Confederation Minerals Ltd. Announces Completion of the previously announced Preliminary Economic Assessment
Suite 1980, 1075 West Georgia Street, Vancouver, British Columbia, V6E 3C9 Tel: 604 688 9588; Fax: 778 329 9361
Confederation Minerals Ltd. Announces Completion of the previously announced Preliminary Economic Assessment
Vancouver, B.C.; Oct 23th, 2014; Confederation Minerals Ltd. (TSX.V:CFM; OTCQX:CNRMF): (“Confederation” or the “Company”) is pleased to announce the completion of the previously announced (April 8, 2013 press release) Preliminary Economic Assessment (PEA) for the Newman Todd Project ("the Project") in the Red Lake Mining District of Northern Ontario.
The Executive Summary of the full PEA, prepared by Mining Plus Canada Pty. (Mining Plus) from their Vancouver, BC offices, will be available shortly on the Company’s website (www.confederationmineralsltd.com) and on SEDAR (www.sedar.com). Furthermore, a technical report prepared in compliance (or accordance) with NI 43‐101 is being completed and will be available on the Company’s website and on SEDAR within 45 days. The PEA was authored by Neil Schunke, MAusIMM (CP Mining) of Mining Plus Canada Consulting with contributions by Ralph Bullis, B.Sc., P.Geo, of Bullis Consulting, Tracey Meintjes, P Eng. of Moose Mountain Technical Services, Jeffrey Barrett, M.Sc.E., P.Eng of Stantec Consulting Ltd., Gary Giroux, MASc., P.Eng of Giroux Consultants Ltd, Andrea Diakow, B.Sc., P Geo, of Pamicon Developments Ltd. and Doug Blanchflower, B.Sc., P.Geo of Minorex Consulting Ltd.
The foremost purpose of this PEA is to provide early economic guidance to optimise future exploration efforts along the extensive gold‐bearing hydrothermal Newman Todd Structure (NTS) (see Confederation press releases over the preceding 24 months). Optimization scenarios contemplated in the report that could provide significant upside to the Newman Todd Project include:
- Reduction of capital expenditure (processing plant, tailings storage facility and associated infrastructure) through toll treatment options
- Expansion of land holding sufficient to construct processing plant, tailings storage facility and associated infrastructure adjacent to the Newman Todd operation instead of on claims 18km NE of the deposit
- The Newman Todd Structure is open to extension to the northeast and southwest with several discrete known and untested targets and is also open at depth
- Additional drilling may discover further high grade portions of the deposit along strike or down dip within the Newman Todd structure
- Potential increase in resource quantity, particularly through further drilling of the near‐surface mineralised zones within the Newman Todd structure
- Further constraining the high grade mineralization model within the deposit
- Renegotiation and decrease of royalties.
Confederation’s CEO, Mr. Lawrence Dick, PhD., P, Geo. stated that “This PEA is an excellent tool to fine tune our going‐forward exploration approach, to most efficiently and cost‐effectively explore the very large Newman Todd gold‐bearing hydrothermal system.”
It should also be noted that the production by Confederation of a preliminary assessment (within the meaning of NI 43‐101), along with the issuance to Redstar of an additional 500,000 shares of Confederation, will exercise the second option in the Company’s option agreement with Redstar Gold Corp. (TSX‐V:RGC) thereby increasing Confederation’s ownership in the Newman Todd project from 50% to 70% interest.
The PEA is based on results from 138 diamond drill holes totalling 51,328 m with 1,719 down hole surveys and 45,300 assays for gold. Drill holes tested the Newman‐Todd Structure (NTS) which accounts for most of the gold discovered to date on the Project. The NTS stretches over the entire length of the Project property, a distance of about 1.8 kilometres, and is open outside of project boundaries. Much of the drilling is wide‐spaced with the highest drilling density in the “Hinge Zone” and the “Heath Bull Zone” where drill centres are approximately 25 metres to a depth of about 300 metres.
Primarily as a result of distances between wide spaced drilling within the NTS, geostatistical restraints have limited the region of the NTS that contributes to the PEA to the Hinge Zone. It is anticipated that, given the large scale of the Project, additional drilling in the NTS will add to the resources already identified for the PEA.
While the Company understands that the results of the PEA presented are, by definition, preliminary the Company sought guidance, through the PEA summarized below, to help determine parameters for future exploration of the much larger NTS system extending well outside the Hinge Zone and to a depth of at least 900m.
