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Geodex Report March 1 2009

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1. SISSON BROOK TUNGSTEN – MOLYBDENUM DEPOSIT NEW BRUNSWICK PRELIMINARY ECONOMIC ASSESSMENT (2009 TECHNICAL AND ECONOMIC UPDATE) FEBRUARY 25, 2009 J.M Marr M.Sc.,…
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  • 1. SISSON BROOK TUNGSTEN – MOLYBDENUM DEPOSIT NEW BRUNSWICK PRELIMINARY ECONOMIC ASSESSMENT (2009 TECHNICAL AND ECONOMIC UPDATE) FEBRUARY 25, 2009 J.M Marr M.Sc., P.Geo. VP Exploration, Geodex Minerals Ltd Geodex Minerals Ltd. TSX.v – “GXM” Head Office Regional Office Suite 450-800 West Pender Street 150 Woodside Lane Vancouver, BC,Canada,V6C-2V6 Fredericton, NB, Canada E3C 2R9 Tel:604-689-7771 Tel: 506-450-4488 FX:604-689-5528 Toll Free:888-999-3500 Fax: 506-450-4422 E-Mail: [email_address] Website: www.GeodexMinerals.com
  • 2. GEODEX MINERALS LTD MANAGEMENT & DIRECTORS Jack M. Maris, President, Director Jack M. Marr, V.P. Exploration, Director Jack Patterson, Director Neil D. Humphreys, Chief Geologist, Director Clem Pelletier, Director David M. Buckle, Director Neil S. Seldon, Director Blaine Bailey, Chief Financial Officer David Martin, Regional Manager New Brunswick Christopher R. Anderson, V.P. Business Development ADVISORY BOARD David Sinclair, Ph.D William Gardiner, M.Sc. Raymond Dujardin, P.Eng. <ul><li>SHARE STRUCTURE JANUARY 2009 </li></ul><ul><li>CASH ON HAND </li></ul><ul><li>General Account $1,003,000 </li></ul><ul><li>Flow Through Account $1,729,000 </li></ul><ul><li>SHARES OUTSTANDING </li></ul><ul><li>87,453,349 </li></ul>
  • 3. Table of Contents Executive Summary………………………………………………………………………………………………………….. 4 1 A. Introduction……………………………………………………………………………………………………… 5 1 B. Purpose of this report………………………………………………………………………………………. 6 1 C. Background, History and Geology…………………………………………………………………….. 6 1 D. Present Project Development Status…………………………………………………………………10 2. Updated Resource (block) model………………………………………………………………………………… 11 3. Pit Design/Grade Scheduling………………………………………………………………………………………… 15 4. Metallurgical Results, Process Development Basis, Operating Costs …………………………….20 5. Capital Cost Estimation………………………………………………………………………………………………… 25 6. Waste /Tailings Management……………………………………………………………………………………….. 33 7. Financial Model – Spreadsheet…………………………………………………………………………………….. 37 8. Recommendations to Pre-Feasibility …………………………………………………………………………..44 9. After Pre-feasibility – What happens next?...................................................................... 46
  • 4. Executive Summary The last document on the economic status of the Sisson Brook tungsten-molybdenum project north of Fredericton, New Brunswick was a Preliminary Economic Assessment carried out by Wardrop Engineering in November 2007. A robust NPV and IRR led to the recommendation that work proceed to the next development stage. Infill drilling, geotechnical work and environmental/community studies took place in 2008 and have continued since that time. The present study, compiled mainly by consultants as described herein, is based largely on new data, particularly an expanded block model which has recently undergone preliminary pit design and grade scheduling and a program of metallurgical work at SGS in Vancouver. Parallel testing indicated that a pre-concentration circuit would profoundly benefit operating and capital costs. This upfront ore-sorting process concentrates 96.0% of the tungsten and 83.8% of the molybdenum in slightly more than half of the rock mined, which increases grade to the mill and reduces capital and operating costs. A plant layout and process equipment list was prepared and costed by an independent engineering group to reflect this revised concept. The report spreadsheet uses a mining rate of 20,000 tonnes/day for a mine life of 20 years. Overall recoveries (sorter and mill) are 74% for tungsten and 70% for molybdenum. Tungsten is priced at an APT price of $US 220/tonne of WO3 in concentrate, with a blended $US 50/tonne reduction (gravity/flotation) for offsite costs. Molybdenum uses a long term price of $US 15/lb with an 8% assessment for offsite costs and roasting. Mine Operating Costs remain at $Can 1.30/tonne ($US 1.11), beneficiation costs are re-assessed at $Can 4.66/tonne ($US 3.96) with G &A costs at $Can 0.66/tonne ($US 0.56). The re-calculated pre-production Capital Costs from the new process concept are slightly reduced at $US 339 million which includes a 30% contingency. Owner’s costs include $US 1.0 million for environmental costs during construction. Sustaining (and sinking fund provision for reclamation) costs are assessed at 2.5% of original capital per production year. Spreadsheet analysis indicates that the project has an Unleveraged IRR from Year -2 of 23%. The pre-tax NPV at an 8% discount rate is $US 372 million, $US 277 million at 10%. Payback is in Year 4. Cumulative cash flow is $US 1.18 billion. It has long been recognized that New Brunswick offers a mining-friendly environment, good access and excellent infrastructure. The economics of open pit development linked to the large size of the deposit suggest that much flexibility will exist in mine planning. Reaction to changes in metal prices can occur by constraining supply to increase margins or increasing daily volume. The recommendation within this report is that the company moves to completion of a Pre-Feasibility study by Q4 2009. The present report is a ‘baseline’ study or directional concept produced in a worldwide trough of mining finance. It requires refinement and upgrading in several areas to bring it to the stage of a commercial concept.
