dfs confirms net profit increase of 30%

DFS Confirms Net Profit Increase of 30% for Mutiny Gold’s Deflector Project
Highlights:
• Results of Definitive Feasibility Study (DFS) further confirms Deflector as a highly profitable low
cost, premium Gold-Copper Project
• Net profit increases by 30% to $223 million, compared to Bankable Feasibility Study (BFS)
• Forecast initial gold production increases by 20% to 397,000 oz Au and 480,000 oz Au Equivalent
(Au Eq)
• Capital costs largely unchanged
• C1 cash costs remain remarkably low at $618
Key DFS Outcomes:
• Estimated average Life of Mine Cash Operating Cost of $618 per oz Au Eq
• Initial Life of Mine of seven and a half (7½) years
• Current production forecast of 480,000 oz Au Eq; including, 397,000 oz Au, 18,147 tonnes of Cu
and 395,864 oz of Ag, compared to original BFS of 380,000 oz Au Eq
• Estimated Net Operating Cash Flow of $425 million
• Net Operating Cash Flow after debt (project finance) and taxes of $225 million
• EBITDA of $425 million
• Net Profit of $223 million
• NPV at 8% of $137 million
• Capital costs for plant construction of $71 million
• Capital costs for mine construction of $20 million
• IRR of 66%
Australian resources company, Mutiny Gold Ltd (ASX:MYG) (“Mutiny” or the “Company”), is pleased to advise that
an enhancement of its studies at its Deflector Copper-Gold Project (“Deflector Project”) in the Murchison Region of
Western Australia, from Bankable Feasibility Study (BFS) to Definitive Feasibility Study (DFS),has further elevated
the economics of the project
The main financial outcome of the DFS is a sizeable increase in forecast profit (up 30%), as a result of an major
increase in production, with no material increase in capital or operating costs, substantially improving the
economics at the Deflector Project and lowering project risk considerably.
Forecast profits in the DFS have increased by 30% to $223 million as compared to the BFS released in early July
2012 (see ASX announcement dated 3 July 2012).22 October 2012
Page 3
The First Stage of a Much Larger Operation
“We continue to upgrade both the resource and economics at Deflector, which is really confirming our belief that
this is a premium, highly profitable, gold-copper mine – and we will continue to work hard to improve on these
already impressive figures.
“The DFS forecasts that the high grade Mining Inventory and low operating costs are expected to generate strong
cash flows and economic outcomes. As we have previously stated, this gives the Company a strong base from
which to grow and the DFS is another example of Mutiny being well on target to achieve a much larger growth
picture,” Mr. Greeve said.
Project Expansion foreshadowed in near term
The current design of the plant was upgraded to enable the plant to be readily expandable as required at the end
of year two (2) of production.
Supplementing studies associated with the DFS show that the proposed underground infrastructure and orebody is
such to allow for a mining rate of 480,000 tonnes underground (as against the modeled 380,000 tonnes). The
analysis suggests he processing plant can be readily upgraded to process at this rate and increase the average
production rate to 105,000oz Au Eq. The forecast capital cost for this expansion, including adding additional mill
and float circuits, would be approximately $30 million.
“The expansion program is a preferred option in the near term,” Mr Greeve said.
“The metrics are that an additional $30 million in capital will slightly increase the risk profile for not sufficient gain
at this project start-up phase. However, the culmination of the success of Mutiny’s targeted expansion drill
program, along with an expectation of increasing gold prices, should see this option come into favor in the short
term.
“It is important to note that an approximately $3 million outlay on drilling in 2011/12 produced a 25% increase in
reserves and 30% increase in project profit forecasts.
“With the significant prospectivity available to us at Deflector, we can see that further drilling success along strike
and down dip will be the catalyst to activate this plan. Mutiny has a proven exploration success record at Deflector
and we are confident in our target range of 9 to 14 million tonnes at 4 to 8 g/t gold for 1.65 to 3 million ounces of
gold and 40,000 to 80,000 tonnes of copper from future drilling (Note 1). “
Project Background
The Deflector Gold-Copper deposit is Mutiny’s flagship project and is contained within the Company’s vast Gullewa
Tenements, located in the pro-mining South Murchison region of Western Australia, approximately 190km east of
the Regional City of Geraldton.
