VANCOUVER, BRITISH COLUMBIA, Nov 12, 2009 (MARKETWIRE via COMTEX News Network) --
Brett Resources Inc. (TSX VENTURE: BBR) ("Brett" or the "Company") is pleased to announce the results of the Preliminary Assessment Study (the "Study") of its 100% owned Hammond Reef Gold Project (the "Project") located near Atikokan, Ontario. The Study was compiled by Scott Wilson Roscoe Postle Associates, Inc. (Scott Wilson RPA) and uses the new Base Case Inferred Mineral Resource of 6.70 million ounces of gold (259.4 million tonnes grading 0.8 grams per tonne (g/t) gold (Au) at a cut-off grade of 0.30 g/t, which relates to the economic cut-off in the Study). Using a base case gold price of $825 per ounce, the Study shows that the Project has a net pre-tax cashflow (undiscounted) of $1,186 million with an after tax Net Present Value (NPV) of $413 million using a 5% discount rate. The mine would recover 5.13 million ounces of gold at a strip ratio of 1.43 to 1 over a 14-year mine life.
Over the first six years, on average, Hammond Reef will produce 463,000 ounces of gold per year at a head grade of 0.91 g/t Au, with direct cash costs of $360 per ounce (net of silver credits). Over a projected 14-year mine life the current deposit would produce an average of 369,000 ounces of gold per year at an average direct cash cost of $414 per ounce (net of silver credits), generating earnings before interest, taxes and capital recovery (EBITDA) of $1,958 million and earnings before interest and taxes (EBIT) of $1,186 million. For the first six years of production, the pre-tax operating cash flow is $1,229 million (EBITDA) and $656 million (EBIT). The Study shows a pre-tax Internal Rate of Return of 18.5% (15.2% after tax) and a Payback Period of 4.2 years (4.6 years after tax). Results of the Study are highly encouraging and Brett is continuing infill and exploration drilling as well as metallurgical, environmental and engineering studies to advance the Hammond Reef Gold Project to feasibility and production.
Patrick Soares, President and CEO of Brett, commented: "These robust economic results, the recent signing of the MOU with eight First Nations, very strong community support and promising nearby exploration targets encourage Brett to press on with exploration and engineering activities and advance the Hammond Reef Project to and through feasibility as quickly as possible."
Study Summary
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Estimated Pit Contained Gold 5,515,000 ounces
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Estimated Net Recoverable Gold (based on 93% recovery) 5,129,000 ounces
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Mill production rate
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Daily 50,000 tonnes
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Annual (million) 17.5 tonnes
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Life of Mine 14 years
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Overall Strip Ratio 1.43
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Capital Expenditure
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Initial $ 614 M
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Sustaining $ 158 M
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Total $ 772 M
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Total per ounce produced $ 151
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Years 1 to 6 Life of Mine
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Gold Production (ounces per year) 463,000 369,000
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Average feed grade to mill (grams per tonne) 0.91 0.70
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Cash cost per ounce
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Before royalties $ 360 $ 414
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After royalties $ 382 $ 442
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Economic results for the Base case and Base Case +20% are as follows:
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Base Case Base Case +20%
($825/oz gold) ($990/oz gold)
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Net Present Value at 5% Discount Rate
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Pre tax $ 588 M $ 1,110 M
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After tax $ 413 M $ 811 M
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Net Cashflow (NPV at 0% Discount Rate)
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Pre tax $ 1,186 M $ 2,014 M
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After tax $ 900 M $ 1,534 M
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Internal Rate of Return (IRR) pre tax 18.5% 27.7%
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Internal Rate of Return (IRR) after tax) 15.2% 22.9%
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Revenue $ 4,272 M $ 5,117 M
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Operating earnings pre tax,interest and
capital recovery (EBITDA) $ 1,958 M $ 2,786 M
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Operating earnings pre tax, interest and
after capital recovery (EBIT) $ 1,186 M $ 2,014 M
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Payback pre tax (years) 4.2 3.1
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Payback after tax (years) 4.6 3.5
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All dollar amounts presented in this press release are expressed in US dollars. An exchange rate of 1.11 Canadian to US dollars was used with respect to Canadian expenditures.
Life of mine capital expenditures are estimated at $772 M (which includes an initial capital expenditure of $614 M), giving the Project an overall capital expenditure per recoverable ounce of $151.
This Study will be the foundation for further growth as Brett continues with infill drilling to raise the resource classification and explores for new resources on nearby targets. Brett's current 70,000 metre drill program includes exploration drilling of new gold zones identified by this summer's exploration.
