Vango Mining Ltd (ASX:VAN) Releases Highly Positive DFS Upgrade on Gold Project
Releases Highly Positive DFS Upgrade on Gold Project
Sydney, Feb 15, 2017 AEST (ABN Newswire) - Gold exploration and development company Vango Mining Limited (
ASX:VAN) (Vango, the Company) is pleased to announce positive results from a recently completed upgraded Definitive Feasibility Study (DFS) on its K2 Deposit within the wider 100%-owned Plutonic Dome Gold Project, in the Mid West region of Western Australia.
The upgraded DFS updates commodity prices and exchange rates from a previous DFS update (ASX announcement 8 October 2014) to current values, as at February 2017, as well as mining costs. The original DFS was released 1 July 2014.
All other components of the DFS remain unchanged from the previous DFS update of October 2014.
This DFS upgrade is intended to be read in conjunction with the 2014 DFS and 2014 DFS Update.
Highlights
The results of the upgraded DFS are highly positive, and further strengthen the economic robustness of the K2 Deposit. Headline results include;
- The Project's pre-tax NPV has increased to $19.02 million from $14.87 million in the previous DFS update of October 2014;
- Project's IRR is 382.07%, up from 229% in the October 2014 DFS update;
- Pre-production Capital costs are estimated at $6.4 million;
- All-In Sustaining Unit Cost of Production indicates a project margin of approximately $462/oz;
- The Project will generate total free cashflows of $22.66 million over an initial two year mine life, compared to $18.22 million in the October 2014 DFS update; and
- Project margin of approximately $462 per ounce and Payback period is just 13 months.
Total mined tonnes of 245,214t and head grade of 6.91 g/t gold remain unchanged, and the upgraded DFS does not contemplate additional potential Resources that may be delineated in Vango's 2017 drilling programs. Details of the outcomes of the upgraded DFS are included in this announcement.
DFS Background
The K2 DFS assessed the economic viability of underground mining methods to extract ore from the K2 Deposit with toll treatment of ore at the nearby Plutonic Processing Plant, which is owned by Billabong Gold Pty Ltd (Billabong). Vango has a binding Ore Treatment Agreement with Billabong to facilitate the processing of ore from K2 (ASX announcement 24 September 2014).
The DFS, DFS 2014 update and this upgraded DFS were undertaken by leading engineering and services group, Entech Pty Ltd (Entech), with input from various industry consultants.
The DFS has been evaluated at project level and does not consider ownership structures between Vango and external parties. All currency values are in Australian dollars unless specified otherwise.
About the K2 Deposit
The K2 Deposit is part of Vango's 100%-owned Plutonic Dome Gold Project, which covers an area of 412 km2. K2 is located in the north-eastern extent of the Project, approximately 35km by haul road from Billabong's Plutonic Gold Mine Treatment Plant, in the southwest region of M52/183.
The K2 Deposit was last mined in 1997 by Resolute Mining who had completed an underground development Feasibility Study in 1996. Resolute excavated a boxcut and established the decline to access underground drill positions before the mine was prematurely closed in 1998 after only minor amounts of ore extraction.
Vango and Dampier Gold Limited (ASX:DAU) (Dampier) have a Heads of Agreement for the funding and profit share arrangements over the future proposed production and extraction of gold from the K2 Deposit (ASX announcement, 16 December 2016).
K2 Development Plan
Based on the positive outcomes of the upgraded DFS, Vango will now expedite its plans to bring the K2 Deposit into production in the near term, pursuant to its agreement with Dampier. It then plans to utilise the free cashflows generated to expand Resources at the Trident Deposit within the Plutonic Dome Project with a view to developing Trident into a long term gold producing project.
At K2, the Company also plans to expand the Resource base, and the potential mine life of the proposed mining operation, by targeted drilling programs designed to delineate additional Resources. These are anticipated to be conducted in H1, 2017 and further details of these programs will be provided in due course.
