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Majestic Gold Corp. (TSXV:MJS) announced that SRK Consulting China Ltd., completed and delivered a positive Preliminary Economic Assessment for the Song Jiagou Gold Project located in Shandong Province, People’s Republic of China.
Majestic Gold Corp. (TSXV:MJS) announced that SRK Consulting China Ltd., completed and delivered a positive Preliminary Economic Assessment for the Song Jiagou Gold Project located in Shandong Province, People’s Republic of China.
As quoted in the press release:
Scenario 1
In Scenario 1, only the Indicated mineral resource was used for the pit optimization and the relocation of the two villages near the mine was assumed not to be necessary. This scenario utilized the existing mill capacity and assumed additional capital expenditures of US$31.9 million for engineering, road construction, processing facilities upgrades, tailings, land leases and community relations.
The ultimate pit’s maximum length along the east-west axis is about 660 m, and the maximum width along the north-south axis is about 600 m. The highest elevation of benches is 140 m and the lowest is -125 m. The vertical depth of the open pit is about 270 m. At a bench height of 10 m, there will be a total of 27 benches within the pit.
Despite the limitations imposed by the current mining license, as of 31 January 2013, at a cut-off grade of 0.3g/t Au, the Song Jiagou Project contains the following remaining resources within the pit:
Resource
CategoryTonnes
(kt)Grade
(g/t)Gold
(Kg)Gold
(ounces)Indicated 17,200 1.35 23,200 746,600 Inferred* 10,128 1.25 Nil Nil * The Inferred resources report to waste in scenario 1. Scenario 1 involves the movement of 57,899 kt of waste (including the 10,128 kt of Inferred resources) and has a strip ratio of 3.37.
The mining recovery is 95% and the dilution is 5%. The grade of the dilution material is 0.12 g/t. The processing recovery depends on the feed grade. If the average feed grade is greater than 1.00 g/t Au, 95% of the Au can be recovered. The gold smelting recovery is 93%. The salable metal is estimated as 20,441 kg, or about 657 thousand ounces (“koz”).
According to the preliminary production schedule, Scenario 1 will have a life of mine (“LOM”) of seven years of stable production at a mill throughput of 7,400 tpd.
The pre-tax NPV at various discount rates are tabulated below
Discount Rate NPV
(RMB x 1,000,000)NPV
($US x 1,000,000)10% 2,998 477 7% 3,163 503 12% 2,899 461 Scenario 2
In Scenario 2, all of the mineral resources have been considered for the pit optimization, while the relocation of the two villages near the mine was not considered. This scenario involves expanding the mill capacity to 10,000 tpd and assumes additional capital expenditures of US$83.4 million for engineering, road construction, processing facilities upgrades, tailings, land leases and community relations.
The ultimate pit’s maximum length along the east-west axis is about 730 m, and the maximum width along the north-south axis is about 640 m. The highest elevation of benches is 140 m and the lowest is -145 m. The vertical depth of the open pit is about 290 m. At a bench height of 10 m, there will be a total of 29 benches within the pit.
As of 31 January 2013, at a cut-off grade of 0.30 g/t Au, the Song Jiagou Project contains the following remaining resources within the pit:
Resource
CategoryTonnes
(kt)Grade
(g/t)Gold
(Kg)Gold
(ounces)Indicated 19,076 1.32 25,200 809,600 Inferred 13,598 1.37 18,600 599,000 Scenario 2 involves the movement of 65,394 kt of waste and has a strip ratio of 2.00.
The mining recovery is 95% and the dilution is 5%. The grade of the dilution material is 0.12 g/t. The processing recovery depends on the feed grade. If the average feed grade is greater than 1.00 g/t Au, 95% of the Au can be recovered. The gold smelting recovery is 93%. The salable metal is estimated as 38,584 kg, or about 1,241 koz.
According to the preliminary production schedule, the LOM of Scenario 2 will be 11 years with a capacity of 10,000 tpd, including ten years of stable production and one year of ramp up.
The pre-tax NPV at various discount rates are tabulated below:
Discount Rate NPV
(RMB x 1,000,000)NPV
($US x 1,000,000)10% 4,882 777 7% 5,394 858 12% 4,584 730 Scenario 3
In Scenario 3, all of the mineral resources have been considered for the pit optimization, and the relocation of the two villages near the mine was also considered. This scenario involves expanding the mill capacity to 12,000 tpd and assumes additional capital expenditures of US$124.4 million for engineering, road construction, processing facilities upgrades, tailings, land leases and relocation and community relations.
The ultimate pit’s maximum length along the east-west axis is about 830 m, and the maximum width along the north-south axis is about 850 m. The highest elevation of benches is 140 m and the lowest is -190 m. The vertical depth of the open pit is about 330 m. At a bench height of 10 m, there will be a total of 33 benches within the pit.
As of 31 January 2013, at a cut-off grade of 0.30 g/t Au, the Song Jiagou Project contains the following remaining resources within the pit:
Resource
CategoryTonnes
(kt)Grade
(g/t)Gold
(Kg)Gold
(ounces)Indicated 26,284 1.35 35,500 1,140,800 Inferred 22,927 1.40 32,000 1,032,000 Scenario 3 involves the movement of 147,507 kt of waste and has a strip ratio of 3.00.
The mining recovery is 95% and the dilution is 5%. The grade of the dilution material is 0.12 g/t. The processing recovery depends on the feed grade. If the average feed grade is greater than 1.00 g/t Au, 95% of the Au can be recovered. The gold reclamation ratio of the concentrate is 93%. The salable metal is estimated as 59,632 kg, or about 1,917 koz.
According to the preliminary production schedule, Scenario 3 will have a LOM of 13 years with a capacity of 12,000 tpd, including twelve years of stable production and one year of ramp up.
The pre-tax NPV at various discount rates are tabulated below:
Discount Rate NPV
(RMB x 1,000,000)NPV
($US x 1,000,000)10% 6,637 1,056 7% 7,482 1,191 12% 6,164 981 Mineral resources that are not mineral reserves do not have demonstrated economic viability. The PEA is preliminary in nature and is based, in part, on inferred mineral resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves. There is no certainty that the preliminary assessment will be realized. All figures are rounded to reflect the relative accuracy of the estimate.
The Company cautions that the cash flow models and resulting NPVs were done on a pre-tax basis. After tax NPVs would be adjusted downward after considering depreciation and other allowable expenses and deduction of Chinese corporate taxes (currently estimated at 25%).
Sensitivity analysis shows that the changes of gold price will affect the NPV of the project most significantly; the following table summarizes the changes of NPVs at 10% discount rate against the change of gold prices.
NPVs Vs. Changes of Gold Price for Song Jiagou Project (US$ Million) -20% -10% Base Case 10% 20% Scenario US$1084/oz US$1220/oz US$1355/oz US$1490/oz US$1626/oz 1 334 406 477 549 620 2 544 661 777 893 1,009 3 729 893 1,056 1,220 1,384 Based on the estimates in the PEA, Majestic plans to move ahead with the continued development of the project, including more detailed engineering studies as well as applications for expanded mining licenses.
Click here to read the Majestic Gold Corp. (TSXV:MJS) press release