The Study is preliminary in nature, it includes Inferred Mineral Resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as Mineral Reserves, and there is no certainty that the Preliminary Assessment will be realized.
Location
The Hammond Reef Project is located in the Sawbill Bay-Marmion Reservoir area of the Thunder Bay Mining District, approximately 170 kilometres west of Thunder Bay, Ontario, Canada, and roughly 23 kilometres northeast of the town of Atikokan, Ontario. The property can be accessed both by water and by gravel road and there is a power line approximately 10 kilometres to the west, and a 230MW power generating station 14 kilometres to the southwest of the property. Atikokan has a population of about 3,000 people and is serviced by provincial highway and rail. The local economy is based on forestry, a thermal generating station, government services, retail services, tourism and light manufacturing, and has a history of mining. The region benefits from a strong contractor and supplier base to the mining industry and an experienced mining workforce. Other resources are available from Thunder Bay, which has a population of over 100,000 and is home to an international airport with daily scheduled jet service, rail service and port facilities.
Mineral Resources
Based on the results of the Study, the economic cut-off at a gold price of $825 per ounce is 0.27 g/t gold. Therefore, the Study was based on a new base case NI 43-101 compliant Inferred Mineral Resource of 259.8 million tonnes at 0.80 g/t gold totaling 6.7 million ounces of gold at a 0.30 g/t Au cut-off. The mineral resource at various cut-offs is as follows:
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Cut-off Tonnes Grade Gold Oz
Au g/t (000,000) Gold g/t (000,000)
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1.00 60.2 1.46 2.83
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0.90 77.1 1.35 3.34
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0.80 98.4 1.24 3.93
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0.70 124.6 1.14 4.56
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0.60 155.0 1.04 5.19
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0.50 188.5 0.95 5.78
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0.40 227.0 0.87 6.34
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0.30 259.4 0.80 6.70
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0.20 281.9 0.76 6.89
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Capital Investment Program
The initial capital investment program amounts to $614 M and is summarized below:
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Mining
- Equipment $70.8 M
- Pre-production $34.2 M $105.0 M
Infrastructure (including roads, buildings, communications) $46.0 M
Mineral Processing Plant $300.9 M
Tailings $33.5 M
Indirects $72.8 M
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Subtotal $558.2 M
Contingency $55.8 M
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Total (millions) $614.0 M
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The investment program is scheduled over a three year period. Sustaining capital is estimated at $158 M and is primarily for additional mining equipment, infrastructure and a dike to extend the pit into Marmion Reservoir. Closure cost provisions amount to $35 M.
Mining
The preliminary mining plan was developed using the Inferred Mineral Resources audited by Scott Wilson RPA. An open pit optimization was performed using Whittle software, which is based on the Lerchs-Grossmann algorithm. The pit optimization resulted in an estimated mining resource conversion rate of 82 percent relative to the Inferred Mineral Resource at a cut-off of 0.3 g/t gold. The annual mining excavation plan shown below was based on stockpiling lower grade material during the initial 6 years for processing in the later years of the mine life.
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Processed Mine to Cumulative Total
---------------- Mill Waste Stockpile Moved Strip
Year kTonnes Au (g/t) kTonnes kTonnes kTonnes kTonnes Ratio
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-1 - - - 9,045 50 9,095 -
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1 14,875 0.85 14,825 18,248 6,004 39,127 1.23
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2 17,500 0.86 17,500 31,784 15,797 59,077 1.82
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3 17,500 0.80 17,500 30,016 29,878 61,598 1.72
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4 17,500 0.94 17,500 29,700 37,848 55,170 1.70
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5 17,500 0.99 17,500 27,333 48,220 55,205 1.56
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6 17,500 1.01 17,500 32,354 56,034 57,668 1.85
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7 17,500 0.49 7,772 42,228 46,306 59,728 2.41
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8 17,500 0.63 17,222 40,778 46,028 58,278 2.33
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9 17,500 0.61 17,500 36,040 46,028 53,540 2.06
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10 17,500 0.72 17,500 20,406 46,028 37,906 1.17
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11 17,500 0.72 17,500 22,318 46,028 39,818 1.28
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12 17,500 0.51 7,537 7,760 36,065 25,260 0.44
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13 17,500 0.39 - - 18,565 17,500 -
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14 17,500 0.39 - - 1,065 17,500 -
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15 1,065 0.39 - - - 1,065 -
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Total 243,440 0.70 187,356 348,008 647,531(i) 1.43
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(i) Includes 56.034 million tonnes re-handled from the stockpile to the mill
The deposit will be mined by conventional open pit mining methods using an initial fleet of thirteen 218-tonne haul trucks, two hydraulic shovels, one loader, three drills and various ancillary equipment.