The Deflector Deposit was acquired by Mutiny in July 2010 from Canadian Company Red Hill Resources Ltd (then
ATW Gold Corp). Following successful initial drilling activities, Mutiny commissioned a Scoping Study determining
Deflector was a robust and profitable project. The Company then embarked on a series of drilling programs and
conducted extensive metallurgical test work to improve the Project metrics.
In August/September 2011 world class gold investment bank Credit Suisse completed project reviews with the
assistance of Snowdens, which concluded the Project had no fatal flaws and supported the findings of the Scoping
Study. Credit Suisse then advanced Mutiny an $11 million facility to enable the Company to complete the
acquisition of the Gullewa Gold Tenements and to fund the completion of the Bankable Feasibility Study, which
was released in July 2012.22 October 2012
Page 4
In August 2012 Mutiny released a new resource showing a substantial increase from the previous model based
upon the drill programs conducted at Deflector and completed in March 2012.
In October 2012 the Company released a reserve statement (Table 10) and Life of Mine Inventory (Table 9)
completed by Entech defined from the August 2012 Reserve.
The feasibility results released today are based on these new reserves and life of mine inventory.
The study has confirmed the Project as highly profitable with significant upside based on technical information
generated by a number of in-house and external industry consultants (refer Table 2).
The DFS defines an operation initially based on a 2 year open pit mining operation and a five and a half (5½) year
underground mining operation, along with milling and processing on site to provide gravity gold and gold copper
concentrate. The underground mining method is Long Hole Open Stoping from a single decline. The Open Pit
mining rate will be 480,000 tonnes per annum (2 years) with underground operating at 380,000 tonnes per annum
(5½ years); producing 480,000 oz of Au Eq over an initial 7½ years Life of Mine.
Capital Costs
The capital cost estimate provided in Table 3 includes all on-site components of the project, including those for the
construction of processing plant, accommodation village and construction of the mine.
Development costs for the underground mine are shown separately at $29 million, however, they are funded out
of Operating Cash Flow over the initial seven and a half (7½) year Life of Mine (Table 7) and not part of the
required start-up capital.
Operating Costs
Operating costs for the Deflector Gold Copper Project (Table 4) have been developed using indicative pricing
received from prospective mining contractors undertaking the open pit and underground mining operations and
with these cost assumptions received and modeled by Mutiny’s mining consultants (Table 2). Processing of mined
material is by GR Engineering Services and Mutiny and includes transportation costs related to the refining of
copper gold concentrate.
Financial Analysis
The company considers the DFS shows the Deflector Gold-Copper Project to be a premium project due to the low
cost of production ($618 oz Au Eq) and the stable geo-political Western Australian location.
The key financial outcomes (refer Table 1) include net operating cash flow of $425 million, IRR of 66%, a forecast
net profit of $223 million and an NPV at 8% of $137 million.
This is a compelling financial forecast of a premium gold-copper project.
Geology and Mineral Resources
The Deflector mineralisation is hosted by a series of northeast trending sulphidic quartz lodes that cut basalt and a
minor sedimentary unit within the Gullewa Greenstone Belt. Three main steeply dipping lodes sets are present:
the West Lode, the Central Lode, and the Contact Lodes. The lodes contain moderately plunging shoots of highgrade gold and gold-silver-copper mineralisation. Three sulphide oxidation domains have been recognised within
the lode mineralisation: oxide, transition, and primary. The oxide mineralisation is characterised by the presence
of iron oxides and the copper minerals malachite, azurite, chrysocolla, cuprite, and native copper; the transition
zone by chalcocite, bornite, covellite, chalcopyrite, and pyrite; and the primary zone by chalcopyrite and pyrite.22 October 2012
Page 5
Significant mineralisation has been intersected within the West and Central Lodes over a distance of 1000m, which
is also the limit of systematic drilling within the mineralised corridor. The mineralisation is open along strike in
both directions. Reported resources within the lodes extend to a maximum depth of 380m below surface, the limit
of present drilling. The lodes are open at depth along their entire known lengths.
