Scoping Study1 confirms Oposura as economically and technically robust, high-margin project
- EBITDA (LOM): A$237 million
- NPV8 (pre-tax): A$112 million
- IRR (pre-tax): 76%
- Average Life of Mine (C1) cash costs: US$0.42/lb zinc
- Year 1 C1 cash costs: US$0.14/lb zinc
- Pre-production CAPEX: A$69.9 million
Exploration drilling intersects more high-grade mineralisation in the Central Zone2 :
- OPDH-187: 3.60m @ 15.5% Zn+Pb from 108.45m; including 2.45m @ 20.5% Zn+Pb
Infill drilling within East Zone Mineral Resource to upgrade resource classification intersects3 :
- OPDH-184: 5.25m @ 24.4% Zn+Pb from 48.35m; including 3.05m @ 39.3% Zn+Pb
- OPDH-185: 8.65m @ 11.4% Zn+Pb from 61.15m; including 4.55m @ 19.6% Zn+Pb
- OPDH-194: 6.00m @ 11.7% Zn+Pb from 39.00m; including 2.95m @ 21.9% Zn+Pb
The Feasibility Study has commenced
- Teck has completed its Phase 2 diamond drilling program comprising 21 holes (10,537m)
- Testing of porphyry copper potential at Cerro Alacrán was the major focus
- Assays are awaited
Oso Negro Project
- Sampling returns more high-grade mineralisation, with best result of:
- Sample OSON-103: 17.55g/t Au 1,935g/t Ag 5.9% Zn 4.6% Pb
- Surface exploration is continuing in preparation for a trenching program
Cash balance at 31 December 2018 was approximately A$3.4 million
OPOSURA SCOPING STUDY
Azure has defined a body of high grade, massive sulphide-hosted, zinc, lead and silver mineralisation, which delivered an initial Mineral Resource Estimate of 2.9Mt @ 5.0% Zn, 2.8% Pb & 17.0g/t Ag (refer ASX announcement dated 4 July 2018).
The Oposura Scoping Study (Study) demonstrated that Oposura is an economically and technically robust, high-margin project (refer ASX announcement dated 15 October 2018).
Based upon metals prices of the date of the Mineral Resource Estimate (MRE), the project is expected to generate a total positive EBITDA of A$237 million and an NPV8 of A$112 million, with an Internal Rate of Return of 76% and a payback period of 16 months.
Low operating and capital costs, high-value concentrates, strong operating cashflows and, most importantly, a C1 cash cost (per pound of payable zinc production, net of by product credits) in the lowest quartile of world zinc producers, all support the positive project economics.
The Study demonstrated that the optimal mining rate will be approximately 500,000tpa from a combination of open pit and underground mining operations, at Life of Mine (LOM) average grades of 4.6% Zn, 2.6% Pb and 15.9g/t Ag, delivering an initial mine life of 5.3 years.
The resources in the mining plan are summarised in Table 1:
The Study identified that approximately 95% (by contained metal) of the zinc and lead mineralisation to be mined in the first year is classified in the JORC Indicated Mineral Resource category. This ensures that almost all of the payback period of 16 months is achieved by mining Indicated Resources.
From the first month of the mining schedule, high-grade mineralisation will be exploited from low strip ratio open pits. It is expected that minimal pre-stripping of the open pits will be required due to the presence of significant quantities of near-surface mineralisation.
The processing flowsheet comprises two-stage crushing followed by ore sorting utilising Dense Media Separation (DMS) to reject waste material and to feed an upgraded product to the milling and flotation circuit at approximately 295,000tpa at LOM average grades of 7.5% Zn, 4.1% Pb and 24.5g/t Ag.
The Study demonstrated both high metal recoveries and clean, commercial-grade concentrates with:
- average zinc concentrate grade of 53% Zn with an average zinc recovery of 87.5%; and
- average lead concentrate grades of 60% Pb and 320 g/t Ag with an average lead recovery of 85% and an average silver recovery of 67%.
The plant will produce approximately 35,000t of zinc concentrate and 16,000t of lead concentrate annually, containing approximately 19,000t of zinc and 10,000t of lead respectively. The annual production of lead concentrate will contain approximately 145,000 ounces of silver.
