Each one in plain English, with the numbers worked through for a shareholder.
7 Sept 2017resource reserve update▲ GoodMajor
A preliminary study of an underground mine below the old Fox open pit at Ekati gives an incremental after-tax value of US$187 million (company share) and a 23% return, on initial capital of US$628 million. It would extend Ekati's mine life from fiscal 2035 to fiscal 2042, but it rests on indicated resources, not reserves, so economic viability is not demonstrated. This delivers the Fox Deep PEA expected in the earlier context; a pre-feasibility study is on track for late fiscal 2018, and the filing says Misery Deep permitting began in August 2017.
A pre-feasibility study on an underground mine below the Misery open pit at Ekati shows a first probable reserve of 1.8 million tonnes and 8.7 million carats, an incremental post-tax value of US$92 million (company share) and a 40% return, on initial capital of US$94 million. It extends Ekati's mine life from fiscal 2034 to 2035, a construction decision is expected in June 2017, and permit applications are expected in the third quarter of calendar 2017. A preliminary assessment for Fox Deep is expected in the third quarter of fiscal 2018, with a pre-feasibility study late in fiscal 2018.
The company announced a renewed focus on exploration, with a success-based five-year budget of about C$50 million, and a first estimate for the Leslie pipe at Ekati: an inferred resource of 51 million tonnes and 16 million carats (not reserves, so economic viability is not demonstrated). A concept study on Leslie is planned for 2017, and summer 2017 work includes drilling the Kodiak pipe and at least five geophysical targets. It also states the Buffer Zone interest as 72% (the earlier context had 65.3%), and the CFO is now Matthew Quinlan, who signs the filing, and Jim Gowans is Chairman.
The company filed the updated Ekati technical report it had said was being prepared, with mineral reserves and resources effective July 31, 2016. Its life-of-mine plan is updated from the July 6, 2016 Jay study release to include the impact of the June 23, 2016 process plant fire and results of recent production trials at Misery Main and Pigeon. The release gives no new reserve, resource or cost figures.
The company corrected a transcription error in the life-of-mine operating cost forecast issued July 6; the corrected total for Ekati (100% basis) is US$4,804 million for fiscal 2018-2034. It says the correction does not affect the other economic figures in that release, and an updated Ekati technical report including the Jay study is being prepared.
The board approved developing the Jay Project after a feasibility study, resolving the earlier question of Jay development funding: the company expects to fund it from existing cash and internal cash flow. The study shows initial capital of US$647 million, a 100%-basis post-tax NPV of US$398 million and IRR of 15.6% (company-share NPV US$278 million, IRR 16.7%), versus US$610 million NPV and US$657 million capital in the January 2015 pre-feasibility study. Base diamond price is US$53 per carat, processing starts in 2022 and Ekati's life extends to 2033, though permitting is not yet complete.
The company says it can keep Ekati running continuously without starting major Jay construction in 2016, so it is pushing the Jay schedule back: access road in 2017, dike construction 2018-2020, pre-stripping in 2021, and mining and processing of Jay kimberlite by late 2022. The earlier plan was permitting in 2016 and mining from 2020. It cites Sable ore, deeper Koala underground mining and a lower processing throughput trial as the reasons; the feasibility study is still being finalised.
The pre-feasibility study on the Sable pipe (Core Zone, 88.9% owned), which follows the September 2015 preliminary assessment, shows 10.1 million carats of Probable Mineral Reserves, an incremental post-tax value (NPV) of US$137 million (down from US$233 million) and a 16.2% post-tax return (down from 17.3%). The base diamond price assumption was cut from about US$190 to about US$140 per carat, and initial capital is US$142 million (PEA: US$147.4 million); the company says it has contracted nearly all of the fiscal 2017 construction program and expects mining and processing by late fiscal 2019, with no stand-alone feasibility study planned.
A preliminary economic assessment of the Sable pipe in the Ekati Core Zone (88.9% owned) shows 11.7 million carats of Indicated Resources, an incremental post-tax NPV of US$233 million and a 17.3% post-tax IRR, developed alongside Jay. It assumes about US$147.4 million initial capital, construction starting in the first half of 2016 and mining by 2019. This is preliminary and based only on Indicated Resources, which are not proven reserves; a pre-feasibility study is being advanced and Jay still awaits regulatory approvals.
A pre-feasibility study on the Jay pipe in the Ekati Buffer Zone (65.3% owned) estimates 84.6 million carats of Mineral Reserve and an after-tax NPV of US$610 million (post-tax IRR 16%), on a 100% basis. It assumes about US$657 million initial development capital, permitting in 2016, construction starting in the second half of 2016, and mining from 2020 for about 11 years beyond the current projected Ekati closure in 2020. Brendan Bell is now named Acting CEO, and Ron Cameron signs as CFO.
