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SolGold PLC Announces Completion of New Cascabel Pre-Feasibility Study

February 16, 2024
176

SolGold

LSE:SOLG | TSX: SOLG

SolGold announce the successful completion of a new Pre-Feasibility Study (“PFS” or “Study”), prepared in accordance with National Instrument 43-101 (“NI 43-101”) that supports a Phased Block Cave Mine at its flagship Cascabel Project (“Cascabel” or “Project”) in Ecuador. Cascabel is 100%-owned through SolGold’s Ecuadorian subsidiary Exploraciones Novomining S.A. (“ENSA”). All dollar amounts are quoted in US Dollars.

Key Highlights of the Pre-Feasibility Study

  • Excellent economic viability of a Cascabel Phased Approach Block Cave Mine
  • +$1bn initial capital expenditure savings compared to previous estimates, reflecting efficient project development strategies, lower technical risk attributed to the phased strategy
  • Potential for accelerated cash flow and project development
  • The current Cascabel mine plan reflects the profitable exploitation of only 18% of the Alpala measured and indicated mineral resource through a 28-year mine life – the size of the entire resource indicates the mine’s potential to be a multi-generational mining asset
  • Strong commitment to responsible and sustainable mining practices, including the use of renewable energy (hydropower) and an environmentally conscious Project footprint reduction

“Cascabel is not just a mining project; it’s a promise of responsible mining, lasting value for all stakeholders and a sustainable legacy for the planet. With reduced capital needs and lower risk compared to previous approaches, together with our ongoing commitment to sustainability and responsible mining, Cascabel is more than copper and gold; it’s a story of innovation, collaboration and a vision for a greener and more prosperous tomorrow for the people of Ecuador. This Study was conducted with the best outcomes for all our stakeholders in mind.”

Scott Caldwell, SolGold’s CEO and President of SolGold Ecuador

Summary of Cascabel PFS Results

Table 1:Economic and Operating Summary

Key PFS Outcomes (US$)Base Case
Economic AssumptionsCopper ($/lb)$3.85
Gold ($/oz)$1,750
Silver ($/oz)$22.50
Operating ParametersThroughputPhase 1: 12Mtpa; Phase 2: 24Mtpa
Initial Project LOM28 years
Total Ore Mined540 Mt
Average Copper Grade / Recovery0.60% | 88.7%
Average Gold Grade / Recovery0.54 g/t | 72.9%
Average Silver Grade / Recovery1.62 g/t | 65.7%
ProductionTotal CuEq Produced4.3 Mt
Total Copper Produced2.9 Mt
Total Gold Produced6.9 Moz
Total Silver Produced18.4 Moz
Annual CuEq Production (peak/average)370 kt | 182 kt
Annual Copper Production (peak/average)216 kt | 123 kt
Annual Gold Production (peak/average)734 koz | 277 koz
Annual Silver Production (peak/average)1,159 koz | 794 koz
CapitalPre-production$1.55bn
Post-production$2.57bn
Operating Costs
($/t processed)
Mining Costs$6.2
Processing Costs$7.4
G&A Costs$1.0
Tailings, Port and Infrastructure Costs$0.7
Total Operating Costs$15.3
Cash CostsLOM Average Net Cash Cost ($/lb Cu)$0.25
LOM Average AISC ($/lb Cu)$0.69
FinancialsPre-tax NPV8% / IRR$5.4bn | 33%
After-tax NPV8% / IRR$3.2bn | 24%
Capital payback period4 years
Average Annual Free Cash Flow(first 5 years of production)$449m
First 10-Years Free Cash Flow Generation$7.1bn

Reduced Initial Capital Expenditure

Compared to previously considered development scenarios, the Phased Approach Block Cave Mine has substantially reduced the initial capital expenditure required to develop Cascabel. This approach optimizes project development by gradually scaling up operations, effectively managing costs and minimizing financial risk.

After a ramp-up period of approximately two years, the initial block cave will achieve a production rate of 12 million tonnes per annum (“Mtpa”). The initial cave will extract high-grade ore, averaging approximately 1.45% CuEq for the first ten years of production. The extraction of this high-grade material will not sterilize the surrounding lower-grade ore. The mining operations will be expanded by an additional 12Mtpa, increasing to a total annual production rate of 24Mtpa in year 6. The phase 2 mill expansion is expected to be entirely funded from Project cash flow. This phased approach also allows for scaling other capital items over time, such as the tailings storage facility, the camp and mining equipment.