Stated Mr. Dick, “We have had unprecedented exploration success with gold intercepted on almost every hole along the 1.8km NTS, including a consistent trend of increased grades along the hanging wall contact. We have a small region in the Hinge Zone at the centre of the property where drill density and grade are starting to contribute to something economically meaningful. Expanding this zone laterally and to depth is our goal and we look forward to sequential positive updates to our existing model.”
Summary
The PEA is based on the resource model (with effective date December 17, 2013), extraction of the deposit by open pit mining methods and additional metallurgical and environmental studies. A pit optimisation process (using Whittle software) was undertaken to identify the ultimate pit shell using the base case economic and geometric parameters. Project highlights and key potential economic outcomes from the mine plan considered in this PEA are detailed in Table 1.
| TABLE 1 | ||
|---|---|---|
| Mining | ||
| Mining Inventory tonnes, t | 1,157,727 | |
| Mining production rate, tpa | 375,000 | |
| Total open pit material mined, t | 7,487,665 | |
| Stripping ratio | 5.47 | |
| Production | ||
| Average feed grade Au, g/t | 2.5 | |
| Payable Au, oz | 82,699 | |
| Capital Costs |
| Initial Capital Costs, CA$M | 48.8 | |
| Sustaining Capital Costs, CA$M | 23.2 | |
| Mine Closure Capital Costs, CA$M | 5.1 | |
| Contingency (Initial Capital Costs), CA$M | 9.8 | |
| Contingency (Sustaining Capital Costs), CA$M | 2.1 | |
| Total Capital Costs, CA$M | 89.1 | |
| Operating Costs | ||
| Total Operating Costs, CA$M | 90.6 | |
| Unit Operating Costs, CA$/t milled | 78.3 | |
| Metal Price and Exchange Rate Assumptions | ||
| Au price, US$/oz | 1,400 | |
| USD/CAD exchange rate | 1.01 | |
| Economic Outcomes | ||
| Net income (pre-tax, undiscounted), CA$M | (66.9) | |
| Net Present Value (pre-tax, 5% discount rate), CA$M | (62.4) |
Note: All designs and costs in this Preliminary Economic Assessment are preliminary in nature and include both Indicated and Inferred Mineral Resources. Inferred Mineral Resources are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as Mineral Reserves.
Resources
The mineral resource estimate for the Newman Todd Project was prepared by Gary Giroux, MASc., P.Eng., of Giroux Consultants Ltd, using higher grade quartz carbonate breccia mineralized shells outlined and provided by Ralph Bullis, B.Sc., P.Geo, of Bullis Consulting and a geologic solid model provided by Doug Blanchflower, B.Sc., P.Geo of Minorex Consulting Ltd. Andrea Diakow, B.Sc., P Geo, of Pamicon Developments Ltd provided data verification through quality assurance and quality control protocols in the drilling assays and field sampling on the project. Other geological data was supplied by Confederation Minerals Ltd. The higher grade shells were used to create 3D wireframes for ten mineralised zones that were subsequently used to constrain the mineralised breccia zones. A 3D wireframe representing the Newman Todd Structure was also created and will be included in our web site subsequent to the publication of this news release. Resources are classified according to NI43‐101 and CIM Definition Standards based on the geologic continuity established through surface mapping and drill hole interpretation. The Mineral Resources at a 0.7 g/t Au cutoff for Newman Todd are as summarised in Table 2. Table 3 presents the Newman Todd Mineral Resource Estimate at a range of cut‐off grades.
Table 2 Newman Todd Mineral Resource Estimate
| Resource Class | Tonnes | Au Grade (g/t) | Au Ounces | ||||
|---|---|---|---|---|---|---|---|
| Total Indicated Resources | 6,400,000 | 1.35 | 277,000 | ||||
| Total Inferred Resources | 7,630,000 | 1.35 | 332,000 |
Table 3 Newman Todd Mineral Resource Estimate at Range of Cutoff Grades
| Indicated Resources | Inferred Resources | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Au Cutoff | Tonnes | Tonnes | Au Grade (g/t) | Au Ounces | Au Ounces | Tonnes | Tonnes | Au Grade (g/t) | Au Ounces | Au | |
| Grade | Ounces | ||||||||||
| (g/t) | |||||||||||
| 0.4 | 17,100,000 | 0.83 | 456,000 | 22,460,000 | 0.80 | 578,000 | |||||
| 0.6 | 8,640,000 | 1.17 | 325,000 | 10,450,000 | 1.16 | 390,000 | |||||
| 0.8 | 4,750,000 | 1.55 | 237,000 | 5,430,000 | 1.60 | 279,000 | |||||
| 1 | 2,970,000 | 1.95 | 186,000 | 3,202,000 | 2.10 | 216,000 | |||||
| 1.2 | 2,040,000 | 2.35 | 154,000 | 2,244,000 | 2.53 | 183,000 |
Note: Totals in above tables may differ due to rounding.
