Velocity Minerals Ltd. (TSXV:VLC) (“Velocity” or the “Company”) announces the results of an independent Preliminary Economic Assessment (“PEA”) on its Rozino gold project (“Rozino” or the “Project”) located in southeast Bulgaria. The PEA provides a base case assessment of developing the Project by open pit mining and gold recovery by a combination of on-site preconcentration in a flotation plant (“Flotation Plant”) and further processing in an existing operating carbon-in-leach plant (“CIL Plant”) located in Kardzhali, 85km by road from Rozino. Saleable gold doré will be produced at Kardzhali. The PEA financial model returns an after-tax NPV5% of $129 million and an after-tax internal rate of return (“IRR”) of 33.1%.
Rozino is located within the Tintyava prospecting license, an exploration property in which Velocity has an exclusive right to acquire a 70% interest by delivering the PEA report to the underlying property owner, Gorubso Kardzhali A.D. (“Gorubso”), in the coming weeks.
“We have achieved our goal of advancing Rozino from discovery and exploration drilling through to this positive economic assessment in just over one year. On delivery of the PEA, the Company will have earned its 70% interest in the Project and will move forward towards a prefeasibility study in joint venture with our partner Gorubso,” commented Keith Henderson, Velocity’s President & CEO. “We believe that there is significant potential for resource expansion at Rozino and additional exploration drilling is expected to be completed over the coming months in tandem with infill drilling of the existing mineral resource.”
Mr. Henderson continued, “The work completed at Rozino represents an important first step in Velocity’s strategy to explore and develop multiple satellite deposits for processing in the existing centrally located CIL Plant. The Company is completing due diligence on other advanced properties located within the exploration and mining alliance area, with a view to earning 70% interests through additional option agreements with Gorubso. The aim is to build a multi-asset production profile that maintains annual production of more than 100,000 ounces of gold over a period in excess of 10 years.”
PEA1 Highlights
- After-Tax Financials: After-tax NPV5% of $129 million and after-tax IRR of 33%
- Cash Cost: All-in sustaining cost2 of US$543 per ounce
- Annual Gold Production: Steady state3 annual production of 65,000 ounces, peak annual production of 78,000 ounces
- Capital Costs: Total estimated capital costs of $97.6 million (includes contingency)
- Sustaining Capital: Low estimated sustaining capital of $6.3 million
- Mining: Open pit with 0.6 g/t gold Cut-Off Grade (COG), attractive strip ratio of 2.5 and 1.51 g/t Life of Mine (“LOM”) gold grade
- Processing: On-site flotation producing gold bearing pyrite concentrate assaying 30 g/t and transportation to the CIL Plant (located 85 km from the Project) for processing
- ROCE: Return on capital expenditure of 3.3
(1) Base case parameters assume a gold price of US$1,250/ounce and an exchange rate (CAD$ to US$) of 0.75. All amounts are reported in Canadian dollars unless otherwise specified. Financial results on 100% equity basis.
(2) All In Sustaining Cost (AISC) is defined as all cash costs related to mining and processing to final product. It includes on-mine and off-mine costs (direct and indirect). Sustaining capital costs related to continuing the business including exploration, development and equipment required to sustain production are included. Taxes, working capital, M&A, disposals and acquisitions as well as new mine development capital costs are excluded.
(3) Steady state refers to the long-term average over time where processing throughput is maintained at nameplate capacity.
The PEA is preliminary in nature and includes Inferred mineral resources that are too speculative geologically to have economic considerations applied to them that would enable them to be categorized as mineral reserves. There is no certainty that the PEA results will be realized. Mineral resources are not mineral reserves and do not have demonstrated economic viability.
The PEA was prepared by CSA Global, an international mining consultancy with experience in Bulgaria, in accordance with National Instrument 43-101 Standards of Disclosure for Mineral Projects (“NI 43-101”). A technical report prepared pursuant to NI 43-101 on the Project will be filed on SEDAR within 45 days of the date of this news release.
Rozino Development: Mine Site to Payable Gold
The PEA provides a base case assessment of developing Rozino by open pit mining, on-site crushing, milling and simple flotation to produce a 30 g/t gold concentrate. The concentrate would then be trucked 85km on existing roads to the currently operating CIL Plant where saleable gold doré would be produced.
In addition to returning positive economic results, this assessment also provides significant benefits, including shortened permitting timelines and capital cost reductions for the following reasons:
- the existing CIL Plant and tailing management facility (“TMF”) are fully permitted, currently operational, and have sufficient capacity to process concentrate from Rozino
- the use of the existing CIL Plant reduces total capital cost requirements
- development on-site at Rozino only requires permitting for mining, preconcentration and disposal of relatively benign waste products
The engineering work leading to the PEA economic results presented here included a range of development scenarios, which will be documented in the upcoming PEA.
PEA Results and Sensitivity
The PEA’s financial model returns an after-tax NPV5% of $129 million and an after-tax IRR of 33.1%. Total undiscounted post-tax cash flow over the life of the Project is estimated to be $182 million, with a robust return on capital expenditure of 3.3.
| Sensitivities | After-Tax IRR% | After-Tax NPV5% ($M) | ||||
| CAPEX | -25% | 43.8 | % | $148.5 | ||
| Base Case | 33.1 | % | $129.2 | |||
| +25% | 25.7 | % | $110.3 | |||
| OPEX | -25% | 41.2 | % | $173.6 | ||
| Base Case | 33.1 | % | $129.2 | |||
| +25% | 24.2 | % | $84.5 | |||
| Gold Price | US$1,000 | 17.6 | % | 51.3 | ||
| Base Case US$1,250 | 33.1 | % | 129.2 | |||
| US$1,500 | 46.0 | % | 207.0 | |||
| Cut-off Grade | 0.5 g/t gold | 29.2 | % | $133.3 | ||
| Base Case 0.6 g/t gold | 33.1 | % | $129.2 | |||
| 0.7 g/t gold | 36.7 | % | $122.3 | |||
Mining
The PEA model uses open pit contractor mining and a gold price of US$1,250, which is the 3-year trailing average gold price. Pit shells at this gold price returned 461,000 ounces of potentially mineable gold …read more
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