Financial and Production Highlights:
Table 1: K2 Financial Summary of Project Returns
Project ReturnsNPV @ 8% $ 19,022,205NPV @ 10% $ 18,238,737IRR 382.07%Payback Years 1.1Free Cashflow $ 22,662,013C1 Cash Costs / oz $ 907/ ozAll in Sustaining Costs $ 1,117/ ozC1 Cash Costs / t $ 181/ tAll in Sustaining Costs $ 223/ tMined Tonnes 245,214 tHead Grade 6.91 g/t
Notes:
Gold Metallurgical Recovery 90%
WA State Royalty 2.5%
Northern Star Royalty 1%
Mining Recovery for stopes 90%
Mining Recovery Crown Pillar 80%
Total Resources includes Inferred Mineral Resources. See Table 6 (in link below) - Total Resources.
There is a low level of geological confidence associated with inferred mineral resources and there is no certainty that further exploration work will result in the determination of indicated mineral resources or that the production target itself will be realised.
The proposed underground mine will be accessed via the existing boxcut, portal and decline development. This existing development will require some minor rehabilitation. It is proposed that a mining contractor will be used to extract and deliver ore to Northern Star Resources' Plutonic Processing Plant. Underground trucks will deliver ore to a specified location where a surface haulage contractor will transport this material from the mine to the Plutonic plant.
The mine design includes rehabilitation of approximately 840m of the existing decline before extending the decline and strike drive level arrangement. The decline is designed with a minimum standoff of 30 metres from the main ore zone. Levels are designed at 20m level spacing (floor to floor) implying that the stopes will be approximately 16m in height over a strike length of 37.5m.
The selected mining method of longitudinal open stoping with pillars has been determined to be the optimal method for the style of mineralisation and geotechnical parameters. The mining environment at K2 has been described as being relatively benign given the good rock mass conditions and shallow depths.
Metallurgy & Processing:
Metallurgical test work completed concluded that K2 ore is amenable to conventional processing methods and can be expected to yield metal recoveries in excess of 90%. A metal recovery factor of 90% was adopted for the project, representing a value just below the lower end of the range reported in metallurgical test work.
The Plutonic Processing Plant is located 36km from K2 via existing Haul Roads. The ore processing schedule is based upon delivered ore being processed when made available to Northern Star Resources' Plutonic Processing Plant. Processing costs is all inclusive from the point of delivery.
Site Infrastructure and Services:
Electrical power will be provided to site by a BOO (Build, Own, Operate) power station located on the surface consisting of two 500kVa diesel generators producing power at 415V. The site based infrastructure will be located adjacent to the box cut and includes a ROM pad, waste dump, workshops, fuel storage and site based buildings, communications infrastructure and explosives storage facility.
Mineral Resource Estimation:
The Mineral Resource estimates were compiled by Geonomics Australia Pty Ltd (Geonomics) and are in accordance with JORC 2012 (Edition) Guidelines (ASX Release, Resource Upgrade at Plutonic Dome Project 01/10/2014). K2 contains a total mineral resource of 415,000t at 7.7g/t for 103,000oz Au at a 3g/t Au cut-off grade.
There is a low level of geological confidence associated with inferred mineral resources and there is no certainty that further exploration work will result in the determination of indicated mineral resources or that the production target itself will be realised.
An Ore Reserve estimate was conducted based on the Mineral Resource estimation conducted by Geonomics. The Ore Reserves have been estimated by Entech and is similarly in accordance with JORC 2012 (Edition) Guidelines. The Mineral Resources are reported inclusive of Ore Reserves. The estimation was conducted based upon the information derived from the Definitive Feasibility Study estimation conducted at K2. Cut off grades were determined based on unit costs from the feasibility level mining cost model.