The Deflector Mineral Resources are summarised in Table 8.
Mining Method and Ore Reserves
Mutiny will mine the Deflector Ore Body for an initial 2 years open pit and initial five and a half years (5½) years
underground.
The mining method is the same as utilised in the BFS.
The open pit will be mined using selective drill and blast methods utilising 100 tonne hydraulic excavators for
overburden and ore removal and 100 tonne trucks for ore and waste haulage. Ore will be drilled, blasted and
excavated on 5m benches.
The mining method applied to the underground is conventional jumbo development and long hole open stoping.
Stoping will follow a top-down sequence, commencing at the extremities of each level and retreating to the level
of access. Rib pillars will remain between adjacent stopes to maintain mine stability. No backfilling of the stope
voids is planned, however there may be opportunities in parts of the mine to dispose of waste rock in stope voids
which would reduce the truck haulage requirements.
This methodology reduces development metres and provides quick access to ore, requiring minimal capital to be
spent upfront whilst maximising recovery of the ore body.
Ore Reserves
The Life of Mine Inventory (refer Table 9) includes Ore Reserves and Inferred Resources that have been evaluated
using all mining modifying factors.
The surface mining reserve has been optimised by Entech Pty Ltd using Minesite commercial software to generate
an optimal pit shell at Deflector. The ore reserve is that part of the Mineral Resource which can be economically
mined. Dilution of the Mineral Resource and allowance for ore loss was included in the Ore Reserve estimates. The
ore reserves are based upon JORC code standards of reporting. Only measured and indicated resources are used
and the reserves are summarised in Table 10.22 October 2012
Page 6
Mineral Processing
The plant is comprised of conventional jaw and cone crushers, primary ball mill, gravity recovery centrifuges,
flotation circuits, concentrate thickener and filter followed by tailings storage; all at a design capacity of 480 ktpa
for oxide and transition ore and 380 ktpa for the primary ore.
- Crushing Ore and Storage: ore extracted from the mine will be trucked to the surface and delivered to the
ROM pad where it will be stockpiled. It will then be fed through a three stage crushing process. The
Primary Crusher will be a single toggle jaw crusher with the Secondary and Tertiary Crushers being cone
crushers.
- Grinding: crushed ore will be ground using a 3.8m diameter, 5.2m long primary ball mill with 1600kw
motor.
- Gravity Recovery: gravity recovery will be used to recover the gravity gold via two centrifugal
concentrators.
- Rougher Flotation: comprises a bank of eight forced air, mechanically agitated cells (8m
3
each).
- Cleaner Flotation: comprises of a bank of five forced air, mechanically agitated cells.
- Concentrate Dewatering: concentrate from the cleaner circuit is pumped to the 5m diameter high rate
concentrate thickener, followed by a concentrate filter to produce a cake for bagging and transport.
- Tailings Storage: an existing tailing storage facility will be expanded for the project, with adequate
capacity to store 7 years of process tailings.
- Total Recovery: of gold is 93% including gravity floatation (refer Table 11).
Metals Price and Hedge
Mutiny carefully selected the metals prices used in this report based on forecasts by leading banks and advice from
industry consultants.
Table 12 shows the London Metals Exchange Forward Gold Prices for the next five (5) years with prices ranging
from A$1768 to A$2035 and the average gold price being A$1897 per oz Au - which confirms Mutiny’s Gold price
selection of A$1750 as conservative. In addition, Mutiny already has 50,000 oz Au of gold hedged at an average
price of A$1847.
Sensitivity Analysis
Mutiny has supplied four sensitivity graphs (Chart 4) showing the effects on Net Cash Flow and NPV due to
possible changes, sales prices of gold and variations in operating costs.
However, if a reviewer wishes to take a view that Global Deflation will lead to a reduction in Gold Prices then the
key economic principle must also be applied to costs. For example, a key cost in production is diesel. The price of
diesel has fallen over 8% since the BFS and 35% since the price parameters where set and is predicted by the
suppliers to fall another 10 to 15% this year. This would equate to a plus 5% reduction in bottom line operating
costs.
Mutiny advises that based on the sensitivity analysis this project is economically stable as illustrated in the
following Tables, Charts and Figures