Lower Technical Risk

The phased development strategy also contributes to a reduction in technical risk. Incrementally advancing the Project provides an opportunity to implement and fine-tune mining and processing methodologies, ensuring a more efficient and stable production process. This approach enhances the Project’s overall resilience and minimizes potential challenges associated with large-scale development. A practical height-of-draw for this deposit was determined to be 400m which is considered to be more technically feasible than other alternatives.

Accelerated Cash Flow

The Study’s results indicate a strong potential for accelerated cash flow generation. With a reduced initial capital burden and lower technical risk, Cascabel is expected to deliver a quicker path to positive cash flow.

Commitment to Responsible Mining

SolGold remains committed to responsible and sustainable mining practices. The Company’s dedication to environmental, social and governance (ESG) standards remains unwavering. Cascabel’s development will continue to prioritize minimizing environmental impact, promoting community engagement and ensuring ethical practices throughout the Project’s lifecycle.

Integration of Renewable Energy

SolGold is proud to prioritize sustainability and environmental responsibility in the development of the Cascabel Project. The Company is actively integrating renewable energy supplied by governmental and private sources into the Project’s energy supply strategy as part of a net zero commitment.

Project Description

Cascabel is located in northern Ecuador approximately a three hours’ drive north of Quito, the capital city of Ecuador. Access is via sealed highways through the closest major centre of Ibarra, located approximately 80 km south of the property. Infrastructure in the region and throughout Ecuador is generally of a high standard, with excellent road access, power and water sources readily available in the local area.

Cascabel Project – Alpala Underground: Mineral Resource Estimate (“MRE”) #4

Table 2: Cascabel Project Alpala Underground Mineral Resource Estimate (Effective Date November 11, 2023)

Cut-Off Grade(CuEq%)Resource CategoryTonnage(Mt)GradeContained Metal
CuEq(%)Cu(%)Au(g/t)Ag(g/t)CuEq(Mt)Cu(Mt)Au(Moz)Ag(Moz)
0.21Measured1,5760.640.430.351.1610.06.717.558.6
Indicated1,4370.390.280.200.715.64.09.332.7
Measured + Indicated3,0130.520.350.280.9415.610.726.891.3
Inferred6070.360.260.190.562.21.53.711.0

Notes:

  1. Dr Arseneau, P. Geo. Associate Consultant with SRK Consulting (Canada) is responsible for this Mineral Resource statement and is an “independent Qualified Person” as such term is defined in NI 43-101.
  2. Reasonable prospects of eventual economic extraction were assessed by enclosing the mineralised material in the block model estimate in a 3D wireframe shape that was constructed with adherence to a minimum mining unit with geometry appropriate for a block cave.
  3. The cut-off grade for the shape was defined as the cut-off grade under a breakeven, eventual economic extraction criterion. The cut-off grade of 0.21% CuEq was calculated using (copper grade (%)) + (gold grade (g/t) x 0.683).
  4. All material within this shape was reported in the Mineral Resource statement as block caving is a non-selective method, and all material extracted is treated as mill feed.
  5. The material inside the shape without a Mineral Resource category was reported as planned dilution.
  6. The resulting shape contained planned internal and edge dilution that the QP considers appropriate.
  7. Cut-off inputs included:
    1. Metal prices of Cu at US$3.60/lb and Au at US$1,700/oz,
    2. Recoveries of Cu 93% and Au 83%,
    3. Costs including mining, processing, general and administration (G&A), and off-site realization (TCRC), including royalties.
  8. The QP considers that the Mineral Resource has reasonable prospects for eventual economic extraction by an underground mass mining method such as block caving.
  9. Mineral Resources are not Mineral Reserves and do not have demonstrated economic viability.
  10. Mineral Resources are reported inclusive of Mineral Reserves.
  11. Figures may not add up due to rounding.

