The Buchans Base Metal Project is located in central Newfoundland and covers the former producing Buchans Mine and includes the Company’s undeveloped Lundberg deposit. The Buchans base metal project comprises four advanced base metal properties in the Buchans area of central Newfoundland that contain numerous exploration prospects.
Namely, these are:
- the 100% owned Buchans property, which contains the Lundberg deposit;
- the 100% owned Tulks North property, which contains the Daniels Pond deposit;
- the 100% owned Bobbys Pond property, which contains the Bobbys Pond deposit; and,
- a 49% joint venture interest in the Tulks Hill property, which contains the Tulks Hill deposit.
The information relating to the Lundberg deposit in the following sections has been largely extracted from the Lundberg Report dated April 26, 2013 that was prepared by Michael Cullen, P.Geo. and Andrew Hilchey, P.Geo. of Mercator Geological Services Limited, Qualified Persons defined by NI 43-101, as filed on SEDAR on July 18, 2013.
The Lundberg Report is intended to be read as a whole document, and sections should not be read or relied upon out of context. The technical information in the Lundberg Report is subject to the assumptions and qualifications contained in the Lundberg Report. For readers to understand the technical information on Lundberg in this document, they should read the Lundberg Report (2013) filed under Minco’s profile on www.sedar.com in its entirety, including all qualifications, assumptions and exclusions that relate to the technical information set out in this document.
The Lundberg copper-zinc-lead-silver-(gold-barite) deposit is at the core of Buchans base metal project in the Buchans camp.
Buchans is located approximately 530 km by highway west of the provincial capital city of St. John’s and is accessible via paved Route 370 from its junction with the Trans-Canada Highway at the town of Badger, approximately 70 km north of Buchans. The nearest major airports are Gander International Airport and Deer Lake Regional Airport, which are located 128 km east and 181 km west of the town of Badger, respectively.
Access to the Lundberg deposit area for exploration purposes is by a network of paved and gravel roads extending from the community of Buchans in central Newfoundland, providing year-round access to the property. The Lundberg Deposit is situated at the southwest periphery of the community of Buchans.
In 2008, a National Instrument 43-101 (“NI 43-101”) compliant resource estimate was prepared for the Lundberg and Engine House zones by Mercator. The Lundberg Zone was reported to contain Inferred resources totaling 15,690,000 tonnes grading 1.96% Zn, 0.83% Pb, 0.38% Cu, 6.57 g/t Ag, 0.08 g/t Au and 2.36% BaSO4, and the Engine House Zone was separately reported to contain Inferred resources totaling 890,000 tonnes grading 2.37% Zn, 0.95% Pb, 0.96% Cu, 11.29 g/t Ag, 0.15 g/t Au and 4.40% BaSO4 (Webster and Barr, 2008).
In August 2011, the Lundberg Project was reviewed by Tetra-Tech Wardrop Engineering Inc. (Tetra Tech WEI) in connection with the completion of a NI 43-101 compliant Preliminary Economic Assessment (“PEA”) of the Lundberg and Engine House zones, entitled “Preliminary Economic Assessment on the Lundberg and Engine House Deposits, Newfoundland, Canada”, dated August 11, 2011 and prepared for Buchans Minerals by Tetra Tech WEI (“2011 PEA”).
The 2011 PEA identified the combined Lundberg and Engine House deposits (using estimates of Inferred mineral resources as of November 3, 2008) as having potential to support stand-alone 5,000 tonne per day open pit mining and milling operations over a 10-year life of mine. The 2011 PEA suggests sufficient developable area exists in the immediate area to accommodate development of a mine and mineral processing facility, including tailings and associated disposal areas. Buchans has secured land access agreements with surface right holders for the purpose of mineral exploration.
The 2011 PEA is preliminary in nature and 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 2011 PEA will be realized. Mineral resources that are not mineral reserves do not have demonstrated economic viability.
The estimates of mineral resources evaluated by the 2011 PEA have been succeeded by estimates of mineral resources completed by Mercator in 2013, as reported in the Lundberg Report.
In March 2013, Mercator prepared an updated mineral resource estimate for the combined Lundberg and Engine House zones, including results for this new drilling and upgraded the majority of the previously estimated Inferred resource of 21.82 million tonnes, as well as increased the overall tonnage as Indicated resources of 23.44 million tonnes and an additional Inferred resource to 4.31 million tonnes.
Lundberg Deposit Resource Statement* – February 22, 2013
|Category||Rounded Tonnes||Zn %||Pb %||Cu %||Ag g/t||Au g/t||BaSO4%|
- The Lundberg Deposit includes both the Lundberg Zone and the Engine House Zone
- Tonnages have been rounded to the nearest 10,000 tonnes.