The mine production daily rate, including waste, is estimated at 158,000 tonnes per day for the first nine years, decreasing thereafter. The waste-to-ore ratio is estimated at 1.43 to 1. The pit design includes a maximum inter-ramp pit slope of 49 degrees and a maximum highwall height of 345 m.
The initial pit design is limited by a 20 m standoff from Marmion Reservoir to the southwest. In year 5, a 1,200 m long dike may be constructed to allow the open pit to extend into the reservoir area for maximum extraction of the resource, extending the life of the mine from 12 to 14 years and optimizing the Project economics. The A-zone mineralized system remains open to the southwest as no drilling has taken place within the reservoir or on the land mass beyond where positive surface exploration results have been realized.
Mining costs have been estimated at an average of $1.40 per tonne moved. Fuel price assumption is based on $70 per barrel. The average annual fuel consumption is estimated at 31.2 million litres.
Mineral Processing
The plant design is based on tests recently completed at SGS Lakefield, Ontario which confirmed the viability of a flotation-cyanidation process. Coarse primary grind (180 micron) feeds bulk sulphide flotation to pre-concentrate the gold to a stream of less than 10% by weight of the plant feed. The concentrate is subjected to fine regrinding to nominal 80% passing 10 micron and cyanidation to achieve an overall gold recovery of 93%.
Confirmatory, variability and optimization metallurgical testwork continues.
In order to minimize the environmental impact of the Project, the use of thickened tailings disposal technology has been selected. In addition, placement of the tailings in the former Steep Rock iron ore open pits is being investigated. All Acid Base Accounting (ABA) and Net Acid Generation (NAG) analyses indicated that the process tailings are likely to be non-acid generating. The sulphide sulphur content of the deposit is low, and there appears to be adequate carbonate to neutralize any potential acid generation.
The mineral processing costs, including tailings operations and power, are estimated at $4.45/tonne milled using a power cost of $0.054 (CDN$0.06) per kilowatt hour.
Operating Costs
Total direct operating costs, including $0.73/tonne for general and administration costs, are estimated at $8.90 per tonne milled or an average of $414 per ounce before royalties. At a base case gold price of $825 per ounce this operating cost is equivalent to an average cut-off of 0.27 g/t gold.
The summary per year is outlined below, based on an average gold recovery of 93%:
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Tonnes Average Payable Gold Cost/ounce Cost/ounce
Milled Grade Production Excluding Including
Year (000's) (g/t Au) (000's oz) Royalties Royalties
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1 14,875 0.85 376 346 368
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2 17,500 0.86 447 380 402
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3 17,500 0.80 420 431 453
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4 17,500 0.94 492 341 363
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5 17,500 0.99 515 335 357
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7 17,500 0.49 258 661 683
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8 17,500 0.63 327 510 531
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9 17,500 0.61 320 500 521
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10 17,500 0.72 378 387 409
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11 17,500 0.72 376 405 426
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12 17,500 0.51 268 464 486
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13 17,500 0.39 202 473 495
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14 17,500 0.39 202 473 495
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Total 243,440 0.70 5,119 $414 $442
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Economic Results
Under the Base Case scenario at a gold price at $825 per ounce, the unleveraged pre-tax Internal Rate of Return (IRR) is estimated at 18.5%, the Net Present Value (NPV) at a 5% discount rate is $588.4 million and the undiscounted cashflow is $1,186 million. The Base Case after tax IRR is 15.2%, the NPV at 5% is $413.2 million and the net cashflow (undiscounted) is $900.1 million.
The table below outlines sensitivities under various pre-tax price scenarios:
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Gold Price($)(i) NPV at NPV at
per ounce IRR (%) 5% discount (M $) 0% discount (M $)
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1073 31.8 1,370.1 2,427.5
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1155 35.6 1,630.7 2,841.3
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The table below outlines sensitivities under various after-tax price scenarios:
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Gold Price($)(i) NPV at NPV at
per ounce IRR (%) 5% discount (M $) 0% discount (M $)
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990 22.9 811.3 1,533.8
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1073 26.3 1,010.4 1,850.6
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1155 29.6 1,209.5 2,167.4
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(i) Gold prices are varied by increments of +/- 10% from the Base Case
of $825
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