Endeavour’s Agbaou Gold Project Enters Construction With Planned 103,000 ozs/yr at $635/oz Cash Cost
NEWS–Endeavour Mining Corporation (“Endeavour”) (TSX:EDV, ASX:EVR, OTCQX:EDVMF) announces its 85% owned Agbaou Gold Project in Côte d’Ivoire has entered the construction phase of its development. An updated NI 43-101 compliant technical report (the “SENET Report”) has also been completed that incorporates updated mineral resources & reserves, project optimizations and updated capital & operating costs.
(All amounts in US dollars unless otherwise indicated)
Highlights from the SENET Report, on a 100% basis, include:
Measured and Indicated resource of 1.157 million ounces comprised of 14.970 million tonnes at 2.43 g/t (at 0.5 g/t cut-off). See Table 1.
Proven and Probable reserves of 0.905 million ounces comprised of 11.075 million tonnes at 2.54 g/t. See Table 4.
Open pit mine and gold plant designed to treat 1.6 Mtpa saprolite ore or 1.34 Mtpa bedrock ore. The plant design incorporates a conventional gravity and CIL circuit for a recovery rate of 92.5%.
Average gold production of 103,000 ounces per year over an 8 year mine life.
A construction capital cost of $121 million, plus pre-production mining costs, working capital and contingencies of $38 million for a total upfront funding requirement of $159 million.
Forecast life of mine direct cash cost of $635 per ounce, using contractor mining.
The project yields, on an after-tax basis:
Neil Woodyer, CEO, stated
“Our Agbaou Gold Project is a robust project with attractive economics. By our assessment, Agbaou stands in the top quartile of all potential new gold projects being developed on a global basis. Our engineering optimizations include a 12% increase in plant capacity when processing bedrock ore and an updated mineral resource estimate which increased the proven and probable reserve grade by 21% to 2.5 g/t and contained ounces to 905,000. These improvements have allowed us to increase the average annual gold production by 40% to 103,000 ounces from 73,000 ounces. With our financial strength and operating cash flow we are able to immediately start construction.
We maintain regular contact with the authorities in Côte d’Ivoire in relation to the issuance of our mining permit. Pending receipt of the permit we have received a letter from the Ministry of Mines, Petroleum and Energy encouraging us to continue our development efforts for Agbaou. We do not require any other material permits for construction or production.
Having selected Lycopodium Minerals Pty Ltd as our EPCM contractor and commenced purchasing long-lead order items, Agbaou is on schedule to achieve gold production during Q1 2014. This positions us to produce 280,000 ozs of gold per year, including our two operating mines – Nzema and Youga – which are currently producing at a rate of 180,000 ozs per year.
We have maintained a high level of exploration activity at Agbaou during 2012 with the objective of further increasing the resources and reserves. The 2012 exploration program is $6 million and with eight targets currently being explored, we believe Agbaou has significant upside potential beyond what is included in the technical report.”
Management Conference Calls
Endeavour’s Management will host two conference calls to discuss the results of the SENET Report and the Agbaou mine development plan at times convenient for the Australian and North American time zones. Both conference calls will feature Neil Woodyer, Chief Executive Officer; Mark Connelly, Chief Operating Officer; and David Laing, Senior Vice President – Technical Services. Details for the conference calls can be found at the end of this news release.
Updated Technical Report
In the fall of 2011, Endeavour commissioned a group of independent international consultants to optimize several aspects of the Agbaou Gold Project Feasibility Study conducted in September 2009, which included the following entities:
- SRK Consulting (South Africa) – Mineral Resource, Mineral Reserve and Mining;
SENET (South Africa) – Process Plant, Infrastructure, Economic Evaluation, and overall study management;
- Knight Piésold (South Africa) – Tailings Management Facility
Endeavour will file the “SENET Report on the Agbaou Gold Project summarizing the geology, mineral resources and reserves estimate, mining and mine production schedule, metallurgy, process plant design, infrastructure design, updated capital and operating cost estimates, and financial evaluation. The SENET Report will be available on www.sedar.com within 45 days of the date of this news release.
Award of EPCM Contract
Endeavour has selected Lycopodium Minerals Pty Ltd as the Engineering, Procurement and Construction Manager (“EPCM”) for the Agbaou Gold Project processing plant and certain other facilities. Lycopodium will work closely with Endeavour’s engineering team, many of whom worked together on the successful construction of the Nzema Gold Mine processing plant.
Lycopodium has a highly experienced team that has delivered 22 projects in West Africa over 17 years and a strong database of designs for plants and infrastructure similar to those planned for Agbaou.
