Artemis Announces Feasibility Study for Blackwater Project
Artemis Announces Feasibility Study for Blackwater Project
- INDUSTRY LEADING AFTER-TAX NPV5% OF C$2.15 BILLION
- COMPELLING AFTER-TAX BASE CASE IRR OF 32% FOR A WORLD CLASS, LARGE SCALE, ADVANCED DEVELOPMENT ASSET IN A TIER-ONE MINING JURISDICTION
- LEVERED AFTER-TAX IRR OF 43%
- YEARS 1-5: AVERAGE ANNUAL GOLD PRODUCTION UP 29% FROM THE 2020 PFS TO 321,000 OUNCES AT AISC OF US$578/oz, AVERAGE GRADE OF 1.62 g/t Au AND STRIP RATIO OF 1.7:1
- YEARS 1-10: AVERAGE ANNUAL GOLD PRODUCTION OF 351,000 OUNCES AT AISC OF US$643/oz
- LOM: AVERAGE ANNUAL GOLD PRODUCTION OF 339,000 OUNCES AT AISC OF US$672/oz
- AFTER-TAX PAYBACK PERIOD OF 2 YEARS
- DE-RISKS CAPEX AND OPEX ESTIMATES & UPDATES FOR CURRENT PRICES
- A 9% INCREASE IN INITIAL DEVELOPMENT CAPITAL TO C$645 MILLION ACHIEVES A 9% INCREASE IN INITIAL ANNUAL THROUGHPUT, COSTING UPDATED REFLECTS LARGER CRUSHING CIRCUIT AND INVESTMENTS IN ESG
(Vancouver, September 13, 2021) Artemis Gold Inc. (“Artemis” or the “Company”) is pleased to announce the results of its 2021 Feasibility Study (“FS” or the “Study”) for the staged development of the 100% owned Blackwater Gold Project in central British Columbia (“Blackwater” or the “Project”).
The results of the Study supersede the 2020 Prefeasibility Study (“2020 PFS”) dated August 26, 2020 entitled “Blackwater Gold Project British Columbia NI 43-101 Technical Report on Pre-Feasibility Study” filed on SEDAR by Artemis on September 18, 2020. The results of the FS reflect several positive changes in the approach to the planned development of the Blackwater Project compared with the 2020 PFS. The scope changes incorporated in the Study include:
- Higher initial throughput: Phase 1 throughput has been expanded 9% to 6 million tonnes per annum (“Mtpa”) with a larger crushing circuit, providing greater operational throughput upside potential in the early years, up from 5.5Mtpa in the 2020 PFS.
- Streamlined Phase 2 & 3 Expansions: a greatly reduced footprint of the FS Stage 1 facility, and the installation of a higher-capacity gyratory crusher in the proposed Stage 1 development. Importantly this allows for a streamlined and construction-ready approach to the Phase 2 Expansion throughput of 12Mtpa. The increase in up-front investment of C$53 million reduces expansion capital to:
- C$347 million (a reduction of C$79 million from C$426 million in the 2020 PFS) for the Phase 2 expansion to 12Mtpa
- C$374 million (a reduction of C$24 million from C$398 million in the 2020 PFS) for the Phase 3 expansion to 20Mtpa
- Net impact is a slight increase in total life of mine (“LOM”) capital to fund the 3 Phases of development to C$1,417 million, up from C$1,415 million in the 2020 PFS.
- Accelerated Phase 2 & Phase 3 expansions: Phase 2 expansion begins with an expansion to 9Mtpa in year 5 (up from 5.5Mtpa in year 5 in the 2020 PFS), ramping up to 12Mtpa in year 6. Phase 3 expansion begins with an expansion to 15Mtpa in year 10 (up from 12Mtpa in year 10 in the 2020 PFS), ramping up to 20Mtpa in year 11;
- An Environment, Social Governance (“ESG”) commitment in the Stage 1 development phase: an initial investment to replace diesel and propane-powered components within the process plant facility reduces the carbon footprint of the Project;
- Phase 3 throughput of 20Mtpa is supported by two mineral processing trains, reduced from three in the 2020 PFS: results in lower overall maintenance and labour costs, with improved economies of scale at higher throughput rates;
- Estimate accuracy increased with reduced risk: the FS costing accuracy has improved to +15% /-10% (from +25%/-10% in the 2020 PFS). Engineering undertaken in connection with the guaranteed maximum price (“GMP”) memorandum of understanding (“MOU”) on each of the process plant and the power transmission line have de-risked these components since the 2020 PFS. The achievement of negotiated fixed-price EPC contracts for these components of capital cost (targeted for Q4 2021/Q1 2022) will also mitigate the potential for capital cost and schedule overruns on up to approximately 50% of the initial development capital estimate;
- Compelling economics even after reflecting current inflationary pressures, timelines and additional management driven environmental investments: the initial development capital has increased 9% to C$645 million, up from C$592 million, which provides a 9% increase in Phase 1 annual throughput, with current pricing, and environmental investments. The net result is an after-tax net present value at a 5% discount rate (“NPV5%“) of C$2.15 billion, an after-tax Internal rate of return (“IRR”) of 32%, and an after-tax payback period of 2.3 years, essentially in line with the 2020 PFS.
