By Cory FIREWEED ZINC ANNOUNCES POSITIVE PRELIMINARY ECONOMIC ASSESSMENT WITH PRE-TAX IRR OF 32% AND NPV8 OF C$779M ON MACMILLAN PASS PROJECT
Here is the PEA that we have been waiting for out of Fireweed Zinc (TSX.V:FWZ). There is a lot of information in the release so please take your time to read over it and let me know what you think.
I will be chatting with Brandon McDonald, Fireweed President and CEO tomorrow so please send me any questions to have to Fleck@kereport.com.
Click here to listen to the most recent interview with Brandon and I.
…Here’s the news…
Vancouver, British Columbia: FIREWEED ZINC LTD. (“Fireweed” or the “Company”) (TSXV: FWZ) is pleased to announce the positive results of an independent Preliminary Economic Assessment (“PEA”) for its Macmillan Pass Project (the “Project”) in Yukon, Canada. The PEA was prepared in accordance with National Instrument 43-101 Standards of Disclosure for Mineral Projects (“NI 43-101”) by JDS Energy and Mining, Inc. (JDS) with work on tailings and water by Knight Piesold Consulting, both of Vancouver, Canada.
Production and Economic Highlights:
- Long mine life and large-scale production:
- 18-year mine life with 32.7Mt of mineralization mined at 4,900 tonne-per-day average processing rate.
- 1.54Mt of Zinc, 0.88Mt of Lead, and 37Moz of Silver in concentrate shipped.
- Average yearly contained-metal production of 85kt Zinc, 48kt Lead and 2Moz Silver.
- Robust economics using metals prices of $1.21/lb Zn, $0.98/lb Pb, and $16.80/oz Ag:
- Pre-Tax NPV at 8% of $779M CAD and IRR of 32%.
- After-Tax NPV at 8% of $448M CAD and IRR of 24%.
- Manageable CAPEX and rapid payback:
- Pre-production CAPEX of $404M CAD.
- Payback period of 3.9 4 years.
- Starter-pits on Tom West and Jason Main zones reduce up-front capital.
- Significant Upside
- Numerous opportunities for significant economic improvement.
- Known zones remain open for expansion, including into high-grade areas.
- Highly prospective and large land package untested with modern exploration methods.
“This first NI43-101-compliant PEA on the Macmillan Pass Project represents a significant step for the Company as we progress the Project towards production. Project economics in the PEA demonstrate that Macmillan Pass is not just viable at the zinc, lead and silver prices levels contemplated in the study, but highly robust,” commented Brandon Macdonald, Chief Executive Officer. “With consideration of the exploration upside not just at the known zones, but also within the broader land package, the Project is steadily shaping up to be a premiere district-scale zinc mining camp in the mining-friendly Yukon Territory.”
Overview of PEA Results and Assumptions
Summary Table of Economic Inputs and Results
| Unit | Base Case | Spot Prices2 | ||
| Inputs | Zinc Price | US$/lb | $1.211 | $1.42 |
| Lead Price | US$/lb | $0.981 | $1.05 | |
| Silver Price | US$/oz | $16.801 | $16.38 | |
| Exchange Rate | CAD/USD | 0.77 | 0.78 | |
| Economics | Cash Flows (Undiscounted) | C$M | $1,735 | $2,581 |
| Pre-Tax | NPV at 8% | C$M | $779 | $1,214 |
| IRR | % | 32% | 42% | |
| Payback Period | years | 3 | 2.4 | |
| Economics | Cash Flows (Undiscounted) | C$M | $1,119 | $1,669 |
| Post-Tax | NPV at 8% | C$M | $448 | $729 |
| IRR | % | 24% | 31% | |
| Payback Period | years | 4 | 3 | |
| Unit Parameters | Net Smelter Return3 | C$/tonne | $167.38 | $193.28 |
| Per Tonne Mined | Pit Mining Costs | C$/tonne | $4.45 | $4.45 |
| Underground Mining Costs | C$/tonne | $52.02 | $52.02 | |
| Processing Costs | C$/tonne | $22.92 | $22.92 | |
| Site G&A | C$/tonne | $10.37 | $10.37 | |
| Total OPEX | C$/tonne | $82.00 | $82.00 | |
| Operating Margin | C$/tonne | $85.38 | $111.28 | |
| Sustaining Capital & Closure | C$/tonne | $19.88 | $19.88 | |
| Adjusted Operating Margin | C$/tonne | $65.50 | $91.40 |
1. Base case prices for zinc, lead and silver are the average of three years past and projected two years forward by analysis of London Metal Exchange futures as of April 30, 2018.