The time frame to commencement of production is estimated to be a minimum of two years as follows:
Pre-Feasibility Study to be completed by mid-2019
Definitive Feasibility Study to be completed by end of 2019
Project Approvals to be completed in first quarter of 2020
Construction to be completed by the end of 2020
First production in late 2020 or first quarter of 2021
Capital expenditure required to achieve commercial production of concentrates totals approximately A$70 million, as summarised in Table 2:
A summary of operating cost estimates for Oposura is as follows in Table 3:
KEY MATERIAL ASSUMPTIONS
Revenue and cash flow forecasts have been developed using commodity prices prevalent at the time of, and used for, the MRE (dated 4 July, 2018), and are shown in Tables 4 and 5.
4 Metals prices as used in Mineral Resource Estimate dated 4 July 2018
OPOSURA FEASIBILITY STUDY
Work to support the Feasibility Study (FS) has commenced and currently includes:
Updating East Zone mineral resource estimate following completion of infill drilling in December;
Drilling into potential aquifers located on the Oposura concessions that were identified in the preliminary hydrological study conducted in 2018;
Condemnation / sterilisation drilling on the proposed sites for the plant and tailings storage facility;
Commencement of field work for the geotechnical study to enable calculation of Ore Reserves;
Selection of metallurgical samples for FS-level physical and flotation testwork;
Assessment of engineering proposals for major elements (e.g. mining, processing) of the FS; and
Site visits by potential concentrate offtake parties to establish commercial offtake terms.
The Phase 2 drilling program is ongoing. To date, 58 holes (OPDH-158 to OPDH-215) have been completed for a total of 4,538.35m. The Company has received assay results for 47 holes (up to and including OPDH204) (refer to ASX announcements dated 24 October and 11 December 2018).
The primary objectives of the drilling undertaken during the December quarter were:
Infill drilling within the East Zone mineral resource area to increase the confidence level of resources scheduled to be exploited early in the mine plan; and
Close-spaced resource extension drilling within the western part of the East Zone Mineral Resource and extending further to the west into the Central Zone to follow-up very high-grade mineralisation intersected around Tunnel D.
Resource definition drilling defined two mineralised zones at Oposura – the East and West Zones (refer ASX announcement dated 4 July 2018). Infill drilling is being undertaken within the East Zone to upgrade certain areas of the Mineral Resource from JORC Inferred classification to JORC Indicated classification. This will enable most of the East Zone resources to be converted to JORC Probable Reserves as part of the Feasibility Study and further de-risk what the Scoping Study (refer ASX announcement dated 15 October 2018) has already identified as a financially robust, high-margin project.
Highlights of the East Zone Mineral Resource infill drilling include:
- OPDH-184: 5.25m @ 24.4% Zn+Pb & 34g/t Ag incl 3.05m @ 39.3% Zn+Pb & 54g/t Ag
- OPDH-185: 8.65m @ 11.4% Zn+Pb & 17g/t Ag incl 4.55m @ 19.6% Zn+Pb & 29g/t Ag
- OPDH-194: 6.00m @ 11.7% Zn+Pb & 13g/t Ag incl 2.95m @ 21.9% Zn+Pb & 23g/t Ag
The resource extensional drilling was successful in delineating a zone of very high-grade (+20% Zn+Pb) zinc-rich mineralisation located around Tunnel D (refer Figures 2 & 3) within the western part of the East Zone Mineral Resource and extending further to the west into the Central Zone.
Highlights of the resource extensional drilling include:
OPDH-159: 4.80m @ 19.3% Zn+Pb & 122g/t Ag from 107.05m
OPDH-163: 4.15m @ 25.8% Zn+Pb & 148g/t Ag from 97.40m
OPDH-165: 2.90m @ 21.1% Zn+Pb & 148g/t Ag from 95.90m
OPDH-166: 6.95m @ 38.7% Zn+Pb & 365g/t Ag from 68.15m
OPDH-171: 4.40m @ 20.4% Zn+Pb & 294g/t Ag from 99.05m
OPDH-177: 4.55m @ 36.9% Zn+Pb & 138g/t Ag from 107.55m
OPDH-187: 3.60m @ 15.5% Zn+Pb & 26g/t Ag from 108.45m
Azure is currently assessing the potential for early development of this mineralisation.
