic analysis.
Table 3 – Open Pit Mineral Reserve Estimate
| Oxide | Transition | Fresh | Total | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Mt | Au | Au | Au | Au | Au | Au | Au | Au | ||||||||
| Classification | g/t | Moz | Mt | g/t | Moz | Mt | g/t | Moz | Mt | g/t | Moz | |||||
| South Pit | Probable | 9.8 | 0.57 | 0.18 | 7.9 | 0.56 | 0.14 | 141.4 | 0.67 | 3.05 | 159.1 | 0.66 | 3.39 | |||
| North Pit | Probable | 0.9 | 0.47 | 0.01 | 0.4 | 0.46 | 0.01 | 0.6 | 0.57 | 0.01 | 1.9 | 0.50 | 0.03 | |||
| Total | 10.7 | 0.56 | 0.19 | |||||||||||||
| Probable | 8.3 | 0.56 | 0.15 | 142.1 | 0.67 | 3.06 | 161.1 | 0.66 | 3.42 |
Notes
1. The Mineral Reserves are classified according to the “CIM” definitions with an effective date of February 14, 2022.
2. All Mineral Reserves were classified as Probable based on the Indicated Mineral Resource
3. The Mineral Reserve cut off grade range from 0.19 g/t to 0.31g/t based on a $1,250/oz gold price
4. The Mineral Reserve statement was prepared by Joeline McGrath of Carci Mining Consultants Ltd., who is a Qualified Person as defined by NI 43-101.
5. The figures in this tables are rounded to reflect the precision of the estimates and may include rounding errors.
6. The estimates may be materially affected by environmental, permitting, legal, marketing, or other relevant issues. Please see “Forward Looking Statements” below and the technical report for the Koné Gold Project that will be prepared in accordance with National Instrument 43-101 and filed on SEDAR.
Definitive Feasibility Study Overview
The DFS is based on an open-pit gold mine feeding a gold processing facility (Figure 2). The Project will produce an average of approximately 207,000 ounces of gold per year over the life of the mine. The initial life of the Project is 14.8 years with upside potential through regional exploration and identification of satellite pits targeted at higher grades that can be mined and trucked to a central processing facility.
Initial capital to fund construction and commissioning is estimated at $543.9 million with total capital estimated at $835.6 million over the LOM including closure costs. All-in sustaining costs1 are estimated at $787 per ounce during the first three years of the Project, well below the current industry average, and $933 per ounce over the life of the Project. Processing costs of just $8.04/t position the Project to take advantage of processing satellite pits identified through exploration.
The financial analysis performed from the results of this DFS demonstrates the economic viability of the Koné Gold Project using the base case gold price assumption of $1,600 per ounce. This results in an aftertax net present value cashflow at a 5% discount rate (NPV5%) of $746.2 million and an after-tax IRR of 34.8% (both on a 100% basis).
The Company believes there are additional opportunities to further strengthen the Project through the continued drilling and testing of satellite pit targets through the property package.
The study was prepared for Montage by Lycopodium Minerals Pty Ltd. Other discipline specific consultants were:
- Mineral Resource Estimate: MPR Geological Consultants Pty Ltd.
- Metallurgical Testwork: SGS Lakefield
- Metallurgical oversight: MPH Minerals Consultancy Ltd.
- Tailings and Water Storage: Knight Piésold Pty Ltd.
- Hydrogeology: Australasian Groundwater & Environmental Consultants (AGE)
- Environment: Mineesia Ltd.
- Mineral Reserve Estimate and Mining: Carci Mining Consultants Ltd
Key Differences in Project Scope Compared to PEA
As part of the feasibility process, several areas of the Project were re-evaluated to optimize the DFS:
- The tailings storage strategy was revised to incorporate in-pit deposition after open pit mining is completed in year 9. This reduces sustaining capital by $146.4M compared to the PEA, reduces the surface footprint of the TSF by 40% and mitigates environmental impact (Figure 2).
- The mine plan was revised to reduce the size of the North Pit such that road diversion could be avoided. This has minimal economic impact but improves the Project permitting process due to the reduction of the footprint within the Toundia Forest Reserve.
- Replacement of the SAG Mill with High-Pressure Grinding Rolls. The use of HPGR’s reduces the power required for grinding by 19%, positively impacting operating costs.
Figure 2: Koné Site Layout Mining
Mining operations will be carried out by a contractor on a unit cost per tonne basis utilising a mining fleet comprised of 145t rigid body haul trucks with suitably sized loading units at a rate of 35Mtpa. The grade of the processed material in the first nine years is enhanced by using an elevated cut off grade and stockpiling the lower grade material for later processing.
Pit optimizations were completed based on slope angle recommendations from SRK Consulting of 48° for oxide, 68° for transition and 68° for fresh rock. The overall slope angle inclusive of ramps and berms is approximately 55°.
