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BFS Confirms Mutiny’s Deflector as a Premium Gold Copper Project
Highlights:
• Highly profitable Feasibility Study confirms Deflector as a low cost, premium Gold Copper Project
Key Outcomes:
• Estimated average Life of Mine Cash Operating Cost of $617 per oz Au Equivalent (Eq)
• Initial Life of Mine of 7 years
• Initial production forecast of 382,000 oz Au Eq including, 314,475 oz Au, 14,432 tonnes of Cu and
344,604 oz of Ag
• Estimated Net Operating Cash Flow of $342 million
• Net Operating Cash Flow after debt (project finance) and taxes of $171 million
• EBITDA of $323 million
• Net Profit of $171 million
• NPV at 8% of $103 million
• Capital costs for plant construction of $66 million
• Capital Costs for mine construction of $21 million
• IRR of 43%
NB: All currency is denominated in Australian Dollars in this announcement
Australian resources company, Mutiny Gold Ltd (ASX:MYG) (“Mutiny” or the “Company”), is pleased to advise that
the completed Bankable Feasibility Study (BFS) on its Deflector Deposit in Western Australia has confirmed it to be
a low cost, premium gold copper project.
The key financial outcomes shown on Table 1 confirm the technical and economic viability of the Deflector Gold
Copper Project, paving the way for the development of the project at an initial production rate of 55,000 oz Au Eq
(annual range 44,600 (1
st
year) to 61,612 oz Au Eq) with a forecast low average operating cash cost of $617 per oz
Au Eq and initial mine life of 7 years.
In financial terms, the feasibility shows Deflector to be a highly profitable, low cost, high gold grade project with
significant gold recoveries, robust mine inventory and a vast scope to increase resources, profit and mine life.
The project generates an initial net operating Cash Flow of $341 million (m) from which Mutiny can readily service
the Company’s Project Finance Facility (debt plus interest), government charges and taxes. The feasibility forecasts
EBITDA of $323m (annual average $46m) and a net profit (after interest, taxes and depreciation) of $171m
(annualised return of $25m). 3
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July 2012
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The feasibility defines an operation initially based on a 2 year open pit mining operation and a 5 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 320,000 tonnes per annum (5 years)
producing 382,000 oz of Au Eq over an initial 7 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 included in mining operation costs as they are funded out of
Operating Cash Flow over the initial 7 year Life of Mine (Table 7).
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 to refining of copper gold
concentrate.
Financial Analysis
The company considers the BFS shows the Deflector Gold Copper Project to be a premium project due to the low
cost of production ($617 oz Au Eq) and the stable geo-political Western Australian location.
The key financial outcomes (refer Table 1) include net operating cash flow of $342m, IRR of 43%, a forecast net
profit of $171m and an NPV at 8% of $103m.
Considering this is only an initial position given there is a pending resource upgrade which is expected to enable a
meaningful increase in production and bottom line profit, the economics of the Deflector Gold Copper Project are
compelling.
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.
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. 3
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July 2012
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The Deflector Mineral Resources are summarised in Table 8. They were estimated prior to the receipt of recent
drill-hole assays, which have been previously announced and which are displayed as pierce points on the long
sections on Figures 1 and 2. These later results are presently being incorporated in a revised resource estimate
that can be expected to increase the size of the resources available for both open pit and underground mining.
Mining Method and Ore Reserves
Mutiny will mine the Deflector Ore Body for an initial 2 years open pit and initial 5 years underground.
The open pit will be mined using selective drill and blast methods utilizing 100 tonne hydraulic excavators for
overburden and ore removal and 55 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 meters 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 Xstract Mining Consultants using Minesite commercial software
to generate an optimal pit shell on Deflector. The open pit Ore Reserve is that part of the Mineral Resource which
can be economically mined by open pit mining methods. Dilution of the Mineral Resource and allowance for ore
loss was included in the Ore Reserve estimate. The open pit ore reserves are based upon JORC code standards of
reporting. Only measured and indicated resources are used and are summarised in Table 11.
Underground Reserves
The underground mining reserve has been optimised by mining consultants Entech Pty Ltd using Mine 2-4D
commercial software to generate the optimised development and stope shapes for Deflector.
The underground Ore Reserve is that part of the Mineral Resource which can be economically mined by
underground mining methods. Dilution of the Mineral Resource and allowance for ore loss was included in the ore
reserve estimate.3
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July 2012
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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 320 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 1300kw
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 12).
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 13 shows the London Metals Exchange Forward Gold Prices for the next 5 years with the average gold price
being $1789 per oz Au which confirms Mutiny’s Gold price selection of $1700. In addition, Mutiny already has
50,000 oz Au of gold hedged at an average price of $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 15% since the study 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.
In addition, as Mutiny adds ounces and increases production rates, assuming a positive Resource and Reserve
upgrade, production costs per ounce are anticipated to fall.
Mutiny advises that based on the sensitivity analy