Note: All designs and costs in this Preliminary Economic Assessment are preliminary in nature and include both Indicated and Inferred Mineral Resources. Inferred Mineral Resources are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as Mineral Reserves.
Description of Proposed Mining Operations
The PEA contemplates open pit mining of the Newman Todd deposit that would be undertaken by a contractor owing to the relatively small size of the mineral resource. Mining would commence with a 21 month pre‐production period involving the following activities:
- Construction of a dike at the inflow end of Abate Lake and a water diversion channel, prior to
dewatering of the lake
- Lake bed sediments and overburden removal
Mining of potentially mineralised material intended for direct feed to the processing plant would occur over 36 months following this pre‐production period.
In the PEA mining is planned using conventional truck and shovel operations. The ramp is constrained to the South‐western side of the proposed open pit to maximise pit slope angles for the majority of the mine life and to access pockets of potentially mineralised material at deeper elevations on the northeastern side of the pit. The slope angles used in the mine design were adjusted according to this ramp position.
It is expected that a 98% mining recovery and a dilution factor of 5% will be achieved for the open pit operation. Mining recovery accounts for the ore loss events during mucking due to unclear ore/waste contacts or areas where selectivity cannot be reached. The dilution factor is applied to ore blocks due to the undesired waste tonnes added to the ore in the mining process.
Waste rock removed from the operation would be stored on the waste storage facility which is to be sited to the southeast of the open pit. It is expected that waste rock would be categorised as either potentially acid‐generating or non acid‐generating, although no specific test‐work and classification has been undertaken for this level of study. Owing to the known presence of significant carbonate zones constrained to the waste portions within the Newman Todd Structure, these are expected to provide a substantial neutralisation effect. On this basis, there is expected to be sufficient non‐acid‐generating waste rock available for construction of the walls for the tailings storage facility and for capping of potential acid‐generating waste rock within the waste storage facility.
Metallurgical Testing and Ore Processing
Metallurgical test work was undertaken during 2013 on 11 diamond drill hole intersections (totalling 221.9 kg of material) that characterized the various types of mineralization/alteration and waste rock found within the NTS. Gold mineralization within the NTS is predominantly associated with the presence of sulphides and magnetite as well as pervasive silica alteration, and occasionally associated with the presence of minor sulphides and/or magnetite. Combining results of flotation and cyanidation tests, the overall Au recovery, with regrinding, was approximately 91% for the sulphide/magnetite‐rich composite approximately 92% for the sulphide/magnetite‐poor composite, and approximately 82% for an arsenopyrite‐rich composite. The presence of arsenopyrite and galena, while not particularly abundant, is often a good indicator for the presence of gold.
Processing would involve crushing, gravity separation, flotation and carbon‐in‐pulp leaching to produce gold doré bars. Tailings would be disposed of in a tailings storage facility that is constructed as an initial starter dam and progressively expanded as production from the operation progresses to minimise early capital expenditure. The processing plant would be operated by the owners of the project.
Capital and operating costs
Capital and operating costs are summarised in Tables 4 and 5.
Table 4 Capital Cost Summary
| Cost Area | Initial Capital (CA$M) | Expansion and | Total Capital (CA$M) | |
|---|---|---|---|---|
| Sustaining | ||||
| Capital | ||||
| (CA$M) | ||||
| R Roads | 1.51. 1.5 | |||
| Buildings and Electrical | 1 1.3 | |||
| Power line extension and Admin. | 8.4 | |||
| Processing Plant & Tailings Management Facility | 37.0 | |||
| Infill and Sterilisation Drilling | 0.6 | |||
| Contingency (Initial Capital) | 9.8 | |||
| Sustaining Capital (Tailings Storage Facility and Process Plant Water Management) | 23.2 | |||
| Mine Closure | 5.1 | |||
| Contingency (Sustaining Capital) | 2.1 | |||
| TOTAL | 58.6 | 30.5 | 89.1 |
A Table 5 Operating Cost Summary A
| Cost Area | Operating Cost (CA$/t milled) | ||
|---|---|---|---|
| Mine | 39.0 | ||
| Processing Plant | 28.7 | ||
| G&A | 5.9 | ||
| Royalties | 4.7 | ||
| TOTAL | 78.3pansion |
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and
Economic and Sensitivity Analysis
The Newman Todd Project is subject to several royalties based either on Net Smelter Return (NSR) or Net Carried Interest (NCI). Those royalties for the project that are based on NSR have been applied to the revenue from payable gold, less the selling costs. However, the royalty based on NCI was not applied in the optimisation phase of the project because, under its terms, it will only result in a payable amount after the recovery of all operating costs, capital expenditures, a carrying charge calculated at prime plus 1% and a reserve for working capital. In this calculation, capital expenditures also include all moneys expended prospecting, exploring and developing the property prior to commercial production. The NCI‐ based royalty has been applied later in the cash flow model. Economic analysis on Newman Todd Project shows a cash flow after capital depreciation of ‐CA$66.9M and a NPV (5% discount rate) of – CA$62.4M.taining Capital
(CA$M)
A sensitivity analysis was conducted on key economic inputs: gold price / feed grade / processing recovery, processing cost, mining cost, capital expenditure and mining recovery. This analysis indicates that the Project is most sensitive to gold price, processing recovery, feed grade and capital expenditure, followed by mining cost, mining recovery and processing cost.