  • 5. 1 A. Introduction Sisson Brook is a bulk tonnage tungsten/molybdenum deposit amenable to the cost benefits of open-pit mining. It is located in rolling ‘bush’ country (crown land) about 100 km north of Fredericton, N.B. within easy reach of several small towns. Logistics are excellent. The property is crossed by a network of logging roads connecting into main access routes. A power line passes south of the proposed pit area and a rail line exists north of the claims through the town of Napadogan. Water is readily available at the site and there is highway access to tidewater at the port of Saint John. A Scoping Study was prepared for an open-pit deposit by Wardrop Engineering on November 9, 2007 which is available on SEDAR. This report concluded that the deposit had positive economic characteristics. Using the normal Scoping Study combination of available data and industry assumptions, including metal prices current at that time, the report produced an NPV of $Can 693 million and an IRR of 29.8%. The recommendation was made to proceed to Pre-Feasibility. The decision at that time was therefore made to proceed to Pre-Feasibility, the next stage in mine development. Contractors were hired as shown in the ‘development’ section below to assist in collecting all the engineering, economic and environmental data necessary to reach Pre-Feasibility and subsequent stages. Drilling continued on the property in 2008 (11,800 m) to infill the most prospective part of the deposit (Zone III) and to check for higher grade areas such as the molybdenum-rich East Flank Zone which was discussed in various 2007 News Releases. The 2008 program also led to discovery of the Ellipse Zone south of Zone III. An aggressive regional campaign was also carried out to look for other nearby deposits (six properties) which could potentially provide ore to be trucked to the millsite to help the overall economics. Zone III and possibly its attached Ellipse zone (as shown in Section 2) are the only sources of tonnage for this study. The higher sulphide chalcopyrite-wolframite Zones I and II are not presently in the mine plan and their potential remains unexamined at this stage. Although work is continuing, enough of the Zone III data is now in hand for an updated economic study. A new Resource model incorporating the 2008 drilling with revised resource categories (Measured/Indicated/Inferred) was received from Mercator Geological Services Limited, an independent consulting group, in January 2009. These resource tonnage tables are shown in Section 2. This block model then underwent preliminary pit design analysis (Section 3) to schedule mine grades in the twenty years of anticipated mine life with optimal grades in the first few years. New metallurgical results from SGS (Vancouver) have led to a revised plant layout, most importantly incorporating a new pre-concentration option (Section 4). Metal prices, particularly molybdenum, have been lowered in line with the commodity downturn. Capital cost estimation has been reviewed in detail (Section 5) and the present status of waste/tailings management in Section 6. These factors are pulled together into an economic evaluation and spreadsheet in Section 7.
  • 6. 1 B. Purpose of this report This report is intended to present a ‘snapshot’ economic portrait of the Sisson Brook tungsten-molybdenum deposit north of Fredericton, New Brunswick. It is a ‘point in time’ spreadsheet evaluation incorporating much new data (particularly metallurgical results), revising previous studies and using a new pricing structure for the two main metals. It is not intended to be a detailed or complex review although much analysis (Sections 4, 5) has gone into a new processing concept, plant layout and necessary equipment lists and costing. It will provide a summary and valuation for the deposit at this time and will point the way forward to the Pre-Feasibility stage. 1 C. Background, History and Geology The Sisson brook deposit was periodically explored by various companies after the mid 1950s, much of this directed to VMS targets of Bathurst type, a completely different style of mineralization. The present Zone III (Scheelite/molybdenite) and the adjacent Zones I and II (chalcopyrite, wolframite) were discovered and drilled by Texasgulf Sulphur/ Kidd Creek Mines Ltd. in the period 1978 to 1982. Extensive surface exploration was done and 40 holes were drilled at that time. By a Letter of Agreement dated October 25, 2004, Geodex optioned a 70% interest in the property from Champlain Resources Inc., a private company based in Nova Scotia. A formal agreement was concluded on July 6, 2006. There are no royalties. Terms and conditions of that agreement have now been met and Geodex’s 70% interest has been earned. The agreement allowed Champlain to be carried to production, its share of production costs to be recovered from the first proceeds of commercial production. In November 2007, Champlain’s 30% interest was the subject of competing bids from Geodex and from Rockport Mining Corp., a private New Brunswick-based company. By acquiring 54% control of Champlain (which is still in existence under Geodex direction), Geodex now owns an effective 86% interest in the Sisson Brook deposit. At the time of the Letter Agreement in 2004, the property comprised 141 claims. Additions over the years have led to a present total of 631 claims in eight groups, protecting the deposit and surrounding land required for development. The overall block is about 12 km north-south and about 4 km wide, reflecting the trend of Zone III. The claim map is attached on the following page.