- Net Smelter Return (NSR) values were determined by calculating the value of each resource model block using 3 year trailing average metals prices of $0.95/lb Zn, $1.00/lb Pb, $3.68/lb Cu, $29.00/oz Ag, and $1,493.65/oz Au, metallurgical recoveries to concentrate are as projected in the 2011 Preliminary Economic Assessment of the Lundberg Deposit carried out by Wardrop Engineering Inc. (a Tetra Tech company), plus current concentrate shipping and smelting terms for similar concentrates.
- All pricing reflects US currency.
- The resource statement cut-off grade of $15 NSR approximates a breakeven cost for an open pit mining and milling operation at Lundberg, and is comparable to the $14.80 operating cost for open pit mining and milling defined in the 2011 Preliminary Economic Assessment by Tetra Tech Wardrop.
- Mineral resources that are not mineral reserves do not have demonstrated economic viability. The estimate of mineral resources may be materially affected by environmental permitting, legal, title, taxation, sociopolitical, marketing, or other relevant issues.
Based upon work programs carried out in support of the 2013 resource estimate, Mercator concluded that the Lundberg Deposit has been sufficiently delineated by drilling to support pre-feasibility and feasibility level studies.
Mineral Processing and Metallurgical Testing
In 2010, BMC retained SGS Lakefield Research Limited (“SGS”) of Lakefield, ON to carry out mineral processing and metallurgical testing on three representative samples of mineralized material from the Lundberg and Engine House zones. Results of this work were used by Coley at al. (2011) in the PEA prepared by Wardrop.
The mineralization tested by SGS consisted of stockwork style Cu, Pb and Zn sulphides in association with non-sulphide phases such as quartz, chlorite and lesser amounts of barite. The only copper bearing sulphide mineral identified was chalcopyrite, the only lead mineral present was galena, and the zinc mineralization occurred exclusively as sphalerite. Iron was distributed in primary sulphides including chalcopyrite, sphalerite, galena and pyrite. There was no arsenopyrite present as quantified by the associated study of mineralogy.
Metallurgical process development studies focused on flotation recovery of copper and lead followed by zinc. After completion of testing, the most appropriate flow sheet for processing of future mineralization, typified by the sample material, was assembled. Initial grinding of mill feed to 80% passing 52 μm was established for flotation circuit feed materials.
2011 Preliminary Economic Assessment of the Lundberg Deposit
The Lundberg Project was reviewed by Wardrop Engineering Inc. (a Tetra Tech company) (“Wardrop”) in connection with the completion of a NI 43-101 compliant Preliminary Economic Assessment (“PEA”) of the Lundberg and Engine House zones, entitled “Preliminary Economic Assessment on the Lundberg and Engine House Deposits, Newfoundland, Canada”, dated August 11, 2011 and prepared for Buchans Minerals Corporation (“BMC”) by Tetra Tech WEI Inc. (“2011 PEA”).
The 2011 PEA is preliminary in nature and 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 2011 PEA will be realized. Mineral resources that are not mineral reserves do not have demonstrated economic viability. The estimates of Inferred mineral resources evaluated by the PEA have been succeeded by estimates of Inferred and Indicated mineral resources completed by Mercator as reported in the Lundberg Report.
The PEA is based on a 5,000 tonne per day open pit mining and milling operation over a 10 year mine life. The project’s base case is forecast to provide a pre-tax internal rate of return (“IRR”) of 43.94% and a net present value (“NPV”) at a 6% discount rate of CDN$217.8 million at base case metal prices of 1.22 US$/lb Zinc, 3.62 US$/lb Copper, 1.10 US$/lb Lead and 22.74 US$/oz Silver. At metal prices 10% above base case, the IRR is 53% and the NPV at a 6% discount rate is CDN$291.3 million.
- A pre-tax IRR of 43.94% and an NPV at a 6% discount rate of $217.8 million on total life of mine (LOM) cash-flow of $471.5 million.
- Average operating costs for the first five years of the project are $24.53 per tonne on net revenue of $61.76 per tonne. This translates to a revenue to cost ratio of 2.5 to 1. For the 10 year LOM the average operating costs are $23.79 per tonne on net revenue of $52.95 per tonne for a revenue to cost ratio of 2.2 to 1.
- Payback for the project is estimated at 1.4 years on initial capital of $119.6 million and sustaining capital over the life of mine of $32.4 million for total capital expenditures of $152.0 million. Capital estimates includes $10.2 million indirect costs, $3.8 million owners costs and $19.1 million contingency.
- Average throughput of 5,000 tonnes per day, with an average stripping ratio over the life of mine of 3.06 to 1, producing separate zinc, copper and lead concentrates with silver credits in both the lead concentrate and to a lesser degree the copper concentrate.
- Average annual gross metal production in the concentrate is estimated to be 27.1 million pounds of zinc (Zn), 5.5 million pounds of copper (Cu), 16.3 million pounds of lead (Pb) and 164.1 thousand ounces of silver (Ag).