Endeavour ran a competitive EPCM tender process and all EPCM tender submissions evaluated by Endeavour proposed experienced teams and the short-listed tenders all had indicative capital estimates close to the amounts estimated in the SENET Report. Endeavour selected Lycopodium on the basis of their reputation, excellent West African track record, and our recent experience working together at the Nzema Gold Mine which was commissioned in 2011.
Agbaou Mineral Resource
The updated mineral resource estimate and additional exploration results for the Agbaou Gold Project now includes 36% of the resource classified as Measured and an overall increase of 14% to the Measured and Indicated resource. This represents a significant upgrade to the confidence of the gold resource, with 438,200 ounces now classified as Measured, where none had been reported previously. At a 0.5 g/t cut-off, the Measured and Indicated resource is now 1.157 million ounces comprised of 6.262 million tonnes at 2.2 g/t (438,200 ounces) Measured resource and 8.708 million tonnes at 2.6 g/t (718,500 ounces) Indicated (Table 1). A further 1.473 million tonnes at 1.5 g/t (72,900 ounces) is in the Inferred category.
The update follows the completion of a 7,000 metre infill drilling program at Agbaou. The infill program included 84 holes and reduced the nominal drill spacing down to 20 metres by 20 metres over an area covering 200 metres by 260 metres of the Main deposit and 60 metres by 180 metres of the South deposit. The results consistently demonstrated continuity of grades and widths and confirmed the quality and interpretation of the mineralized zones within the deposits. The mineralized zones were reinterpreted and the resource estimation was undertaken by SRK Johannesburg using Multiple Indicator Kriging (MIK) estimation.
The Mineral Resource estimate was prepared to both JORC and NI 43-101 standards and is reported to a 0.5 g/t cut-off grade in Table 1. A breakdown of the resource classification at varying cut-off grades is presented in Table 2 and by area in Table 3.
Table 1: Agbaou Mineral Resource Estimate (SRK, 2012) using MIK estimation and a 0.5 g/t cut-off
The drilling completed to date shown in Figure 1 and Figure 2 represents a typical cross-section through the deposit. Results of exploration drilling outside the pit areas has not yet been included in the Mineral Resources.
Table 2: Agbaou Mineral Resource Estimate (SRK, 2012) using MIK estimation at a range of cut-off grades
Table 3: Agbaou Mineral Resource Estimate (SRK, 2012) by area at 0.5 g/t cut-off
Totals may not add due to rounding errors
The resource estimate was prepared by SRK Johannesburg, South Africa based on a total of 58,444 metres drilling (32,171 metres RC in 302 holes and 26,273 metres of core in 212 holes) drilled by Endeavour and previous owners of the property during the period of 2003 to 2011.
In order to access Figure 1 (Agbaou deposit and planned site infrastructure) click on the following URL http://files.newswire.ca/910/EndeavourFig1.pdf
In order to access Figure 2 (Typical Cross-Section through the Agbaou deposit, Main Pit) click on the following URL http://files.newswire.ca/910/EndeavourFigure2.pdf
Agbaou Mineral Reserve
Agbaou Mineral Reserve, estimated using a gold price of $1,200/oz, is shown in Table 4, which reflects 43% of ounces classified as Proven. The estimate was performed by SRK Johannesburg, using Whittle 4D® pit optimization software.
Table 4: Agbaou Mineral Reserve Estimate (SRK, 2012) using $1,200/oz gold price
Agbaou Exploration Drill Program
Exploration drilling resumed in August 2011 and a second drill rig was added to expedite the program. A total of 12 targets were identified for further investigation (News Releases dated August 3, 2011 and September 12, 2011).
At the start of 2012, a $6 million exploration budget was established with the objective of increasing resources and reserves at Agbaou. As of the end of May 2012, a total of 19,863 metres in 355 reverse-circulation (RC) holes were completed and assays have been reported for only 3% of the 2012 exploration program (Figure 3). Eight of the targets were drilled (P1 to P6, P8 and P9) to delineate the mineralized zones. The majority of the intercepts are shallow at depths of less than 100 metres. Recent RC drilling results include 14 metres at 4.08 g/t gold including 6 metres at 7.63 g/t gold (P8 target), additional highlights from these areas are provided in Table 5.
The P1 zone is 300 metres long and is on the northeast edge of the Main pit. The mineralization is oriented approximately 30 degrees to the principal trend of the Main and South mineralization. P8 may be a similar orientation and is located on the southwest corner of the Main pit.
P2 and P9 are at the south end of the Main and South pits respectively and represent strike extensions of the existing bodies. P3 to P6 continue to be drilled and interpretations are not completed on these targets.