  • 7. As referred to above, the Sisson Brook deposit comprises four wide and steeply-dipping zones of porphyry-style, vein and fracture-controlled tungsten, molybdenum and copper mineralization. The deposit straddles the strongly sheared contact of the Howard Peak granodiorite, one of a group of Siluro-Devonian intrusions in New Brunswick hosting important deposits of tungsten, tin, molybdenum and antimony. The focus Zone III and the new Ellipse zones are the largest and best explored of the deposits and are characterized by sheeted quartz veins and stockworks carrying molybdenite and scheelite. Zones I and II to the north of Zone III are younger vein systems with chalcopyrite, wolframite and increased pyrite and pyrrhotite. The presence of mineralized and altered felsic dykes in Zone III (one at least of which is Late Devonian in age) suggest the presence of a buried granitic stock at depth which supplied the heat source for the hydrothermal system and most of the metals in the deposit.
  • 8. The local geology and the distribution of the mineralized zones are shown on the next page. A comprehensive, updated geological report is available from the company on request (Humphreys, 2009).
  • 10. 1 D. Present Project Development Status Following the successful Scoping Study in November 2007, the decision was made to proceed to Pre-Feasibility. Contracts were let to Wardrop Engineering for reporting/engineering studies, to SGS Canada Inc. for metallurgical testing, to Rescan Environmental for environmental and community relations and to TerrAtlantic Engineering Inc. for geotechnical work. Infill and expansion drilling in 2008 (11,800 m) was carried out by Geodex. These contracts were suspended in late 2008 with the downturn in market activity and the lack of financing for mining projects. Much work has already been completed and these contracts can be re-established at any time. Rescan registered the project on September 5 th 2008 under the NB Clean Environment Act and on October 24 th 2008, Geodex was informed that, as expected, a comprehensive Environmental Impact Assessment (EIA) would be required. Environmental monitoring has been maintained over this period. The environmental work has not as yet disclosed any major problems and several community/town hall meetings have introduced the project to the local population. Acid rock drainage (ARD) studies are underway. The very low sulphur value in the Zone III head assay composite (0.45% S) is an encouraging indication. Preliminary rock mechanics studies suggest very favourable 50 degree to 60 degree bench face slopes. Waste and tailings management studies are proceeding. The provincial government of New Brunswick has expressed strong support for the project due to the general ‘have-not’ state of the economy and the de-commissioning of the Bathurst mine in 2010. This large underground zinc mine, a major tax contributor to the provincial economy, has been in operation since 1964.
