Internal Scoping Study on Lundberg Deposit Completed by Stantec
Toronto, November 12, 2019 – Buchans Resources Limited (“Buchans” or the “Company”) has received the results of a conceptual (order of magnitude) study of the Lundberg potential open-pit, zinc, lead and copper deposit in central Newfoundland completed by Stantec Consulting Ltd., evaluating various development, mining and processing options and scenarios, as well as reviewing tailings disposal options and shipping port alternatives.
The purpose of the Stantec study was to prepare a high-level options assessment for use internally by Buchans to assist with planning for future work on the Lundberg project. The results and conclusions of the Stantec study will now be utilised to focus the Company’s approach towards completion of an updated assessment of the Lundberg deposit’s economic potential in the form of a new Preliminary Economic Assessment as the next phase of the project evaluation.
2019 RESOURCE ESTIMATE
On March 1, 2019 Buchans announced a new upgraded pit-constrained Mineral Resource Estimate for its Lundberg base metal deposit, prepared by Mercator Geological Services Limited (Mercator), and a NI 43-101 Technical Report was filed on April 15, 2019.
The 2019 Mineral Resource Estimate includes In-pit Indicated Mineral Resources of 16,790,000 tonnes grading 1.53% Zn, 0.64% Pb, 0.42% Cu, 5.69 g/t Ag and 0.07 g/t Au (3.38% Zn Eq) and In-pit Inferred Mineral Resources of 380,000 tonnes grading 2.03% Zn, 1.01% Pb, 0.36% Cu, 22.35 g/t Ag and 0.31 g/t Au (4.46% Zn Eq).
[Technical Report entitled “NI 43-101 Technical Report and Mineral Resource Estimate on the Lundberg Deposit, Buchans Area, Newfoundland and Labrador, Canada”, and dated April 15, 2019, was prepared by: Michael Cullen, P. Geo., Matthew Harrington, P. Geo., and Shaun O’Connor, P. Geo. of Mercator Geological Services Limited (“Mercator”), Tim McKeen, P. Eng., of Stantec Consulting Ltd., and Doug Roy, P. Eng., of MineTech International Limited (MineTech), each of whom is an independent “Qualified Person” as defined under National Instrument 43-101 (NI 43-101), and Buchans employees Paul Moore, P. Geo., Vice President of Exploration and David Butler, P. Geo, Exploration Manager, who are non-independent “Qualified Persons” as defined under NI 43-101 and as allowed under section 5.3(3) of NI 43-101. ]
STANTEC OPTIONS EVALUATION STUDY
Following recommendations in the Technical Report, Buchans engaged Stantec Consulting Ltd. to undertake a conceptual (order of magnitude) study of the Lundberg deposit to evaluate various development options based on the 2019 Mineral Resource Estimate and to evaluate various potential mining and processing scenarios.
The Stantec study evaluated several variables, including:
- Potential pit shell sizes and production rates.
- Potential to stockpile low-grade material.
- Option to develop a new concentrator at the Lundberg site versus re-use of an existing third-party mill located in the central Newfoundland area.
- The optional use of dense media separation (DMS) technology to pre-concentrate the resource material ahead of milling.
- Tailings disposal options based on expansion of the existing tailings infrastructure at site.
- Concentrate transport and port shipping alternatives.
The mining component of the Stantec study evaluated a range of pit shells and production levels to provide Buchans with the sensitivity of the mine to different development strategies for the project.
Several mine production schedules were generated to examine the interactions between pit size, production rates, stockpiling strategies and process plant capacity. Trade-offs between initial capital, operating costs and overall net present value were examined at a conceptual level as part of the evaluation.
The mineral processing flowsheet for the conceptual study was based on the sequential flowsheet developed by Thibault & Associates Inc. of Fredericton, New Brunswick, as summarized in the Technical Report dated April 15, 2019. Based on the potential mining scenarios considered, conceptual capital and operating costs were evaluated for various process plant capacities.
