|November 23, 2011|
Banks Island Gold Ltd. Reports NPV(8%) of $26.4M and IRR of 414% from PEA
November 23, 2011 - Vancouver, British Columbia. Banks Island Gold Ltd. (the "Company") (TSX-V:BOZ) announces results of a Preliminary Economic Assessment (PEA) for a small scale underground mining operation on Banks Island.
The 43-101 compliant PEA study, dated November 23rd 2011, was prepared by Mr. Robert Baldwin, P.Eng, an independent consultant. The study considers a 75,000 tonne per year operation based on the current Inferred Mineral Resource at the Yellow Giant Gold Property. Underground mining methods are proposed with the utilization of a Dense Media Plant for the production of a gravity gold/sulphide concentrate for shipment to an offsite facility for further processing.
Pretax Financial Summary
The base case scenario, using the 2 year rolling average price of gold of $CDN 1,360 per troy oz, resulted in a pretax NPV(8%) of $CDN 26.4M, an IRR of 414%, and a payback of initial capital of 1.2 months.
A scenario using the current price of gold of $CDN 1,700 per troy oz was also considered. The financial summary for the base case and current price scenario is presented Table 1.
Mr. Mossman, President of the Company stated; "Our primary focus is on the discovery of a major gold deposit on Banks Island. The results of the Preliminary Economic Assessment indicate that a concurrent and lucrative small scale "pilot" mining operation may be possible. Such an operation would increase the chances of success in our primary exploration efforts by allowing a permanent presence on Banks Island, advancing the property in terms of infrastructure and knowledge, and generating cash flow to fund large scale exploration activities."
Life of Mine Parameters
Key parameters used in the PEA study are displayed in Table 2.
Mr. Baldwin updated the current Inferred Resource, which was disclosed in the Technical Report on the Banks Island Mineral Property on September 1st 2011, to include a silver resource for the Yellow Giant zones and incorporated three of the eight diamond drill holes completed by Banks Island Gold in 2011. The current Inferred Resource is displayed in Table 3 and is effective as of November 23rd 2011.
Based on this current resource, a diluted minable resource was calculated for the purposes of the PEA study. The Bob and Tel Zones were broken into distinct areas for the purposes of mine planning. The estimated diluted minable resource is presented in Table 4.
Underground mining methods proposed at Yellow Giant are mechanized sub-level longhole/shrinkage and longhole retreat. Three separate mineral zones, Tel, Discovery, and Bob, at Yellow Giant are proposed to be mined sequentially with the highest grade areas mined preferentially. Based on the current mineral resource estimate, mine production is planned to be 75,000 tonnes per year using contracted mining crews. Following a 3 month pre-production period, the mines are projected to have a combined mine life of 25 months.
Heavy Liquid Separation Testing - November 2011
A single sample of approximately 18 kg prepared from quarter sawn drill core from the 2011 drilling program at the Tel zone was sent to SGS Lakefield site for testing with the purpose of evaluating the amenability of the sample to pre-concentration using Dense Media Separation (DMS).
From the completed testwork on the sample provided to SGS Lakefield, from the combination of the 2.9 sink and -20 mesh fines, a mass rejection of 65.5% was achieved with a crush size of -1/4" and allowed recovery of 90.3% Au, 71.6% Ag, and 95.2% Sulphur. Combining the 2.7 SG and -10 mesh fines reduced the mass rejection to 35.8% and increased recovery to 97.0% Au, 85.4% Ag and 99.1% for Sulphur.
Based on recent Heavy Liquid Separation testing and historic metallurgical testing and mineralogical studies, gold at Yellow Giant is strongly associated with sulphide mineralization. Through the use of Dense Media Separation (DMS) a gold/sulphide concentrate would be produced for shipment offsite to a custom mill. This pre-concentration method would eliminate the high capital cost of a conventional onsite concentrator and allow the use of highly efficient mechanized underground mining methods. All sulphides would be shipped offsite, with a benign coarse sized limestone material produced as rejects. Conventional tailings would not be produced or stored on Banks Island allowing a low environmental impact to be achieved.
Concentrate from the Yellow Giant Gold Property is proposed to be marketed to one of the many gold processing facilities in Nevada. Custom mills in Nevada are motivated to accept ore from outside sources in order to generate revenue from under-utilized plants or, in certain cases, to provide synergies with their own process. The PEA study contemplates shipping concentrate bags from Banks Island to Prince Rupert using 1,000 tonne barges then to Nevada via rail.