Ralph Bullis, P.Geo, FGC, is the Qualified Person as defined by National Instrument 43‐101 and has reviewed or supervised the preparation of the technical content relating to the disclosed document.
On behalf of the Board of Directors,
Confederation Minerals Ltd.
“Lawrence Dick”
Lawrence A.Dick, Ph.D., P.Geo CEO, and Director
CORPORATE INQUIRIES Confederation Minerals Ltd.
Suite 1980, 1075 West Georgia Street Vancouver, B.C.
Lawrence Dick, CEO 604.688.9588 [email protected] www.confederationmineralsltd.com$M)
About CFM
Confederation Minerals Ltd. is a British Columbia based company engaged in the business of acquisition, exploration and development of mineral properties. Its objective is to locate and develop economic precious and base metals properties of merit. Confederation Minerals Ltd. holds an Option Agreement to acquire up to 70% of the Newman Todd project in the Red Lake Mining District of Northern Ontario, as well as 100% ownership in another property in the Red Lake Mining District of Ontario.
Cautionary Note concerning estimates of Measured, Indicated and Inferred Mineral Resource
This news release uses terms that comply with reporting standards in Canada and certain estimates are made in accordance with Canadian National Instrument 43‐101 ("NI 43‐101"). NI 43‐101 is a rule developed by the Canadian Securities Administrators that establishes Canadian standards for all public disclosure an issuer makes of scientific and technical information concerning mineral projects. These standards differ significantly from the requirements of the U.S. Securities and Exchange Commission ("SEC"), and mineral resource information contained herein may not be comparable to similar information disclosed by United States companies.
This news release uses the terms "measured mineral resources", "indicated mineral resources" and "inferred mineral resources" to comply with reporting standards in Canada. We advise United States investors that while such terms are recognized and required by Canadian regulations, the SEC does not recognize them. United States investors are cautioned not to assume that any part or all of the mineral deposits in such categories will ever be converted into mineral reserves under SEC definitions. These terms have a great amount of uncertainty as to their existence, and great uncertainty as to their economic and legal feasibility. Therefore, United States investors are also cautioned not to assume that all or any part of the "measured mineral resources", "indicated mineral resources" or "inferred mineral resources" exist. In accordance with Canadian rules, estimates of "inferred mineral resources" cannot form the basis of pre‐feasibility or other economic studies. It cannot be assumed that all or any part of the "measured mineral resources", "indicated mineral resources" or "inferred mineral resources" will ever be upgraded to a higher category.
Forward‐Looking Information
This release includes certain statements that may be deemed "forward‐looking statements". All statements in this release, other than statements of historical facts, that address events or developments that the Company expects to occur, are forward‐looking statements. Forward‐looking statements are statements that are not historical facts and are generally, but not always, identified by the words "expects", "plans", "anticipates", "believes", "intends", "estimates", "projects", "potential" and similar expressions, or that events or conditions "will", "would", "may", "could" or "should" occur. Although the Company believes the expectations expressed in such forward‐looking statements are based on reasonable assumptions, such statements are not guarantees of future performance and actual results may differ materially from those in the forward‐looking statements. Factors that could cause the actual results to differ materially from those in forward‐looking statements include market prices, exploitation and exploration successes, and continued availability of capital and financing, and general economic, market or business conditions. Investors are cautioned that any such statements are not guarantees of future performance and actual results or developments may differ materially from those projected in the forward‐looking statements. Forward‐looking statements are based on the beliefs, estimates and opinions of the Company's management on the date the statements are made. Except as required by applicable securities laws, the Company undertakes no obligation to update these forward‐looking statements in the event that management's beliefs, estimates or opinions, or other factors, should change.