2. Spot prices at close of London Metal Exchange on April 30, 2018.
3.Net smelter returns are net of off-site costs including TC/RCs, freight and penalties
Capital & Operating Cost Estimates
Table of Initial and Sustaining Capital Costs
| Area | Initial (C$000) | Sustaining (C$000) | Total (C$000) |
| Mining | 30,300 | 378,400 | 408,700 |
| Site Development | 12,000 | 1,100 | 13,100 |
| Mineral Processing | 70,600 | 5,500 | 76,100 |
| Tailings Management | 32,700 | 113,900 | 146,600 |
| On-site Infrastructure | 51,400 | 14,800 | 66,200 |
| Off-site Infrastructure (Canol Road) | 78,300 | 6,700 | 85,000 |
| Project Indirects | 43,000 | – | 43,000 |
| Engineering & Project Management | 20,500 | – | 20,500 |
| Owner Costs | 7,000 | – | 7,000 |
| Closure | – | 56,700 | 56,700 |
| Contingencies1 | 58,600 | 72,300 | 130,900 |
| TOTAL PROJECT | 404,400 | 649,400 | 1,053,800 |
1. Note on contingencies: Contingencies were assigned according to the level of engineering in the various project areas as follows: mining infrastructure 20%, process plant/site infrastructure/indirects 20%, tailings 35%, off-site infrastructure 10%. JDS terms this method “fit for purpose.” An example is the process equipment cost. JDS used vendor quotes on nearly all the equipment. Vendor quotes can generally be assessed a contingency of 5-10%. On the other hand, Knight Piesold had little data on the soils to be excavated for the tailings management facility embankment. They applied a contingency of 35% in that case.
Off-site Charges
Off-site charges include concentrate transport to Skagway for loading onto ocean-going cargo ships bound for smelter destinations yet to be determined but assumed to be in Asia. The charges also include treatment charges and penalties as shown in the table below.
Table of Off-site Charges
| Off-site Charges | Units | Zinc Concentrate | Lead Concentrate |
| Transport to Smelter | CAD/wmt conc. | $211.85 | $211.85 |
| Smelter Treatment Charge | US$/dmt conc. | $190.00 | $170.00 |
| Silver Refining | US$/oz | $1.50 | $1.50 |
| Mercury (Hg) Penalty | US$/dmt conc. | $0.96 | NA |
| Silica (SiO2) Penalty | US$/dmt conc. | $2.00 | NA |
Operating Costs
The estimated operating costs, over the life of the Project, are presented below:
Table of Operating Costs (OPEX)
| Open Pit Mining | C$/tonne mined | $4.45 |
| Underground Mining | C$/tonne mined | $52.02 |
| Processing | C$/tonne | $22.92 |
| G&A | C$/tonne | $10.37 |
| All-In OPEX | C$/tonne | 82.00 |
Mineral Resources
This PEA is based on a mine plan for delivery of 32.66 Mt at a diluted head grade of 9.07% zinc equivalent (5.31% zinc, 3.56% lead and 43.41g.t silver) delivered to the processing plant. The table below outlines the total base case Indicated and Inferred Mineral Resources, including those that were not included in this mine plan.
Table of Base Case Mineral Resource Estimates (at NSR cutoff grade of $65 CAD)
| Category | Tonnes (Mt) | ZnEq % | Zn % | Pb % | Ag g/t | B lbs Zn | B lbs Pb | MOz Ag |
| Indicated | 11.21 | 9.61 | 6.59 | 2.48 | 21.33 | 1.63 | 0.61 | 7.69 |
| Inferred | 39.47 | 10.00 | 5.84 | 3.14 | 38.15 | 5.08 | 2.73 | 48.41 |
Details, supporting information and Qualified Person statements for these Mineral Resources are described in the Company’s news release and the Technical Report both dated January 10, 2018 and both filed on www.sedar.com.
Mining
Initial material will be recovered at a rate of about 5,000 tonnes per day …read more
From:: The Korelin Economic Report