  • 11. <ul><li>Updated Resource (block) model. </li></ul><ul><li>Contributor: Mercator Geological Services Limited. </li></ul><ul><li>65 Queen Street, Dartmouth, N.S. </li></ul><ul><li>B2Y 1G4 </li></ul><ul><li>NEWS RELEASE (Distributed January 27, 2009.) </li></ul><ul><li>Geodex updates Zone III Resource Model at Sisson Brook, New Brunswick and adds new Resources from the adjacent ‘Ellipse’ Zone. </li></ul><ul><li>Geodex Minerals Ltd., (the ‘Company’) is pleased to report receipt of an updated resource model for its Sisson Brook tungsten-molybdenum deposit, located north of Fredericton, New Brunswick. This resource estimate incorporates an additional 11,800 m of infill and expansion drilling (48 angle holes) carried out on the deposit during the summer of 2008. It therefore adds substantial new data to the previous resource estimate, published in a News Release of June 5, 2008. </li></ul><ul><li>As in previous resource estimates, this study was independently prepared by Mercator Geological Services Limited (Mercator) of Dartmouth, Nova Scotia under supervision of Mr. Michael Cullen, P. Geo. and Mercator staff geologist Mr. Matthew Harrington. Mr. Cullen is a ‘Qualified Person’ as defined under National Instrument 43-101 (NI 43-101). The estimate is considered compliant with NI 43-101 and a Technical Report supporting the estimate will be posted on SEDAR within 45 days. </li></ul><ul><li>The present resource estimate differs from previous estimates which were based solely on the southern half of the Sisson Brook deposit, the area referred to as Zone III. It includes for the first time a resource calculation for a new zone called Ellipse which lies a few hundred metres to the south of the central ‘core’ zone of Zone III. The two zones intersect at the south end of Zone III. Details of the nature and size of the Ellipse Zone are set out in a News Release of September 30, 2008. Main differences from Zone III are that Ellipse lies entirely within diorite on the west side of the property and in addition appears to have a northwesterly orientation. It appears to be relatively enhanced in molybdenum, otherwise mineralogy and vein characteristics are similar. </li></ul><ul><li>Updated January 2009 Mineral Resource Estimate and Classification. </li></ul><ul><li>Mineral Resources for Zone III and Ellipse are shown in the following tables. These are Mineral Resources and not Mineral Reserves, as economic viability has not yet been demonstrated. </li></ul>
  • 12. ‘ Zone III’ Mineral Resource Estimate *WO3 Equivalent % Cutoff Resource Category Rounded Tonnes WO3% Mo% 0.025 Measured 26,600,000 0.072 0.025 0.075 Measured 19,400,000 0.086 0.030 0.125 Measured 11,000,000 0.109 0.037 0.175 Measured 5,100,000 0.135 0.044 0.225 Measured 1,800,000 0.168 0.053           0.025 Indicated 257,300,000 0.062 0.019 0.075 Indicated 151,100,000 0.082 0.026 0.125 Indicated 69,100,000 0.107 0.034 0.175 Indicated 26,700,000 0.131 0.045 0.225 Indicated 9,300,000 0.152 0.058           0.025 Inferred 223,600,000 0.055 0.018 0.075 Inferred 118,700,000 0.073 0.027 0.125 Inferred 47,800,000 0.097 0.036 0.175 Inferred 15,900,000 0.120 0.049 0.225 Inferred 5,400,000 0.138 0.064
  • 13. * WO3% EQ = WO3% + (Mo% * 2.02) from current Geodex Mo and WO3 base case pricing All resource grades based on 3 meter composites capped at 0.60% WO3 and 0.35% Mo.     *WO3 Equivalent % Cutoff Resource Category Rounded Tonnes WO3% Mo% 0.025 Measured 1,100,000 0.082 0.023 0.075 Measured 900,000 0.092 0.027 0.125 Measured 500,000 0.112 0.034 0.175 Measured 200,000 0.135 0.044 0.225 Measured 100,000 0.146 0.068           0.025 Indicated 28,300,000 0.072 0.024 0.075 Indicated 22,500,000 0.081 0.027 0.125 Indicated 10,400,000 0.105 0.038 0.175 Indicated 4,600,000 0.121 0.050 0.225 Indicated 1,500,000 0.139 0.067           0.025 Inferred 36,500,000 0.061 0.019 0.075 Inferred 23,400,000 0.073 0.026 0.125 Inferred 8,600,000 0.091 0.041 0.175 Inferred 3,400,000 0.102 0.057 0.225 Inferred 900,000 0.094 0.094
  • 14. All the tonnage in the lowest threshold category in Zone III (including Ellipse) attests to the large size of the deposit, which has not yet been totally defined. New contributions come chiefly from the Ellipse Zone, from peripheral drilling on the east side of Zone III to define the East Flank Zone, which remains open to the east, and to expansion of the overall resource at depth. The company projects that grades at the mid-level threshold (0.125% WO3 Equiv.) will be the base case situation, as presently understood. These are highlighted in the attached tables. The ‘Measured and Indicated’ resource in both zones shown above at this mid-level (0.125%) WO3 Equivalent threshold is 91.0 million tonnes. This is somewhat reduced from the 102.8 million tonnes reported in the June 5 News Release but reflects only use of a reduced molybdenum price in the WO3 Equivalent conversion formula. In view of recent volatility in world molybdenum prices, the conversion molybdenum price was reduced by 30% (to $US15/lb) from the base case pricing in the 2007 Scoping Study. This is indicated in the formula attached to the table. Much tonnage in the Inferred category remains to be upgraded. By contrast, grades have significantly improved in these mid-level grade areas. In the base case Zone III, 0.125% WO3 ‘Measured and Indicated’ category, WO3 grade has increased from 0.088% to 0.107%, an increase of 21.6%. The new tonnage/grade combination indicates a 7.6% increase in contained metal at this threshold. Projec
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