Key Economic Outputs of the Study
- Base case after-tax NPV5% of C$2.15 billion reflecting current market consensus long term forecast gold price of US$1,600/oz and 0.79 USD/CAD exchange rate (C$2,025/oz, effectively the same C$ gold price as the 2020 PFS of C$2,028/oz) increasing to C$2.76 billion at a US$1,800/oz gold price;
- Base case after-tax IRR of 32%, approximating the 2020 PFS after-tax IRR of 35% after incorporating higher initial development capital and ESG investments. Levered1 after-tax IRR of 43%;
- Initial development capital cost of C$645 million to develop a 6Mtpa Phase 1 open pit mining and processing operation (up from a 5.5Mtpa operation in the 2020 PFS);
- Exceptional after-tax payback period on initial capital cost of 2.3 years;
- Optimized mine plan increases average grade to 1.62 g/t Au over the first five years of production, up from 1.57 g/t Au in the 2020 PFS, combined with average throughput of 6.6Mtpa increases average annual gold production by 29% (compared with the 2020 PFS) to 321,000 ounces of gold at an all-in sustaining cash cost (“AISC2”) of C$732/oz generating annual free cash flow (“FCF”) of C$301 million.
Annual Gold production and AISC over the LOM is presented in Table 1.
Table 1: Average Annual Gold Production, AISC and FCF For the Blackwater Gold Project
||Average Annual Gold Production
||Average Annual FCF3
A summary of the technical and financial metrics of the Study in comparison with the 2020 PFS is provided in the Table 2.
Table 2 – Key Results of the FS (including the New Gold Inc. Stream, defined below)
*Operational strip ratio is calculated as total waste mined divided by ore mined
**Please refer to non-IFRS measures notice at the end of this news release for definition of AISC.
***Free cash flow is calculated as project operating cash flow minus sustaining/closure capital and taxes
~Levered case assumptions and parameters are disclosed below under “Economic Results”. The Leveraged Case reflects the impact of debt. Financing of the Project is not a measure of the economic viability and technical feasibility of the Project, but a measure of the Company’s ability to secure debt financing for the Project.
The estimate of life of mine sustaining capital in the FS has increased by C$194 million to C$831 million compared with the C$637 million estimate of sustaining capital in the 2020 PFS. The increase in sustaining capital is a reflection of more accurate cost estimates related predominantly to the continuous expansion of the tailings storage facility (“TSF”) and water management systems as well as the cost of the replacement mining fleet over the LOM. The increase in sustaining capital over the life of mine is the larger factor that contributed to an increase in the AISC to C$850/oz in the FS, up from C$811/oz in the 2020 PFS.
The base case economics are calculated on an unlevered basis, based on a market consensus long term gold price of US$1,600/oz, a silver price of US$21.33/oz and a foreign exchange rate of CAD$1 = USD$0.79. The economics include the effect of the Blackwater gold stream (the “Stream”), which was issued to finance part of the acquisition cost of Blackwater by Artemis from New Gold Inc. (“New Gold”) (refer to news release dated August 24, 2020). Under the terms of the Stream, New Gold will purchase 8.0% of the refined gold produced from the Project. Once 279,908 ounces of refined gold have been delivered to New Gold, the gold stream will reduce to 4.0%. New Gold will make payments for the gold purchased equal to 35% of the US dollar gold price quoted by the London Bullion Market Association two days prior to delivery.
The figures and tables below show the sensitivity of after-tax NPV and IRR to changes in the US dollar gold price and the CAD/USD exchange rate.
Figure 1 – Sensitivity of Base Case After-Tax NPV5% (C$ Billions) to Changes in US$ Gold Price Holding the USD/CAD Exchange Rate Fixed at 0.79 (base case highlighted)
Read More: https://www.artemisgoldinc.com/news/2021/artemis-announces-feasibility-study-for-blackwater-project