ALACRÁN PROJECT – (AZS 100% ownership, Teck earning back an initial 51%)
Azure Minerals earned a 100% interest in the Alacrán Project between 2015 to 2016 from Minera Teck S.A. de C.V. (Teck), a 100%-owned subsidiary of Canada’s largest diversified resource company, Teck Resources Limited.
Teck is currently earning back into the project and is the project operator. Work conducted during 2017 and 2018 represent the first two years of activity in a total four-year program comprising the first Option which will entitle Teck to earn back a 51% share of the project by sole-funding US$10 million of exploration expenditure, and making cash payments to Azure totalling US$500,000.
Upon reaching an initial 51% interest in the project, Teck may exercise the second Option to further increase its interest to 65% by sole funding an additional US$5 million in expenditures over a further two years, and making cash payments to Azure totalling an additional US$1.5 million. In this case, Azure will retain a contributing 35% interest in the Alacrán project. Grupo Mexico retains a 2% NSR royalty.
Teck’s Year 2 work program comprised geological, geochemical and geophysical surveys, followed by the Phase 2 diamond drilling campaign. The major focus for Teck was the porphyry copper potential at the Cerro Alacrán prospect, with other targets including Cerro San Simon and Cerro Colorado (see Figure 1).
The Phase 2 drilling program consisted of 21 holes totalling 10,537m with two drill rigs operating continuously from August to December 2018.
Sixteen of Teck’s holes targeted the Cerro Alacrán prospect where porphyry-style copper mineralisation lies beneath a blanket of copper oxides and chalcocite (an acid-soluble copper sulphide mineral) which was previously drilled by the Mexican Geological Survey in the 1970s and by Grupo Mexico in the 1990s.
The remainder of the holes targeted epithermal-style precious metals mineralisation at Cerro San Simon and Cerro Colorado.
Logging and sampling of the drill core is nearing completion and Teck will release final assay results to Azure when its QA/QC process of the geochemical data has been completed.
OSO NEGRO PROJECT – (AZS 100% ownership)
The Oso Negro prospect is located 70km north of Azure’s Oposura Project (see Figure 2). It comprises two concessions covering 1,275ha which host epithermal quartz veining and historical mine workings.
Quartz veins are exposed over lengths of up to 800m and reconnaissance sampling of veins, selvages and dumps by Azure returned many high grades of silver (up to 2,680g/t Ag) and gold (up to 100.5g/t Au) (refer ASX announcement dated 5 September 2018).
Sampling undertaken in the recent quarter from newly identified outcropping veins also returned strong grades of silver (up to 1,935g/t Ag) and gold (up to 17.55g/t Au), (see Table 6 and Figures 3 – 6).
Table 6: Significant gold and silver assay results from Oso Negro surface sampling
|Sample No.||Gold (g/t)||Silver (g/t)||Location|
|OSON-046||1.58||3.52||Oso Negro Southeast Zone|
|OSON-047||10.60||57.4||Oso Negro Southeast Zone|
|OSON-048||7.98||42.5||Oso Negro Southeast Zone|
|OSON-102||9.74||74.4||Oso Negro North Zone|
|OSON-103||17.55||1,935||Oso Negro North Zone|
|OSON-104||2.95||383||Oso Negro North Zone|
Figure 2: Oso Negro project location
Reconnaissance exploration to identify additional prospective mineralised zones is continuing. A trenching program is being planned and the environmental permitting process is underway.
Figure 3: Image of gold results from surface sampling at Oso Negro, overlying Google Earth image
Figure 4: Image of silver results from surface sampling at Oso Negro, overlying Google Earth image
Figure 5: Silver & gold results from surface sampling at Oso Negro (southeast zone)
Figure 6: Gold and silver results from surface sampling at Oso Negro (north zone)
SARA ALICIA PROJECT – (AZS 100% ownership)
During the quarter the Company hosted site visits and inspections of the drill core by companies investigating the potential purchase or joint venture of this property.
PROMONTORIO PROJECT – (AZS 100% ownership)
No work undertaken. Azure continues to seek a partner for further exploration on this project.
Cash balance at 31 December 2018 was approximately A$3.4 million.
For enquiries, please contact:
Azure Minerals Limited
Ph: +61 8 9481 2555
Media & Investor Relations
Michael Weir / Cameron Gilenko
Ph: +61 8 6160 4903
or visit www.azureminerals.com.au
Original Article: http://azureminerals.com.au/wp-content/uploads/2019/01/1891219.pdf