Volcan Development
Andina's development strategy for the Volcan Gold Project is initially to build a core team of consultants, augmented as required by internal expertise. The Company started the planning and development task by appointing Micon International Limited as lead auditing consultant in March 2009 and Kappas Cassiday & Associates as lead engineers in 2010. As the development team has expanded, Andina has retained various contractors and consultants that have established track records, are experienced in South America and have worked with development scenarios similar to Andina's. The use of consultants has helped in containing development costs while drawing on some of the best experience in the industry.
Pre-feasibility Study
Volcan’s Phase 1 Development Plan has been assessed by way of a pre-feasibility study that was published in February 2011. Highlights of the pre-feasibility study are as follows:
- Based on a subset of in-pit gold resources from the Dorado deposits which targets 74% or 6.6 million contained ounces,
- Average annual gold production of approximately 283 million ounces,
- 15 years mine life,
- Average first 5 years cash operating costs of $584/oz Au,
- Average life-of-mine (“LOM”) cash operating costs of $615/oz Au,
- At $1,300/oz gold, using at a 5% discount rate, after-tax NPV of $863 million generating an IRR of 23%,
- Estimated construction capital costs of $547 million,
- Processing 55,000 tonnes per day (“tpd”) of ore,
- 11,000 tpd Milled (5,500 selected higher grade and 5,500 fines from leach feed)
- 44,000 tpd Heap Leach Pad
- Processing 55,000 tonnes per day (“tpd”) of ore,
- Waste to ore ratio of 2.48:1 LOM,
Future Opportunities
Several opportunities to materially improve project economics were not incorporated into the pre-feasibility study but will be assessed during 2011 as Andina works to complete a feasibility study.
The feasibility study will look to improve the economics of the project by evaluating:
- Potential for Flotation and Sulphide Revenue Streams
- Copper concentrate, gold in pyrite, beneficial effect of copper removal
- Increasing minable resource by inclusion of Dorado Central
- Reduce cyanide consumption through SART and adding copper revenue
- Increased gold recovery
- Higher HPGR grinding pressure; optimize mill recovery of high-grade
- Plant stream optimization (%mill vs. %leach) Stress test on split to the mill. Ideally mill gets bigger up to practical limits
- Additional high-grade feed Ore – Ojo de Agua East potential
- Operation size (increase mining and process)
- A larger scale operation pulls revenue forward, reduces G&A, reduces unit cost
- Value Engineering
- Earthworks, borrow sources, local supply and fab., site facilities locations
- Synergies with nearby operations
- Power line, water, road infrastructure, limestone
Capital Cost Summary
Total remaining pre-production construction costs are estimated at $551 million. Sustaining capital expenditures over the operation’s mine life are estimated to total $249 million, of which nearly 52% is in the first five years mainly for mining fleet and Heap Leach Pad expansion. Provisions for mine closure amount to $22 million or $5 per ounce.
The cost breakdown for pre-production capital expenditures, assuming an owner operator scenario, is shown below.
Andina's development planning for the Volcan Gold Project is being done with the goal of becoming a model for responsible mining, by establishing strong local and government relationships and adhering to best practices in health, safety and environmental management.
The Company continues to focus on its primary objective, the development of the Volcan Gold Project.
To support the continued evaluation of the project in a technically disciplined and measured manner, a number of activities are underway or planned for 2011:
- Andina expects to publish exploration and development drill results through June 2011.
- Management in consultation with its engineering teams and technical advisors, has initiated the preparation of a Feasibility Study which will consider an:
- Evaluation of Flotation and generation of a copper revenue stream and increased gold recoveries;
- Evaluation of SART (Sulfidization, Acidification, Recycling, Treatment) of barren reagent solutions to decrease reagent usage and add copper revenue;
- Evaluation of optimum HPGR grinding pressures to maximize economic gold recoveries;
- Optimization of ore balance between the mill and heap leach;
- Project scale evaluation to consider increasing throughput which could increase IRR and NPV;
Management has developed an aggressive schedule to first pour and one that calls for EIA submission in Q4 2011, finalization of a Feasibility Study in early 2012, permitting in late 2012 and construction beginning in 2013 with first pour late 2014/early 2015. Several factors could adversely affect the development schedule. Risks to our schedule include completion of adequate development drilling in H1 2011, financing and permitting.
| 000's | |
|---|---|
| Initial Construction Capital | |
| Pre-operations Mining | $11,800 |
| Mining | $61,900 |
| Process | $251,900 |
| Infrastructure | $98,000 |
| EPCM | $33,000 |
| Owner Costs | $15,000 |
| Contingency | $75,700 |
| Total Initial Capital | $547,300 |
| Sustaining Capital | $249,100 |
| Reclaimation | $21,600 |
| Total Depreciable Capital | $818,000 |
| First Fills | $3,300 |
| Total Capital | $821,300 |
Andina's development planning for the Volcan Gold Project is being done with the goal of becoming a model for responsible mining, by establishing strong local and government relationships and adhering to best practices in health, safety and environmental management.
The Company continues to focus on its primary objective, the development of the Volcan Gold Project.
To support the continued evaluation of the project in a technically disciplined and measured manner, a number of activities are underway or planned for 2011:
- Andina expects to publish exploration and development drill results through June 2011.
- Management in consultation with its engineering teams and technical advisors, has initiated the preparation of a Feasibility Study which will consider an:
- Evaluation of Flotation and generation of a copper revenue stream and increased gold recoveries;
- Evaluation of SART (Sulfidization, Acidification, Recycling, Treatment) of barren reagent solutions to decrease reagent usage and add copper revenue;
- Evaluation of optimum HPGR grinding pressures to maximize economic gold recoveries;
- Optimization of ore balance between the mill and heap leach;
- Project scale evaluation to consider increasing throughput which could increase IRR and NPV;
Management has developed an aggressive schedule to first pour and one that calls for EIA submission in Q4 2011, finalization of a Feasibility Study in early 2012, permitting in late 2012 and construction beginning in 2013 with first pour late 2014/early 2015. Several factors could adversely affect the development schedule. Risks to our schedule include completion of adequate development drilling in H1 2011, financing and permitting.