Cascabel Project – Alpala Underground: Mineral Reserve Estimate

The Mineral Reserves have been estimated for a block caving method and take into account the effect of mixing indicated material with dilution from low-grade or barren material originating from within the caved zone and the overlying cave backs. The Mineral Resources reflected in MRE#4 are inclusive of the Mineral Reserve estimate, which represents only 18% of the Measured and Indicated Resource estimate. The mining practices contemplated in this study do not compromise the potential extraction of the remaining resources not included in the current mine plan.

Table 3: Cascabel Project Alpala Underground Mineral Reserve Estimate

Mineral Reserve CategoryTonnage(Mt)GradeContained Metal
Cu(%)Au(g/t)Ag(g/t)Cu(Mt)Au(Moz)Ag(Moz)
Proven457.50.640.601.72.98.924.9
Probable82.20.360.221.20.30.63.1
Total539.70.600.541.63.29.428.0

Notes:

  1. CIM Definition Standards were followed for Mineral Reserves.
  2. Mineral Reserves for the Cascabel Project have an effective date of December 31, 2023
  3. The Mineral Reserve reported above was not additive to the Mineral Resource.
  4. The Mineral Reserve is based on the November 11, 2023 Mineral Resource.
  5. Totals may not match due to rounding.
  6. Mineral Reserves are reported using long-term metal prices of US$1,700/oz Au, US$3.60/lb Cu, US$19.90/oz Ag.
  7. Mineral Reserves are constrained within a block cave design, using the following input parameters: height of draw of 400 m; mixing horizon of 350 m; 15% dilution (at 350 m column height); overall operating cost of US$15.00/t; metallurgical recoveries that range from 85-92% for copper and 70-81% for gold; a footprint development cost of US$1,750/m2; cut-off value of US$15.00/t.
  8. Units are metric tonnes, metric grams, troy ounces and imperial pounds. Gold ounces and copper pounds are estimates of in-situ material and do not account for processing losses.
  9. The Mineral Reserve Estimate as of 31 December 2023 for Alpala was independently verified by Jarek Jakubec, C.Eng., FIMMM. Mr. Jakubec fulfils the requirements to be a “Qualified Person” for the purposes of NI 43-101 and is the Qualified Person under NI 43-101 for the Mineral Reserve.

Mining

Underground mining will utilize the block cave mining method, a low-cost, bulk mining method. After a ramp-up period of approximately two years, the initial cave will achieve a production rate of 12Mtpa. The initial cave will extract high-grade ore, averaging 1.5% CuEq for the first ten years of operation. Extraction of this high-grade material will not sterilize surrounding lower-grade ore. The mining operations will be expanded by an additional 12Mtpa, increasing to a total annual production rate of 24Mtpa in year 6 of mine production.

Ore from the mine will be transported to the underground primary crushers by load haul dump loaders (“LHDs”) and crushed to minus 160 mm. The crushed ore will be conveyed directly to the coarse ore stockpile adjacent to the mill at the surface.

Process Plant

Ore will be reclaimed from the coarse ore stockpile and conveyed to a conventional semi-autogenous grinding ball mill crusher (“SABC”) circuit. Slurry from the ball mill will be pumped to the flotation circuit, where concentrate will be floated, filtered and stored for transport by truck to the port site concentrate storage barn. Tailings will flow by gravity to the Tailings Storage Facility.

Production Plan

Additional mining optimization studies indicated that the optimum production profile for the Cascabel Project is, to begin with a processing rate of 12Mtpa, extracting high-grade ore for 6 years, and then expanding the process plant by an additional 12Mtpa, increasing to a total processing rate of 24Mtpa. The initial 12Mtpa throughput rate is expected to be achieved six years after the start of Project development. Over the current life of mine, the plant is expected to produce 2.9 million tonnes of copper, 6.9 million ounces of gold and 18.4 million ounces of silver.

Tandayama-Ameríca (TAM) Deposit

The TAM deposit, located approximately 6 kilometres northeast of the Apala deposit, further emphasizes the significant potential of the Cascabel Project. The TAM deposit outcrops at the surface, resulting in a low strip ratio, offering an excellent opportunity to provide additional mill feed for up to 7 years and the potential for an earlier start of metal production from an open-cut mining method.