There are two existing tailings ponds located on the Lundberg site; Tailings Pond 1 (TP1) to the north and Tailings Pond 2 (TP2) to the south. Both ponds have some remaining capacity. Two expansion options were considered – the first assumed both TP1 and TP2 were modified for additional capacity, and the second assumed only TP2 was increased in capacity.
TRUCKING AND PORT
Road transportation of the concentrates to port for storage prior to loading on to ships for ocean transport to smelters was evaluated. Three port sites in Newfoundland for concentrate loading were considered at a conceptual level, including ports at Botwood, Turf Point and Goodyears Cove.
Botwood was previously used by the former Asarco Buchans Mine. The Duck Pond mine used the Turf Point facility, which has concentrate storage and ship loading equipment. Goodyears Cove is much closer than Turf Point and is currently used by Rambler Metals and Mining to store and ship its copper concentrate.
Additional metallurgical testing is recommended to support a Preliminary Economic Assessment. Locked cycle testing of the proposed sequential flotation flowsheet is recommended to confirm closed-circuit concentrate grades/recoveries and any potential to improve copper recovery without impacting zinc recovery.
The potential for a stockpiling strategy was considered at a conceptual level and further work is recommended to understand the effects on project footprint, metallurgical recovery, plant capacity and overall project economics.
Further evaluation of the tailings management options is recommended. The impact on the site water balance and the integrity of existing dam structures to potential modifications should be determined.
The results and conclusions of the Stantec study will now be utilised to focus the Company’s approach towards completion of an updated assessment of the Lundberg deposit’s economic potential in the form of a new Preliminary Economic Assessment as the next phase of the project evaluation.
BACKGROUND ON LUNDBERG PROJECT
The information in the following paragraphs of this Background has been extracted or summarised from the Technical Report entitled “NI 43-101 Technical Report and Mineral Resource Estimate on the Lundberg Deposit, Buchans Area, Newfoundland and Labrador, Canada”, dated April 15, 2019, filed on SEDAR on April 15, 2019]. The Technical Report is intended to be read as a whole, and sections should not be read or relied on out of context. (See Buchans News release dated April 15, 2019).
The Lundberg deposit surrounds the former Lucky Strike mine site, adjacent to the town of Buchans, in central Newfoundland, where Asarco operated a near-surface underground and glory hole mining operation until mine closure in 1984. The Lundberg deposit is mainly comprised of stockwork mineralization surrounding and lying below the former Lucky Strike orebody but includes some massive sulphide mineralization remaining unmined in the former operations.
The 2019 Mineral Resource Estimate was prepared by Mercator Geological Services Limited (Mercator). The pit shell was developed and optimized by MineTech International Limited. Projected metal recoveries are based on the previous Central Milling Facility Assessment by Thibault & Associates Inc. and the Net Smelter Return calculator as prepared by Stantec Consulting Ltd.
In summary, the Lundberg deposit is estimated to host In-pit Indicated Mineral Resources containing 1.25 billion pounds Zinc Equivalent as well as In-pit Inferred Mineral Resources containing 0.037 billion pounds Zinc Equivalent using a net smelter return (“NSR”) cut-off at US$20 per tonne. These resources are contained within an optimized model pit shell measuring 860 metres by 650 metres and extends to a maximum depth of 240 metres. The In-Pit resource has a strip ratio of 2.9 and approximately 97.8% of the resources are assigned to the Indicated category.
The 2019 Mineral Resource pit shell was developed and optimized by MineTech International Limited and reflects an optimized pit shell at a cut-off grade of US$20 per tonne NSR, considered to reflect reasonable prospects for economic extraction in the foreseeable future using conventional open-pit mining methods. Optimization parameters include mining at US $3 per tonne, processing at US $15 per tonne, and G&A at US$2 per tonne (total US $20) and incorporates NSR cut-offs reflecting metal price assumptions in US dollars of $1.20/lb Zn, $1.00/lb Pb, $3.00/lb Cu, $1,250/oz Au, and $17/oz Ag.