Net Revenue per Tonne
The PEA study evaluated and estimated values for process recovery, concentrate shipping and treatment charges, custom milling fees, and royalties. At the base case gold price of $CDN 1,360/oz, the net revenue per tonne mined is estimated at $491CDN/tonne. Details of the net revenue per tonne calculation are displayed in Table 5.
Based on the mine design and schedule, an estimate of operating costs was derived for the PEA study. Costs are based on productivities, labour and material costs obtained from supplier and contractor quotes, cost data from other mines, first principle calculations, and experience.
A summary of operating cost estimates for the Yellow Giant Gold Project are displayed in Table 6. Mine development accounts for 50% of all operating costs and is the most significant operating cost. A cost of $4,900 per meter is assumed for lateral development.
The PEA study estimated capital expenses required to prepare the mines for operations and for equipment that will not be provided by contractors. An initial capital requirement of $6.8M is required for the Yellow Giant Gold Project and sustaining capital requirements are estimated at $2.3M. Based on the production schedule and expected operating costs, a working capital requirement of $1.2M is anticipated which will cover the operating costs for one month of production.
Initial capital expenditures occur in a three month pre-production period. The estimated initial capital cost during this period is $6,800,000 inclusive of cost contingencies. Details of initial capital costs are presented in Table 7.
Capital expenditures that are expected to occur after production has commenced are termed "Sustaining Capital Costs". The estimated sustaining capital costs are $2,300,000 inclusive of cost contingencies. Details of sustaining capital costs are presented in Table 8.
Environmental and Permitting
The proposed mining operation is anticipated to have a low environmental impact. The dense media process requires no reagents and subsequently no sulphide tailings will be produced. Thus, no tailings storage facilities will be required onsite. The use of underground mining methods will create little surface disturbance.
Production in excess of 75,000 tonnes per year is the threshold that would typically trigger a required environmental review and approval under the British Columbia Environmental Assessment Act. It is not expected that the project will trigger a BC Environmental Assessment.
A Mines Act Permit, from the BC Ministry of Mines, and an Environmental Management Permit, from the BC Ministry of Environment is required to commence production. Baseline studies to support these permit application are currently being undertaken by Banks Island Gold.
Mine Life and Exploration Potential
There is potential for expansion of minable resources at Yellow Giant with a resulting increase in the mine life. Obvious targets for expansion of mineral resources are at the Tel, Bob, Kim, and Discovery Zones. Historical drilling results suggest that mineralization at Tel may continue past the current minable resource at depth and mineralized intercepts exist outside the current resource at Bob and Discovery. With a modest drill program a resource calculation at the Kim Zone may be possible.
Mr. Robert Baldwin, P.Eng is the qualified person who reviewed and approved the contents of this news release. The 43-101 Technical Report will be posted on SEDAR and will be available on the Company's website within 45 days.
The Company is a junior mining resource exploration company focused on exploring for and developing economically viable mineral resources. The Company's mineral property is located in British Columbia. For more information, please refer to the Company's website at www.banksislandgold.com
ON BEHALF OF THE BOARD OF DIRECTORS
"Benjamin W. Mossman"
Benjamin W. Mossman, P.Eng
President, Director, & Chief Executive Officer
For further information, please contact:
Benjamin W. Mossman: 604-245-0066
The TSX Venture Exchange has not reviewed and does not accept responsibility for the accuracy or adequacy of this release. Neither the TSX Venture Exchange nor its Regulation Service Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
This press release contains forward-looking statements. All statements, other than statements of historical fact, constitute "forward-looking statements" and include any information that addresses activities, events or developments that the Company believes, expects or anticipates will or may occur in the future including the Company's strategy, plans or future financial or operating performance and other statements that express management's expectations or estimates of future performance.
Forward-looking statements are generally identifiable by the use of the words "may", "will", "should", "continue", "expect", "anticipate", "estimate", "believe", "intend", "plan" or "project" or the negative of these words or other variations on these words or comparable terminology. These statements, however, are subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of the Company to be materially different from those expressed, implied by or projected in the forward-looking information or statements. Important factors that could cause actual results to differ from these forward-looking statements include but are not limited to: risks related to the exploration and potential development of the Company's project, the actual results of current exploration activities, conclusions of economic evaluations, changes in project parameters as plans continue to be refined, future prices of gold, as well as those factors discussed in the sections relating to risk factors of the Company prospectus dated September 30, 2011 filed on SEDAR.
There can be no assurance that any forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, the reader should not place any undue reliance on forward-looking information or statements. Except as required by law, the Company does not intend to revise or update these forward-looking statements after the date of this document or to revise them to reflect the occurrence of future unanticipated events.
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