The current evaluation of the TAM deposit is not at a PFS level and is, therefore, not included in the Cascabel Project economics presented above or in the PFS mine plan. The Company will begin the additional metallurgical testing, waste rock characteristic testing, geotechnical, hydrogeology, and detailed mine planning required to finalize planning efforts.

Table 4: Tandayama-Ameríca Mineral Resource Statement (Effective Date November 11, 2023)

PotentialMining MethodCut-off Grade (CuEq %)Resource CategoryTonnage (Mt)GradeContained Metal
Cu(%)Au(g/t)CuEq(%)Cu(Mt)Au(Moz)CuEq(Mt)
Open Pit0.16Indicated4920.220.200.351.13.11.7
Inferred450.180.180.310.10.30.1
Underground0.19Indicated2300.260.180.390.61.30.9
Inferred2010.210.210.360.41.40.7
Total Indicated7220.230.190.361.74.52.6
Total Inferred2470.210.210.350.51.60.9

Notes:

  1. Dr. Gilles Arseneau, P. Geo., Associate Consultant with SRK Consulting (Canada), is responsible for this Mineral Resource statement and is an “independent Qualified Person” as such term is defined in NI 43-101.
  2. Reasonable prospects of eventual economic extraction were assessed by:
    1. First presenting the mineralised material in the block model estimate to a conventional Lersch-Grossman open pit optimisation routine based on a cut-off grade of 0.16 % CuEq, and the cost and revenue assumptions listed below. Mineralised material inside the revenue factor one pit and above the cut-off grade were then reported in the “Open pit” section of the Mineral Resource statement.
    2. Subsequently, the remaining material was enclosed in a 3D wireframe shape that was constructed with adherence to a minimum mining unit with geometry appropriate for a block cave.
  3. The Cut-off grade for the underground shape was defined as the cut-off grade under a breakeven, eventual economic extraction criterion. The cut-off grade of 0.19% CuEq was calculated using (copper grade (%)) + (gold grade (g/t) x 0.683).
  4. All material within the underground shape was reported in the “Underground” section of the Mineral Resource statement, as block caving is a non-selective method, and all material extracted is treated as mill feed.
  5. The resulting shape contained planned internal and edge dilution that the QP considers appropriate.
  6. Cut-off/Cut-off inputs included:
    1. Metal prices of Cu at US$3.60/lb and Au at US$1,700/oz,
    2. Recoveries of Cu 93% and Au 83%,
    3. Costs including mining, processing and general and administration (G&A) and
    4. Off-site realization (TCRC), including royalties.
  7. The QP considers that the Mineral Resource has reasonable prospects for eventual economic extraction by open pit or an underground mass mining method such as block caving, as presented in the Mineral Resource statement.
  8. Mineral Resources are not Mineral Reserves and do not have demonstrated economic viability.
  9. Mineral Resources are reported inclusive of those Mineral Resources that were converted to Mineral Reserves.
  10. Numbers may not add up due to rounding.

Environmental, Social and Governance (“ESG”)

SolGold’s unwavering commitment to the highest social and environmental sustainability of our projects positions the Company as a leading advocate of responsible mining practices, particularly in Ecuador. As SolGold advances the Cascabel Project, we remain dedicated to the highest transparency standards and ESG principles.

In line with our corporate values, SolGold has established a comprehensive framework encapsulating the following key ESG criteria:

  • Environment: We are deeply committed to managing our carbon footprint and maximizing the use of renewable resources. We aim to minimize the ecological impact of our operations and contribute to a cleaner environment and biodiversity conservation.
  • Social: SolGold champions diversity and equitable wages within our workforce. We believe that fostering an inclusive workplace and ensuring fair compensation are fundamental to the well-being of our employees and the communities in which we operate.
  • Governance: SolGold is dedicated to adhering to the highest standards of governance practices. We stand for transparency, integrity, and accountability in all our operations, aligning ourselves with global best practices.

Over the past decade, we have forged robust community partnerships in Ecuador underpinned by extensive engagement efforts. These relationships underscore our commitment to responsible resource development and mutual prosperity.