Costs and recovery parameters were determined through continued assessment of the project, comprising multiple, past studies such as the positive Preliminary Economic Assessment completed by Tetra Tech in 2011, and the Mineral Resource Estimate completed by Mercator in February 2013, as well as several metallurgical investigations, including bench-scale studies completed by Thibault in 2017, and additional definition drilling undertaken by the Company in 2018.
Metallurgical recoveries to concentrates are based on the Central Milling Facility Assessment (Thibault & Associates Inc., 2017). Assumed metal recoveries are 83.0% Cu, 13.3% Au, and 7.84% Ag in the copper concentrate, 84.3% Pb, 10.5% Au, and 50.3% Ag in the lead concentrate, and 87.2% Zn, 8.28% Au, and 14.8% Ag in the zinc concentrate.
Net Smelter Return US$ per tonne (“US$ /t”) values were determined by calculating the value of each Mineral Resource model block using the NSR calculator prepared by Stantec Consulting Ltd. The NSR calculator uses the stated metal pricing, metallurgical recoveries to concentrates, concentrate payable factors and current shipping and smelting terms for similar concentrates.
A cut-off value of US$20/t NSR within the optimized pit shell was used to estimate Mineral Resources. A range of cut-off values were also assessed for sensitivity which illustrate that a high proportion of the contained metal is retained at higher cut‐off thresholds (to US$50/t). Using a 100% higher cut-off at US$40/t NSR results in an Indicated Mineral Resource tonnage of 9.2 million tonnes at a Zinc Equivalent grade of 4.67%.
At the even higher cut-off threshold of US$50/t NSR, the 2019 MRE In-Pit Mineral Resource Indicated tonnage is estimated at 7 million tonnes at a Zinc Equivalent grade of 5.32%. Comparing these sensitivities in respect of their contained metal, the Indicated tonnage at the US$30/t NSR threshold contains more than one billion pounds Zinc Equivalent. At the higher threshold of US$50/t NSR, the Indicated tonnage contains more than 800 million pounds Zinc Equivalent.
The 2019 Mineral Resource Estimate excludes significant volumes of mineralization within the Lundberg deposit from classification as Mineral Resources. Much of the excluded volume lies beneath the bottom of the current pit shell and has potential to be included in future optimized pit shells subject to changes in metal prices or other parameters defined for future optimization and mineral resource estimation.
The 2019 Mineral Resource Estimate upgraded the Lundberg deposit to a more robust, pit constrained Mineral resource, with 97.8% of the Mineral Resources in the Indicated category and demonstrated that Lundeberg’s in-pit Mineral resources contain more than 1.25 billion pounds zinc equivalent in the Indicated category.
Based on work carried out for the 2019 Mineral Resource estimation, Mercator is of the opinion that the Lundberg deposit has been sufficiently delineated by drilling to support Pre-feasibility (PFS) or Feasibility level studies, and that additional infill resource delineation drilling is not required for this purpose.
Mercator’s primary recommendation in the Technical Report was that an updated assessment of the Lundberg deposit’s economic potential be completed as the next phase of project evaluation. This could take the form of a new Preliminary Economic Assessment or an internal economic study leading to a decision to proceed directly to a PFS assessment of Lundberg Deposit economics.
FUTURE WORK ON LUNDBERG PROJECT
The purpose of the Stantec study was to prepare a high-level options assessment to assist with planning for future development work on the Lundberg project. The results and conclusions of the Stantec study will now be utilised to focus Buchans’ approach towards completion of an updated Preliminary Economic Assessment of the Lundberg project as a stand-alone open-pit mineral resource development, optimally situated on a brownfields site with excellent infrastructure.
