New Afton Looking Positive
Vancouver-based New Gold Inc. announced in early April the results of a feasibility study conducted on its 100%-owned New Afton copper-gold project, 10 km west of Kamloops in south-central British Columbia. This is the site of the former open pit Afton mine, which operated from 1978 to 1987, producing approximately 500 million lb of copper, 500,000 oz of gold, and 3 million oz of silver. In 1999 New Gold acquired the mineral rights through staking.
The feasibility study has confirmed that the New Afton project is economically and technically feasible as an underground block cave mine, with ramp access from the existing pit. It could produce ore at a rate of up to 4.0 million t/y (11,000 t/d), which would make it one of Canada’s largest underground metal mines, based on tonnage of ore.
The property is host to a copper-gold porphyry, which is among the highest grade in the world of this deposit type. The resource occurs over a 1,000-m length to a depth of about 800 m below surface, within a structural corridor outlined by the Hanging Wall Fault and the Footwall Fault. The Main zone averages 100 m wide and 350 m tall. There are small mineralized Hanging Wall lenses south of the Hanging Wall Fault, and a recently discovered C zone vertically below the Main zone. There are three phases of mineralization: primary (hypogene) mineralization comprising 52% of the total resources with the copper-bearing minerals dominated by chalcopyrite and lesser bornite; mesogene (39% of the resource) dominated by chalcocite with lesser chalcopyrite; and supergene forming 9% of the resource, containing native copper and minor chalcocite.
The reserves from the Main zone (based on copper at US$1.45/lb, gold at US$475/oz and silver at US$8.00/oz) are 44.4 million tonnes grading 0.98% Cu, 0.72 g/t Au and 2.27 g/t Ag. This contains 960 million lb of copper, 1.03 million oz of gold and 3.24 million oz of silver. The estimate used a cutoff value of Cdn$15/tonne.
Measured and indicated resources in the Main zone and Hanging Wall lenses, based on $15/t cutoff and US$1.20/lb Cu, US$450/oz Au and US$5.25/oz Ag, are 58.6 million tonnes grading 1.1% Cu, 0.83 g/t Au and 2.73 g/t Ag. This contains 1.4 billion lb of copper and 1.6 million oz of gold. Using the same price and cutoff parameters, the C zone contains an inferred resource of 6.6 million tonnes grading 1.1% Cu, 0.97 g/t Au and 1.75 g/t Ag.
According to the feasibility study, New Afton could be one of Canada’s lowest cost gold producers, with cash costs of -US$852/oz (net of copper and silver credits). The cost to produce copper is predicted as US$0.58/lb (net of gold and silver credits).
The processing plant comprises a conventional crushing, grinding, gravity concentration and flotation circuit using standard processes and equipment. The penalty elements arsenic and mercury are associated with the mesogene and supergene ore. This will be blended with ore from the main zone to reduce the concentration of penalty elements.
The feasibility study was carried out by a team co-ordinated by John Shillabeer of Hatch Ltd., which also completed the processing and surface infrastructure engineering components of the study. Mine planning and reserves were completed by AMC Consultants, and Scott Wilson Roscoe Postle Associates completed the geology and resource sections. Environmental services and permitting were completed by Rescan Environmental Services Ltd. The tailings disposal analysis was completed by Vector Engineering Inc. The groundwater modeling was carried out by Piteau Associates Engineering.
The initial capital expenditures are estimated at US$268 million, with additional life of mine expenditures of US$215 million. The initial mine life will be 12 years. Annual gold production will average 82,000 oz, while copper production will average 78 million lb/year. The initial construction period will be approximately two years in order to reach commercial production in the second half of 2009.
Upon start-up, the production rate will be 1.6 million t/y for two years, and ore will be trucked to surface and processed on site to produce a concentrate, which will be transported by rail either to eastern Canada, or to Vancouver for shipment to Asia. The full production rate will be 4.0 million t/y; ore will be crushed underground before being conveyed to surface. For the entire mine life, tailings will be deposited in a new facility. Water will be supplied initially from the Afton open pit, and thereafter from Kamloops Lake to the north.
To expedite development, the underground mining contractor Cementation Canada Inc. was scheduled to commence underground work at the beginning of April. As well, the company has begun the process of ordering the 11,000-t/d SAG mill, committing to the principal components by making required cash payments.
The formal mines permit application for the approval of both the mine plan and reclamation program is currently being reviewed, and the company is addressing various questions. In addition, the government of B.C. is conducting its required consultations with the local First Nations communities (Kamloops Indian Band and Skeetchestn Indian Band).
Last August, Barclays Capital was appointed as lead arranger for the debt portion of project financing. New Gold is now focused on securing the financing required to develop the project, including continuing its discussions with Barclays.
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