Tongshan Mining Industry announces New Plan: increasing Copper and Gold production to extend Mine Life and reduce Cash cost

SMM2月26日讯：2月25日，铜山矿业公司宣布其位于不列颠哥伦比亚省南部的Copper Mountain Properties的矿山生产计划。综合生产计划包括将现有的Copper Mountain Mine（“CMM”）工厂适度扩建至每天4.5万吨，并整合New Ingerbelle（“New Ingerbelle”）的生产。
                                                                                                                          

                                                                                                                         
计划包括增加102％的矿物储量，并且在前十年中，年平均铜产量增加27％至1.16亿磅，矿山寿命延长12年至26年。

The plan outlines a phased approach to plant expansion and New Ingerbelle development investment. The first stage is the expansion of the factory, which requires the installation of a third ball mill. The expansion could be completed as early as the first quarter of 2020 and is expected to cost about $25 million. The second phase is the development of New Ingerbelle, which requires about $23 million. The net present value after tax (8 per cent) of the Tongshan mine's integrated production plan (including two growth items) is approximately $619 million. All indicators are 100 per cent and the currency is the United States dollar. Gil Clausen, president and chief executive officer of Copper Mountain, said the new integrated production plan has revolutionized Copper Mountain's operations. With minimal capital and minimum risk, the company is likely to achieve great value, including increasing annual production, prolonging mine life and reducing unit costs. These growth projects are based on already solid operations and have the potential to increase near-term cash flows. The project will not have negative cash flow over the next decade. The company is actively reviewing and replacing existing debt programmes in order to have a large amount of cash available and cash flows will enhance the overall liquidity of the company.

Highlight

The focus of the integrated production plan includes the expansion of the existing plant to 45000 tons per day and the integration of New Ingerbelle production, as shown below.

(1) consensus pricing from US $2.94 / lb copper to US $3.20 / lb copper, long-term copper price of US $3.18 / lb, gold price of US $1314 / oz, silver price of US $17.75 / oz, Canadian dollar exchange rate of US $1.32 / lb

(II) the first ten-year production cycle begins in 2020.

Mining and processing

The integrated production plan sets the plant from 40, 000 tons per day to 45000 tons per day, and integrates the New Ingerbelle mine. The plan is based on mineral reserves only and does not include any other categories of mineral resources. The company believes that production can be further increased by converting resources into reserves and increasing resources through exploration. The plan stipulates that the, New Ingerbelle mine will be transported to the copper mine by truck using the existing mining equipment fleet of CMM, the 45000 ton / day rolling mill and tailings facilities expanded by CMM. The comprehensive production plan is to start the third ball mill in the second quarter of 2020.

Further metallurgical testing of New Ingerbelle ore has been completed and positive results have been achieved. Samples collected within the latest New Ingerbelle pit limits show that the ore will improve flotation performance, reaching a historic New Ingerbelle plant recovery of 87 to 89 per cent. The test results show that the copper recovery rate of New Ingerbelle is better than that of CMM so far, and the gold content and recovery rate are higher. The average life expectancy of copper recovery in mines is expected to be 85.5 per cent, about 5 per cent higher than the current level of CMM.

The total amount of ore to be mined is expected to be 363 million tons and the total amount of mining waste is expected to be 663 million tons, an increase of 1.82 to 2.88 compared with the CBM exploitation plan in 2018. The recovery rates of copper, gold and silver are 85.5%, 69% and 69%, respectively. The total output is expected to be 1.895 billion pounds of copper, 982000 ounces of gold and 7.3 million ounces of silver. A summary of mining, processing and production indicators is provided below.

(I) Ten-year production cycle begins in 2020

Capital and operating costs

The initial capital required to increase throughput to 45000 tons per day is estimated at approximately $25.2 million. This includes the cost of installing the third ball mill and other equipment required, but does not include the actual cost of the ball mill that the company has purchased. The funding required to start the New Ingerbelle mine is estimated at approximately $22.7 million, most of which will be used to complete the short bridge from New Ingerbelle to Copper Mountain Mine. The company expects New Ingerbelle to take about 24 months to develop. The technical report assumes that the pre-stripping of New Ingerbelle will be completed through contract mining and is not included in the initial capital because New Ingerbelle is now integrated into the Copper Mountain Mine production plan. In accordance with the requirements of IFRS, excess costs that exceed the expected cost of mining will be treated and amortized as capital expenditure. The waste in the mine production plan exceeds the average stripping ratio of any year, including the development of New Ingerbelle.

The capital to maintain the life of the CMM mine is estimated at $214 million. Most of the sustainable capital is related to the replacement of mobile mining equipment. The average C1 cash cost (in terms of product credit) is about $1.74 per pound of copper for the first decade from 2020 and $1.87 per pound over the life of the mine. The total operating unit cost is estimated at $92 per tonne, including mining costs of $2.10 per tonne and processing costs of $4.44 per tonne. The unit cost is broken down as follows.

All capital and operating costs are based on the Canadian dollar's long-term exchange rate of 1.32 to the US dollar.

Project funds

The net present value after tax for plant expansion and New Ingerbelle integration is $619 million, above the 8 per cent discount rate. Economics is based on the Canadian dollar's exchange rate of 1.32 against the dollar and consensus metal prices changing in the first four years, and long-term metal prices of $3.18 per pound of copper, $1314 per ounce of gold and $17.75 per ounce of silver. The company conducted a sensitivity analysis of long-term copper price changes in the net present value after tax (8%), and the results are summarized as follows.

Mineral reserves and mineral resources

Compared with mineral reserves on September 1, 2018, Tongshan mining reserves have more than doubled. Mineral reserves are included in mineral resources. The effective date of mineral reserves and mineral resources is January 1, 2019. Mineral reserves and mineral resources are summarized below.

Mineral reserves remarks: 1. Mineral reserves follow the JORC and CIM definition criteria 2. The reserves of minerals generated from the mining surface on January 1, 2019 are used. 3. Ore reserves are $2.75 / lb, $1250 / oz and $16.50 / oz for long-term copper, gold and silver, respectively. 4. The average recovery rate of copper process is 80%, that of gold process is 68%, and that of silver process is 71% 5. The average bulk density is 2.78 tons per cubic meter.

Description of mineral resources:

1. Estimation of mining face of Tongshan Mine on January 1, 2019

2. Mineral resources affected by $3.50 / pound copper pit

3. Cut-off levels are based on copper levels only

4. Mineral resources include mineral reserves, but do not include stored materials

5. The cut-off value for mineral resources is 0.10%

6. as a result of rounding, the total may not increase

The author introduces the vice president of exploration of: Peter Holbek, Tongshan Mining Co., Ltd., who has a great deal of experience in mining industry and is a qualified person defined by National Instrument 43.

(note: this article is translated by Shanghai Nonferrous Metals Network. If you are concerned with copyright issues, please contact SMM. We will deal with "View the original text" in a timely manner.)

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