Each one in plain English, with the numbers worked through for a shareholder.
27 Feb 2012resource reserve update▲ GoodMajor
The company released its long-awaited preliminary economic assessment for Hasbrouck, which had been deferred since April 2011 and was later targeted for Q1 2012. It outlines a heap leach mine processing Hasbrouck and nearby Three Hills material: inferred resource of 1.2 Moz gold and 29.3 Moz silver, 135,000 oz gold a year for five years at $555/oz adjusted cash cost, initial capital $78.1M, after-tax NPV $98.7M (6%) and IRR 60% at $1,000 gold/$18 silver. It is preliminary and relies on inferred resources, so there is no certainty it will be realised; permits are assumed in H2 2013 with production possible from 2015, subject to a positive feasibility study and board decision. This resolves the deferred assessment thread.
Allied Nevada raised proven and probable reserves at Hycroft by 24%, to 12.7 million ounces of gold and 481.9 million ounces of silver, by converting 2.5 million ounces of gold and 93.3 million ounces of silver out of the resource category through infill drilling and engineering work.
Two press releases were furnished. Oct 18, 2011: new Hasbrouck drilling extended the Saddle, Franco and Crossroad zones (e.g. 24 m at 2.1 g/t gold, 9 g/t silver); 26,023 m drilled in 106 holes so far, with a resource update and preliminary economic assessment now expected in Q1 2012. Oct 19, 2011: the company received offers from Caterpillar Financial, Komatsu Financial and a major US financial institution for $300M of equipment financing (60-72 months, 5-6% effective rate, subject to customary closing conditions), and has ordered three CAT shovels, thirty-three 320-ton Komatsu haul trucks and a $8.6M primary crusher from FL Smidth. This continues the Hasbrouck drilling and the Hycroft expansion; the financing is offers only, not closed. The Hasbrouck assessment, deferred in April, now has a new Q1 2012 target. The release also says the crusher is due by end of 2012 and the plant in operation by mid-2013, which differs from the January 2015 mill start in the September study (the filing text does not say whether these are different things; the 2013 date appears tied to the crusher project, an inference).
The company announced a positive feasibility study for a milling expansion at the wholly owned Hycroft mine, on top of the heap leach expansion already in progress. The study projects average annual output of 616,800 ounces of gold and 25.9 million ounces of silver in 2015-2024 at an adjusted cash cost of $190 per ounce, with total initial capital of about $1.2 billion ($985 million for the mill) and an after-tax return of 34% at $1,000 gold and $18 silver. It rests on a Proven and Probable reserve of 10.2 million ounces of gold and 388.6 million ounces of silver (August 23, 2011 release), and the board approved $47.1 million for long-lead items and detailed engineering ($3.6 million in 2011, $43.5 million in 2012), with permits expected January 2013. The mill financing is not yet arranged: the company says it is in discussions with US and Canadian financial institutions. The filing's cover date reads September 16, 2010, but the press release is dated September 16, 2011, so the 2010 date looks like a typo (inference).
A July 19, 2011 press release reported two new higher-grade zones at Hasbrouck east of the Saddle Zone, including the 'Franco Zone' (97 meters at 2.3 g/t gold and 34 g/t silver, 3.1 g/t gold equivalent). The company says one zone may be part of a feeder system to the Saddle Zone, follow-up drilling is under way, and a first-phase drill program has started at Klondike Flats, the newly acquired land to the south. These are drill results, not a resource estimate; this continues the Hasbrouck high-grade story.
A July 6, 2011 press release reported infill drilling in the Vortex Zone at the Hycroft mine, including 125 meters at 0.7 g/t gold and 158.0 g/t silver (4.3 g/t gold equivalent). The company says results are at or above the average grade of the resource, that the mineralization remains open in several directions, and that drilling will continue through year end with five to six rigs. This continues the Vortex drilling described in 2010; these are drill results, not a resource update.
A May 19, 2011 press release gave more drilling results from the Saddle Zone at the wholly owned Hasbrouck project: a hole south of the discovery hole hit 85 meters at 3.0 g/t gold and 102.9 g/t silver (5.3 g/t gold equivalent), and another hole extended the zone south. The zone remains open along its trend and at depth, so this continues the Saddle Zone discovery from April; these are drill results, not a resource estimate. The company also said it grew its Hasbrouck land position from about 2 km2 to about 27 km2 in Q1 and plans a drill program on the new Klondike Flats area in the second half of 2011.
The company announced a high-grade 'Saddle Zone' discovery at the wholly owned Hasbrouck project in the first quarter of 2011, with the discovery hole at 160 meters grading 4.5 g/t gold and 83.3 g/t silver (7.1 g/t gold equivalent at spot prices) and visible gold in several holes. The zone is still open and step-out drilling is under way. The company has realigned its 2011 drilling to target high-grade zones and has decided to defer the preliminary economic assessment it had planned for the first quarter until the zone's size is established. That reverses the Q1 2011 assessment timing given in January. These are drill results, not a resource estimate.