Ore Reserves were calculated by generating detailed mining shapes for each stoping block as well as development. The designed stope shapes included planned dilution, being waste material that was located within the mineable stope shape. A 10% unplanned mining dilution factor was applied and is considered to be appropriate given the ground conditions and proposed style of mining. 95% mining recovery was applied post geological interpretation to generate the final diluted and recovered Ore Reserve estimate. No Inferred Mineral Resources were included in the Ore Reserve Estimation.
Infrastructure required for the proposed underground operation has been accounted for and included in all work leading to the generation of the Ore Reserve Estimation. An 8% discount rate was applied to the project and the NPV of the project is positive at the assumed commodity price and exchange rate.
The financial parameters quoted are based on total Resources included in the DFS. A detailed mine design and economic evaluation was used to generate the Ore Reserve and total Resources, which is completely sourced from underground mining.
The total Resources contains some Inferred Mineral Resources. These are immediately adjacent to, and/or below mined Ore Reserves. They have had the same modifying factors applied as per the Probable Ore Reserve. Vango believes that it is reasonable to expect a proportion of Inferred Resources to be upgraded when ore development and grade control occur in these areas.
Ore Reserves and total Resources are based on the K2 Mineral Resource reported in ASX announcement of 1 October 2014. No material change has occurred since reporting and Mineral Resources are inclusive of Ore Reserves.
Geotechnical:
Ground Control Engineering Pty Ltd (GCE) has conducted a feasibility geotechnical assessment of the mine design and production strategy for the Vango Mining K2 Deposit. The design and production strategy was provided by Entech.
The geotechnical assessment completed by GCE is based on core logging data from seventeen previously drilled geotechnical holes. The holes were originally drilled and logged by Resolute in 1995-1996. GCE completed a site visit in April 2014 to review and validate the historic geotechnical logging, based on inspection of existing core from the drill holes available on site. Additionally the K2 decline was inspected to determine the amount of rehabilitation required.
Permitting:
The works approval and mining proposal has been approved for dewatering of the K2 Open Pit and Underground. The water abstraction licence is due to be granted in the current quarter. The Mining Proposal with respect to the underground mining operation of K2 has also been approved.
Agreements:
The K2 Deposit is subject to various royalty and other agreements with third parties including the following:
- Payment to the Western Australian State Government of 2.5% for gold production above $450/oz Au (1.25% for below $450/oz Au); and
- 1% NSR payable to Billabong.
- Legally binding toll treatment agreement with Billabong for the processing of Vango's ore from K2.
Vango has entered into a binding ore treatment agreement with Billabong, facilitating the processing of ore from K2 at Billabong's Plutonic Processing Facility which is located 36km from the K2 Deposit. Access to Billabong's Plutonic Processing Facility is via established haul roads. Billabong will be paid for the processing services through the provision of gold at the point of refining. This structure will assist greatly with the management of cash flow for Vango.
To view tables and figures, please visit:
http://abnnewswire.net/lnk/FKK03Y33
About Vango Mining Limited
Vango Mining Limited (ASX:VAN) is a minerals exploration mining company with ambitions of becoming a high-grade WA gold miner by developing the 100% owned Marymia Gold Project (Marymia) in the mid-west region of Western Australia. The Project comprises 45 granted mining leases over 300km. It has an established high-grade resource of 1Moz @ 3g/t Au, underpinned by the Trident Deposit, whose resource is 410koz @ 8g/t Au, with immediate extensions open at depth/along strike.
The Marymia Project has the potential to become one of Australia's largest high-grade producers. The Greenstone Belt in the Marymia region includes six major gold corridors, which remain largely un-tested beyond 100m depth - supported with an extensive drilling and geophysical database. Previous mining between 1992-2001, produced 580,000 ounces of gold almost entirely from open-pits.
Vango is focused on growing its high-grade gold resource to support a proposed stand-alone gold mining and production operation at Marymia. The Project is located along strike, immediately to the north of Superior Gold's (CVE:SGI) Plutonic Gold Mine which has produced more than 5.5Moz of gold.
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