The economic analysis contained in the previous Preliminary Economic Analysis completed by Wardrop Engineering-Tetra Tech in 2011, which evaluated a 5,000 tonnes per day open pit mining and milling operation over a 10-year mine life, is now considered out of date, and should not relied upon, as it was based on inferred mineral resources only that do not have demonstrated economic viability, and does not reflect subsequent changes in economic assumptions, including, but not limited to, changes in capital and operating costs, metal prices and currency exchange rates.
It is recognized that further enhancements for mineral development of Lundberg could be achieved through exploration to add additional mineral resources immediately adjacent to the Lundberg deposit that, if successful, may identify new, higher-grade, underground resources that might share common processing and mine infrastructure with an open pit mine development at Lundberg.
Accordingly, Buchans anticipates focusing its ongoing exploration efforts in the Buchans camp on discovery of new Buchans-style high-grade deposits similar to those previously mined at Buchans by ASARCO, who produced more than 16.2 million tonnes from five separate deposits, with a combined average grade of 14.51% Zn, 7.65% Pb, 1.33% Cu, 126 g/t Ag, and 1.37g/t Au, before exhaustion of ore reserves and mine closure in 1984.
Tim McKeen P.Eng. Senior Process Engineer with Stantec Consulting Ltd., a Qualified Person within the meaning of National Instrument 43-101, and Sean Ennis, P. Eng. Regional Business Leader, Mining with Stantec Consulting Ltd., a Qualified Person within the meaning of National Instrument 43-101, have reviewed the technical contents of this news release.
ABOUT BUCHANS RESOURCES
Buchans Resources Limited is incorporated under the laws of the Province of Ontario, Canada and is a “reporting issuer” in the Provinces of Alberta, British Columbia, Nova Scotia and Newfoundland and Labrador.
Buchans Resources has interests in zinc, lead, silver properties located in Canada, Ireland and the United Kingdom; gold properties in Newfoundland and in Labrador; nickel, copper, cobalt properties in Labrador and a manganese project in New Brunswick; and, indirectly through its 22% shareholding in Xtierra Inc. (TSXV: “XAG”), in base metal and silver projects in Mexico.
John F. Kearney: Chairman & Chief Executive +1 416 362 6686
Paul Moore: Vice President Exploration + 1 709 738-7384
Peter McParland: Director – Ireland +353 (0) 46 907 3709
Additional information about the Company is available on the Company’s website at www.BuchansResources.com.
This document contains certain forward-looking statements relating to, but not limited to, the Company’s expectations, intentions, plans and beliefs. Forward-looking information can often be identified by forward-looking words such as “anticipate”, “believe”, “expect”, “goal”, “plan”, “intend”, “estimate”, “may” and “will” or similar words suggesting future outcomes, or other expectations, beliefs, plans, objectives, assumptions, intentions or statements about future events or performance. Forward-looking information may include reserve and resource estimates, estimates of future production, unit costs, costs of capital projects and timing of commencement of operations, and is based on current expectations that involve a number of business risks and uncertainties. Factors that could cause actual results to differ materially from any forward-looking statement include, but are not limited to, failure to establish estimated resources and reserves the grade and recovery of ore which is mined varying from estimates, capital and operating costs varying significantly from estimates, delays in obtaining or failures to obtain required governmental, environmental or other project approvals, delays in the development of projects changes in exchange rates, fluctuations in commodity prices, inflation and other factors. Forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results to differ materially from expected results. Shareholders and prospective investors should be aware that these statements are subject to known and unknown risks uncertainties and other factors that could cause actual results to differ materially from those suggested by the forward-looking statements. Shareholders are cautioned not to place undue reliance on forward-looking information. By its nature, forward-looking information involves numerous assumptions, inherent risks and uncertainties, both general and specific, that contribute to the possibility that the predictions, forecasts, projections and various future events will not occur. The Company undertakes no obligation to update publicly or otherwise revise any forward-looking information whether as a result of new information, future events or other such factors which affect this information, except as required by law.
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