Pre-Feasibility Study
Highlights
- Proven and probable reserves of 1.5 million ounces of gold and 17.3 million ounces of silver
- Additional inferred resources of 0.7 million oz of gold and 4.9 million oz of silver
- Annual production of up to 350,000 ounces of gold
- Average cash cost of production US$198 per ounce
- Robust Internal Rate of Return (IRR) of 40 % ( post-tax) on initial capital investment of US$281 million with a payback of capital in first two years of production
- Significant upside at Cerro Negro remains, including;
- conversion of additional 336,000 oz of inferred gold at Eureka West to indicated resource;
- improving metallurgical recoveries with additional test work;
- using more favourable mining methods; and
- ongoing exploration success from brown fields drill targets
Andean Resources Ltd. (ASX/TSX:AND) (Andean) today reported results of its pre-feasibility study from its 100 percent owned Cerro Negro gold project in southern Argentina. The study supports Andean’s view that Cerro Negro is a world-class project and brings the company a step closer toward becoming a major gold producer by 2011.
"Cerro Negro is a world-class project with robust economics," said President and Chief Executive Officer of Andean Resources, Wayne Hubert. “The project has a very meaningful production profile, lower quartile cash costs, more exploration upside and a high rate of return.”
The proven and probable reserves at Cerro Negro of 1.5 million oz of gold and 17.3 million oz of silver were based on Micon International’s resource statements at Eureka West (April 2008) and Vein Zone (October 2007) and the geotechnical information provided by Golder and Associates.
From this information, Mine Development Associates (MDA) of Reno, Nevada, developed a mine plan for the pre-feasibility study using gold and silver grades being diluted by mining of up to 15%, resulting in the proven and probable reserve at Cerro Negro as shown in the table below:
| Grade | Probable Reserve | ||||
|---|---|---|---|---|---|
| Deposit | Tonnes | Gold (g/t) |
Silver (g/t) |
Gold (K oz) |
Silver (M oz) |
| Eureka underground | 2.5 | 11.6 | 212 | 946 | 17.3 |
| Vein Zone open pit | 4.6 | 3.5 | - | 526 | - |
| Total/Avg | 7.2 | 6.4 | 75 | 1,472 | 17.3 |
These reserves were based on Micon’s measured and indicated resources only – the inferred resources at Eureka (336,000 oz of gold at 10.7 g/t gold) and Vein Zone (367,000 oz of gold at 2.7 g/t gold ) were not included in the pre-feasibility study.
Metallurgical test work, overseen by Ausenco, and completed by PRA Labs in Vancouver determined gold recoveries at Vein Zone of 97% and 90% at Eureka West Silver recoveries are estimated at 67% at Eureka West, based on initial metallurgical samples taken in late 2007
Based on these metallurgical recoveries, the following production schedules have been developed for Cerro Negro:
| Gold Production (K oz) | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | Total |
| Eureka | 227 | 275 | 254 | 98 | - | - | 855 |
| Vein Zone | 65 | 78 | 96 | 113 | 109 | 48 | 508 |
| Total Gold Production | 292 | 353 | 350 | 211 | 109 | 48 | 1,363 |
| Silver Production (K oz) | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | Total |
| Eureka | 3,552 | 3,778 | 2,938 | 1,259 | - | - | 11,527 |
| Vein Zone | - | - | - | - | - | - | - |
| Total Silver Production | 3,552 | 3,778 | 2,938 | 1,259 | 0 | 0 | 11,527 |
Recent test work at AMMTEC in Perth, Western Australia, on the initial Eureka West samples has shown significantly higher silver recoveries than those initially achieved at PRA Labs by using a higher cyanide concentration and oxygen sparging.
Andean is confident that a high proportion of the 336,000 ounces of gold in the inferred category at Eureka West will be able to be converted into indicated resources and hence extend the minelife in this area, once infill drilling has been completed. Further extensions may also be possible with the Eureka West vein open to the west and the potential remaining on the 4km of strike along the Eureka vein system to the east.
“Clearly, the Cerro Negro property is one of the most significant gold resources established by an Australian gold explorer in recent years,” said Mr Hubert.
The project’s Internal Rate of Return (IRR) is estimated to be 40%, (post-tax) based Cerro Negro’s measured and indicated resources only and on initial capital expenditure of US$281 million, which includes a 4,000 tpd processing plant that will cost US$110 million to treat ore from both the Vein Zone and Eureka deposits using conventional technologies. Based on the forecast revenues and cash flows contained in the pre-feasibility study, the project would have a 2 year pay-back period.
For the upcoming Bankable Feasibility Study, Andean plans to unlock further upside to the project’s current economics by:
- Increasing the existing resource at Eureka West with exploration drilling; Andean geologists believe that the exploration potential is significant given the Eureka West veins were discovered only 18 months ago
- Completing further metallurgical test work of more representative samples which may improve metallurgical recovery
- Undertaking further geotechnical drilling and modelling that may allow for a lower cost underground mining method
The Andean Board has reviewed the current pre-feasibility study and approved management’s recommendation to undertake a Bankable Feasibility Study.
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