In accordance with Ecuadorian law, an Environmental and Sustainability Impact Assessment (“EISA”) is required before obtaining authorization for construction and operations. SolGold is committed to ensuring the EISA is aligned with international standards. These standards encompass the Equator Principles, the International Finance Corporation (“IFC”) Performance Standards, Environmental, Health, and Safety Guidelines, as well as the Sustainable Development Goals (“SDG”), as well as other international standards that apply to the mining sector.

Furthermore, SolGold will undertake a comprehensive evaluation to manage and reduce the project’s overall carbon footprint. Our initiatives will encompass maximizing the utilization of renewable energy sources, exploring electrification of mobile and fixed equipment options, optimizing operational efficiency through process integration and other innovative strategies to minimize our environmental footprint.

Our commitment to ESG principles remains unwavering, and we are dedicated to ensuring that the Cascabel Project sets the benchmark for responsible and sustainable mining practices in Ecuador and beyond.

Sensitivity Analysis

A sensitivity analysis was performed on the Study’s after-tax NPV8% to examine the sensitivity to commodity prices, capital costs and operating costs.

Figure 1: After-tax NPV8% Sensitivity to Changes in Project Parameters
Figure 2: Metal Price and Discount Rate Sensitivity

Outstanding Opportunities and Upside Options

Opportunities for further optimization of the Cascabel Project that management will continue to investigate include:

  • Process plant design optimization following additional metallurgical test work focusing on improved gold recovery and other by-product recovery
  • Viability of the TAM open-cut mine to provide early mill feed
  • Continue to examine the impacts of utilizing tunnel boring technology to accelerate underground development
  • Further define the economic benefits of renewable energy, such as hydro and solar, on the project
  • Continue to examine the economic impact of the sub-level cave mining method on the upper portions of the Alpala deposit
  • Process plant design optimization following additional metallurgical test work

Next Steps

SolGold intends to release a NI 43-101 technical report on Cascabel within 45 days of this release (the “Technical Report”).

SolGold expects to commence the technical work to further advance and de-risk the Cascabel Project.

Qualified Persons

The Qualified Persons for the “Cascabel Project, Ecuador, NI 43-101 Technical Report on Pre-Feasibility Study”, which has an effective date of December 31, 2023, are detailed in the table below.

CategoryNameCompany
Mineral Resource EstimateDr. Gilles Arseneau, P. Geo.SRK Consulting (Canada) Inc.
Mineral Reserve Estimate and Mining (Underground)Jarek Jakubec, C.Eng., FIMMMSRK Consulting (Canada) Inc.
Mining (Open Pit Tandayama)Scott Wilson, CPG, SME Registered MemberResource Development Associates Inc.
Environment, Social, Tailings & WaterTim Rowles, BSc MSc FAusIMM CP RPEQKnight Piésold Pty Ltd
Metallurgy & Process PlantBen Adaszynski, P.EngSedgman Canada Ltd.
Surface InfrastructureRichard Boenke, P.EngJDS Energy and Mining Inc.
Financial Evaluation and MarketingCarl Kottmeier, P.EngSRK Consulting (Canada) Inc.

This announcement was approved for release by Scott Caldwell-Chief Executive Officer.

Certain information contained in the announcement would have been deemed inside information.

CONTACTS

Scott Caldwell
SolGold Plc (CEO)
Tel: +44 (0) 20 3807 6996

Tavistock (Media)
Jos Simson/Gareth Tredway
Tel: +44 (0) 20 7920 3150

ABOUT SOLGOLD

SolGold is a leading resources company focused on the discovery, definition, and development of world-class copper and gold deposits and continues to strive to deliver objectives efficiently and in the interests of shareholders.

The Company operates with transparency and in accordance with international best practices. SolGold is committed to delivering value to its shareholders while simultaneously providing economic and social benefits to impacted communities, fostering a healthy and safe workplace, and minimizing environmental impact.

SolGold is listed on the London Stock Exchange and Toronto Stock Exchange (LSE/TSX: SOLG).

See www.solgold.com.au for more information. Follow us on “X” @SolGold plc

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MiningIR hosts a variety of articles from a range of sources. Our content, while interesting, should not be considered as formal financial advice. Always seek professional guidance and consult a range of sources before investing.
James Hyland, MiningIR
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