Highlights of the 2017 Technical Report on Pumpkin Hollow
The Pumpkin Hollow Property encompasses the only fully-permitted copper project of scale in the United States, comprising two potential copper projects both of which are disclosed in the Technical Report:
- A high-grade 5,000 tpd Underground Project Prefeasibility Study (“PFS”); and
- the Integrated Project, a large scale open pit and underground project with reserves of 5 billion pounds of copper, 0.76 Mozs. of gold and 27.6 Mozs. of silver.1
The two projects, which are mutually exclusive and are each viable development options, benefit from over $220 million of prior expenditures which funded a significant amount of engineering work and technical studies, and construction of a production-sized headframe and hoist, warehouse, a 1,900 foot deep, 24-foot diameter concrete-lined production size shaft and over 600 feet of lateral development.
The PFS for the Underground Project builds upon the substantial existing infrastructure at the site, including power, water, road access, plus a production shaft and lateral mine development. The objective of the PFS has been to optimize the previously-defined underground portion of the Mineral Resources at Pumpkin Hollow with a focus on:
- Reduced capital cost;
- Higher mined ore grades;
- Reduced operating cost profile;
- De-risked construction plan, including brownfield assets, EPC construction approach and contract mining during ramp-up; and
- A philosophy on focusing on “margin-over-tons”, while maintaining expansion and extension optionality.
The Technical Report was prepared under the direction of Sedgman Canada Limited (part of the Cimic Group) (“Sedgman”) as lead, along with Mining Plus Limited (“Mining Plus”). Sedgman and Mining Plus are both industry-leading international engineering firms. Sedgman and Mining Plus have taken advantage of the existing infrastructure to improve capital cost accuracy and reduce development risk, and worked with Nevada Copper’s project team, supported by Pala Investments as technical advisor, on preparation of the PFS.
A detailed overview of the Underground Project Case A within the Technical Report is provided below. Highlights include:
- Robust project economics:2
- Average annual copper production of 50 Mlbs (60 Mlbs in Years 1 to 5);
- First five-year copper grades averaging 1.81% (2.01% Cu-equiv.3);
- First five-year C1 cash costs of $1.69/lb of payable copper;
- Average annual operating margins of $67M per annum ($86M in Years 1 to 5);
- Pre-tax NPV5% of $356M and IRR of 27.2%4;
- After- tax NPV5% of $301M and IRR of 25.2%;
- Low initial capital requirements: $182M
- Short lead time to first production:
- Fully permitted for construction and operation;
- Planned commencement of construction by mid-2018 (subject to board approval and financing);
- Target first production in mid-2019;
- Development plan focused on minimizing execution risk:
- Utilizes the existing 1,900 foot deep, 24-foot diameter concrete-lined, production-sized shaft, associated headframe and hoist, and existing surface infrastructure;
- Process plant construction under fixed price engineering, procurement and construction (“EPC”) contract for which engineering designs are well advanced;
- Experienced mining contractor to be utilized for underground development and mine ramp-up, for which initial contractor tenders have been completed;
- Full optionality retained over large-scale fully-permitted open pit:
- Underground Project does not impact Nevada Copper’s ability to develop a future project on the adjacent deposits accessible by open pit methods;
- Significant optimization opportunities identified for open pit project, including potential to:
- Convert assumed waste material to potential mineral resources, and eventually ore, through drilling in Northern Extension and Connector Zones and additional engineering studies;
- Reduce project costs through updated project estimation; and
- Reduce capital costs by optimizing project scale.
- Note that a future stand-alone open pit project development option is not part of the Technical Report. Both the underground and open pit projects are located within privately-held land inclusive of surface and mineral rights.
An overview of the Integrated Project Case B within the Technical Report is provided below. Highlights include:
- Mine life of 23 years with low-risk profile located in an ideal mining jurisdiction close to existing infrastructure, an increase of 5 years from the first published integrated feasibility study;
- Assuming the Base Case of US$3.15 copper, US$1,200 gold and US$18 silver, the Integrated Project generates Life-of-Mine (“LOM”) after-tax net cash flow of US$2.5 billion, NPV@ 5% of US$1.1 billion, an after-tax IRR of 15.6% with 4.7 year payback;
- Significant LOM metal production of 4.5 billion pounds (2.25 million tons) of copper, 512,000 ounces of gold and 15.6 million ounces of silver in a quality copper concentrate. Average annual copper production of 275 million pounds in years 1 to 5;
- The project development contemplates a 63,500 tons/day open pit mine and 6,500 tons/day underground mine, feeding a single 70,000 tons/day concentrator, generating substantial annual cash flow over LOM;
- Proven and Probable Mineral Reserves, including open pit and underground mineable, are 572 million tons of ore grading 0.47% copper equivalent5, containing 5.05 billion pounds of copper, 761,000 ounces of gold and 27.6 million ounces of silver;
- Initial capital costs are estimated to be $1.04 billion including contingencies, excluding working capital of $33 million. Sustaining LOM capital is $0.63 billion;
- Low LOM site operating costs of $12.80 per ton of ore-milled (Year 1 to 5 - C1 Production Costs at $1.49/lb. payable copper), excluding leased equipment and Nevada State Minerals Tax;
- The 2015 IFS includes drilling data to 2011 for the underground deposits and 2013 for the open pit deposits. Further upside and optimization potential exists from current drilling in 2015 which is not included in the 2015 IFS; and
- The 2015 IFS confirms the technical and financial viability of constructing and operating a 70,000 tons/day copper mining and processing operation at Pumpkin Hollow comprising a single large concentrator with mill feed from both open pit and underground operation.