The full 2011 PEA Technical Report can be found under the profile of Buchans Minerals Corporation on SEDAR at www.sedar.com.
Mineral resources that are not mineral reserves do not have demonstrated economic viability. The estimate of mineral resources may be materially affected by environmental permitting, legal, title, taxation, sociopolitical, marketing, or other relevant issues. As of the date hereof, Buchans is not aware of any such issues that may materially affect the mineral resource estimate.
As stated in the Lundberg Report, Mercator considers the updated Lundberg Deposit mineral resource estimate as set out above to provide definition of sufficient Indicated category mineral resources to support pre-feasibility and feasibility level future investigations.
Since the date of the Lundberg Report (2013), Buchans has undertaken exploration drilling and metallurgical test work on the Lundberg property described below. The results from these programs conducted since the date of the Lundberg Report are not considered material to the previous resource estimate contained in the Lundberg Report.
During 2014, Minco completed a four hole, 556 metre, exploration drilling program as an initial assessment of the area that could potentially lead to discovery of new high-grade areas of mineralization located beyond the limits of the former Lucky Strike mine.
Since 2015, Buchans has focused its exploration efforts near the former Lucky Strike mine to explore for high-grade resources that may positively impact open pit and underground development of the Lundberg deposit and initiated a program of relogging of historic archived drill cores to assess potential for discovery of additional high-grade resources near the Lundberg deposit.
During 2015, Buchans re-logged 156 historic surface and underground drill holes (13,418 m) southwest of the former Lucky Strike mine. This re-logging work focused in on a small high-grade massive sulphide deposit, known as the West Orebody deposit, with reported base metal grades similar to Lucky Strike.
2016 Testwork and Metallurgical Studies
During 2016, Buchans, through its wholly owned subsidiary Buchans Minerals Corporation, in a collaboration agreement with Canadian Zinc Corporation (TSX:CZN) successfully completed a research programme to evaluate the metallurgical characteristics of their respective volcanogenic massive sulphide (“VMS”) Zn-Pb-Cu-Ag-Au base metal deposits in central Newfoundland.
The metallurgical research study demonstrated that the ore from Buchans Lundberg, Daniels Pond and Bobbys Pond deposits can be successfully processed in a central mill using a sequential flotation flowsheet, and that selective zinc, lead and copper concentrates at marketable grades can be produced from these deposits.
The programme focused its evaluation on five VMS deposits, three held by Buchans (Lundberg, Bobbys Pond and Daniels Pond) and two held by Canadian Zinc (Lemarchant and Boomerang-Domino). The Lundberg deposit is the largest, most advanced property in terms of resource definition, mine planning (with the potential to have an open pit mine), metallurgical testing and economic studies completed to date. All the other mineral deposits (Bobbys Pond, Daniels Pond, Lemarchant and Boomerang-Domino) are smaller, higher grade deposits, amenable to underground mining, that may not individually support a mine and processing operation. The principal goal of the research program was to assess the technical and economic viability of developing a number of these mineral deposits utilizing a common central processing facility.
The metallurgical portion of the program was successful in confirming that selective zinc, lead and copper concentrates at marketable grades can be produced using a common flotation flowsheet for all five deposits. The positive results from the metallurgical test program strongly support the development of the sequential flotation technology for processing of the central Newfoundland deposits using a centralized processing facility.
The positive results of the research project provide valuable direction to guide future exploration on Buchans central Newfoundland volcanogenic massive sulphide (“VMS”) Zn-Pb-Cu-Ag-Au base metal deposits and the conceptual economic modelling provided key information on which to focus future economic studies and development plans for advancing the development of the Lundberg and satellite deposits using a central milling facility.
It is significant from a metallurgical standpoint, that these five different deposits can be processed on a common flotation flowsheet representing a key step forward in evaluating the viability of centralized milling as a development opportunity for these projects. The initial economic simulations utilizing this new metallurgical data provides valuable information and direction upon which to guide our future exploration and development plans for our Newfoundland deposits.
Qualified Person and Sampling Procedure
Peter C. Webster, P. Geo., of Mercator Geological Services Limited monitored the 2012 drilling program, and is responsible for the resource estimates presented in this news release. Mr. Webster is an independent third party geologist, President of Mercator Geological Services Limited, and a Qualified Person as defined under National Instrument 43-101 of the Canadian Securities Administrators. Historical information used in this resource estimation has been validated and all information obtained from drilling by Buchans Minerals has followed logging, sampling and assaying procedures as per the QA/QC protocol described in Buchans Minerals’ press release dated September 13th, 2012.
Paul Moore, M.Sc., P.Geo., (NL), Buchans Minerals Vice President of Exploration, a Qualified Person within the meaning of National Instrument 43-101 of the Canadian Securities Administrators, supervised the 2012 drill program and has reviewed the contents of this release for accuracy.