In order to access Figure 3 (Agbaou Exploration Drill Plan and Targets of Ongoing Drilling) click on the following URL http://files.newswire.ca/910/EndeavourFigure3.pdf
Table 5: Recent Agbaou RC Drilling Highlights
Additional drilling and other work is required on these exploration targets to be able to incorporate them into the mineral resources.
Infill soil geochemistry has been completed on half of the 25km long Agbaou mineralized trend and reconnaissance RC drilling is being completed on the Niafouta, Zehiri, Agbaou East and Agbaou South areas which are all within 10 km of the mine infrastructure.
Agbaou Mine Plan
Mining operations are based on conventional open pit mining techniques using hydraulic excavators and rear-dump trucks. The oxide portion of the ore body is generally free digging while the transition and fresh rock portions will require drilling and blasting.
All waste material from the excavation area will be hauled to the external waste dump adjacent to the operational pits. The total waste to be moved is about 87Mt, for a life of mine stripping ratio of 7.87.
The mining planning schedule indicates that the open pits will reach a maximum depth of 150 to 175 metres.
In order to access Figure 4 (Agbaou Gold Project – Final Pit 3D View) click on the following URL http://files.newswire.ca/910/EndeavourFigure4.pdf
Agbaou Metallurgy and Mineral Processing
The Agbaou processing plant is based on a 1.6Mtpa in the oxide portion of the ore body (Saprolite and Laterite) and 1.34Mtpa in the transition and fresh (Saprock and Bedrock) zones. The milling circuit will comprise a single stage SAG mill and ball mill, as well as a pebble crusher for the SAG mill oversize followed by gravity/CIL circuit. Overall recoveries are 93% for saprolite and 91% for bedrock.
The Agbaou Gold Project is located approximately 200km north-west of the port city of Abidjan. The concession is reached by paved and secondary gravel roads and is within 10km of the national electric power grid. Electrical power will be supplied from the national grid (91kV), and a 2.4 MW diesel power plant has been included for back-up purposes.
Water is available from a combination of tailings recycling, storage of surface run-off, and pit dewatering.
Agbaou Capital Cost Estimate
The SENET Report includes capital cost estimates prepared at an accuracy level of +/- 10%. The total estimated cost to bring the Agbaou Gold Project into production is $158.9 million, inclusive of contingency and working capital. Table 6 provides a summary of the capital requirements.
Table 6: Agbaou Construction Funding Requirements
Agbaou Life-of-Mine Key Parameters
The SENET Report life of mine gold production schedule and operating costs are shown in Tables 7 and 8.
Table 7 – Agbaou Life-of-Mine Gold Production Profile, based on the SENET Report
Table 8 – Agbaou Life-of-Mine Key Parameters, based on the SENET Report
* Contract mining costs inclusive of Haul & Load, Drilling & Blasting, Mine management and administrative costs, and Grade control
Agbaou Financial Indicators
The financial analysis of the Agbaou Gold Project in the SENET Report has been performed using the parameters summarized in Tables 6, 7 and 8, on a 100% ownership basis and on an after-tax basis. The tax assumptions include a 3% government royalty and a 25% corporate tax rate with a 5 year corporate tax holiday, as provided for under the currently effective mining and tax legislation in Côte d’Ivoire.
Highlights of the financial analysis include:
Direct Operating Costs: Life of mine average cash operating costs of $635 per troy ounce inclusive of mining, processing, assay, general and administration
Total Cash Operating Costs: Life of mine total costs of $677 per troy ounce inclusive of direct operating costs, refining ($5/oz) and royalties charges ($37/oz at $1,250 gold price)
At $1,250 gold price
- NPV at 0% discount rate: $274 million
- NPV at 5% discount rate: $184 million
- IRR: 28%
- Payback period: 2.5 years
At $1,625 gold price
- NPV at 0% discount rate: $549 million
- NPV at 5% discount rate: $401 million
- IRR: 48%
- Payback period: 1.8 years
The Agbaou Gold Project is expected to generate several positive impacts on the social and local environment, including:
- Creation of up to 850 jobs during construction and 350 during operations
- Local infrastructure development and increased standard of living
- Economic growth in local areas and Côte d’Ivoire through the provision of services, construction and manufacturing sectors
- Increased national income through taxes, royalties and fees
- Training and essential skills to develop and promote local community members to be considered for employment opportunities
- Social and community development projects
Endeavour has commenced its community engagement program, most recently with a ground-breaking ceremony on May 18, 2012 to launch the construction of a community centre in the village of Agbahou, approximately 12km from the project.