The optimizations were run using estimates of processing cost and recovery data. Mining costs were broken into base and incremental mining costs, derived from competitive bids received from West African mining contractors.
A gold price of $1,250/oz was used for the optimisation along with the following royalty assumptions: i) a sliding scale royalty payable to the government of Côte d’Ivoire, 3.5% at $1,250/oz Au; ii) a 2% royalty payable to Maverix Metals Inc.; and iii) a 0.5% community development fund royalty.
Pit designs (Figure 3) were completed for the Koné deposit which will be exploited through two pits, a smaller northern pit which reaches a depth of 55m and a larger southern pit which extends to a depth of 470m.
The overall strip ratio is 0.90:1, a reduction compared to the PEA.
Figure 3 – DFS Pit Design vs. Indicated Mineral Resource Shell
Figure 4 shows the mine schedule and Figure 5 shows the processing schedule with the higher-grade feed material being processed during the first nine years of mine life with the stockpiled lower grade material processed after the completion of mining operations.
Figure 4 – Mining Schedule
Figure 5 – Processing Schedule
Figure 6 shows forecasted gold production and processing recoveries. The south pit will be used to store the tailings generated over the last 6 years of the project life.
Figure 6 – Gold Production and Recoveries
Metallurgy
A comprehensive testwork program was carried by SGS Lakefield on 65 comminution and 130 leach optimization and variability samples representing range of material and rock types at the Koné deposit.
The testwork program demonstrated that the Koné deposit mineralization is amenable to direct tank leach carbon in pulp cyanide leaching with good gold recoveries, low reagent consumptions and mediumlow resistance to grinding providing favourable processing economics and a simple flowsheet.
Table 4 shows the forecast gold recoveries and reagent consumptions at the average LOM grades. Forecast gold recoveries were estimated based on variable residue grades related to feed grade, a solution loss of 0.005mg/l gold and carbon fines loss of 0.15%.
Cyanide consumption is low to very low and lime consumption is low for the dominant fresh material (88%), but higher for the less dominant transition (5%) and oxide (7%) zones.
Table 5 shows the comminution results. The fresh mineralization is soft in terms of resistance to ball milling and crushing with medium abrasivity. The SAG mill test data have been used in the design of the High-Pressure Grinding Rolls (HPGR).
Table 4 – Metallurgical Testwork Summary
| Samples Tested | Domain | LOM Plant Feed (%) | Average | Forecast Recovery (%) | Cyanide Consumption (kg/t) | Lime Consumption (kg/t) | |
|---|---|---|---|---|---|---|---|
| LOM | |||||||
| Grade | |||||||
| (Au g/t) | |||||||
| 53 | South HW Fresh | 77.1% | 0.69 | 89.10 | 0.26 | 0.55 | |
| 12 | North HW Fresh | 0.3% | 0.56 | 78.13 | 0.37 | 0.43 | |
| 13 | South FW Fresh | 10.8% | 0.55 | 87.65 | 0.23 | 0.45 | |
| 17 | South Transition | 4.9% | 0.56 | 91.23 | 0.18 | 0.99 | |
| 5 | North Transition | 0.2% | 0.46 | 88.06 | 0.35 | 0.75 | |
| 21 | South Oxide | 6.1% | 0.57 | 93.79 | 0.18 | 2.50 | |
| 9 | North Oxide | 0.6% | 0.47 | 94.17 | 0.13 | 2.79 | |
| 130 | All Domains Average | 100% | 0.66 | 89.30 | 0.25 | 0.70 |
Table 5 – Comminution Testwork for Fresh Rock
| Test | Samples | Units | Average | SGS Lakefield Classification | |
| Tested | |||||
| Bond Ball Mill Work Index SAG Milling Index Crusher Work Index Abrasion Index | 54 53 11 10 | kWh/t A x b kWh/t g | 11.4 31.3 17.0 0.419 | Soft Moderate Medium Medium |
Process Plant
The process plant design is based on a simple and robust metallurgical flowsheet designed for optimal precious metal recovery. The key design criteria for the plant are:
- Nominal throughput of 11.0 Mtpa with a grind size of 80% passing (P80) 75 µm.
• Process plant availability of 91.3% supported by the selection of standby equipment in critical areas • The treatment plant design incorporates the following unit process operations:
- Primary and closed-circuit secondary crushing using a gyratory crusher and two cone crushers to produce a crushed product size P80 of approximately 38mm.
- A crushed feed stockpile with a nominal live capacity of 22,000 wet tonnes, providing buffer storage of crushed ore with continuous reclaim feeders for the HPGR-ball mill comminution circuit.
- Two parallel HPGRs in closed circuit with wet sizing screens, with undersize slurry reporting to the milling circuit via the cyclone feed hopper. Two parallel trains of ball mills in closed circuit with hydrocyclones will produce a P80 grind size of 75 µm.