Management Conference Call Details
Endeavour’s Management will host two conference calls to discuss the results of the SENET Report and the Agbaou mine development plan at times convenient for the Australian and North American time zones. Both conference calls will feature Neil Woodyer, Chief Executive Officer; Mark Connelly, Chief Operating Officer; and David Laing, Senior Vice President – Technical Services.
Analysts and interested investors are invited to participate using the dial in numbers below. The same dial in numbers will be used for both conference calls.
International: +1 201-689-8433
North American toll-free: +1 877-407-0832
Australian toll-free: 0011-800-2246-2666
The conference calls can also be accessed through the following link:
To accommodate the Australian market, the first conference call will be held and webcast by V-Call on Thursday June 14, 2012 at 3:00 PM Sydney time which is equivalent to:
- 1:00 PM in Perth
- 1:00 AM in Toronto
- 10:00 PM in Vancouver (June 13th)
To accommodate the North American market, the second conference call will be held and webcast by V-Call on Thursday June 14, 2012 at 11:00 AM Toronto time which is equivalent to:
- 8:00 AM in Vancouver
- 1:00 AM in Sydney (June 15th)
- 11:00 PM in Perth
The calls will be archived for later playback on Endeavour’s website until June 14, 2013.
Endeavour will file the SENET Report on the Agbaou Gold Project outlining the Mineral Resources and Mineral Reserves Estimate. The report will be available on www.sedar.com within 45 days of the date of this news release.
The SENET Report will be authored by Mark Wanless Pr.Sci.Nat, Hendrik Theart Pr.Sci.Nat, Mark Sturgeon Pr.Eng for SRK Consulting (South Africa) and Neil Senior FSAIMM for SENET (South Africa) and Duncan Grant-Stuart Pr.Eng, Angus Rowland Pr.Sci.Nat for Knight Piésold (South Africa). These independent Qualified Persons have verified the data in this news release.
David Laing MIMMM and Senior Vice-President, Technical Services of Endeavour is a Qualified Person within the definition of that term in NI 43-101, has supervised the preparation of the technical information contained in this news release.
K. Kirk Woodman, P.Geo., Endeavour’s General Manager of Exploration, is the Qualified Person overseeing exploration projects in French West Africa and has reviewed and approved the technical information related to Mineral Resource Estimates at the Agbaou Project contained in this news release.
All sample preparations and standard 40-gram gold fire assays were performed by Bureau Veritas Laboratories, Abidjan, Côte d’Ivoire. Endeavour consistently employs a rigorous quality control and assurance program comprising regular insertion of certified reference standards, blanks and duplicates.
About Endeavour Mining Corporation
Endeavour is a gold producer delivering growth. Endeavour owns two gold mines producing approximately 180,000 oz per year in Ghana and Burkina Faso that are generating significant operating cash flows to fund exploration and development growth. In addition to upside potential at its current operations, Endeavour’s third gold mine, Agbaou in Côte d’Ivoire has entered the construction phase for an additional 100,000 oz per year during Q1 2014. Endeavour’s strong financial base encourages investments in long-term operational growth, exploration to replace and increase reserves, and funding for acquisitions.
Endeavour Mining Corporation is listed on the TSX (symbol EDV) and ASX (symbol EVR), and also trades on the OTCQX (symbol EDVMF).
On behalf of Endeavour Mining Corporation
Chief Executive Officer
This news release contains “forward-looking statements” including but not limited to, statements with respect to Endeavour’s plans and operating performance, the estimation of mineral reserves and resources, the timing and amount of estimated future production, costs of future production, future capital expenditures, and the success of exploration activities. Generally, these forward-looking statements can be identified by the use of forward-looking terminology such as “expects”, “expected”, “budgeted”, “forecasts” and “anticipates”. Forward-looking statements, while based on management’s best estimates and assumptions, are subject to risks and uncertainties that may cause actual results to be materially different from those expressed or implied by such forward-looking statements, including but not limited to: risks related to the successful integration of acquisitions; risks related to international operations; risks related to general economic conditions and credit availability, actual results of current exploration activities, unanticipated reclamation expenses; changes in project parameters as plans continue to be refined; fluctuations in prices of metals including gold; fluctuations in foreign currency exchange rates, increases in market prices of mining consumables, possible variations in ore reserves, grade or recovery rates; failure of plant, equipment or processes to operate as anticipated; accidents, labour disputes, title disputes, claims and limitations on insurance coverage and other risks of the mining industry; delays in the completion of development or construction activities, changes in national and local government regulation of mining operations, tax rules and regulations, and political and economic developments in countries in which Endeavour operates. Although Endeavour has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking statements, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. Please refer to Endeavour’s most recent Annual Information Form filed under its profile at www.sedar.com for further information respecting the risks affecting Endeavour and its business.
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