Gran Colombia Gold Announces Updated Mineral Resource Estimate and Preliminary Economic Assessment for Its Marmato Project
Gran Colombia Gold Corp. (TSX: GCM; OTCQX: TPRFF) announced today that it has completed an updated Mineral Resource estimate for its Marmato Project prepared in accordance with the Canadian Institute of Mining Metallurgy and Petroleum (“CIM”) Definition Standards incorporated by reference in National Instrument 43-101 (“NI 43-101”) with an effective date of July 31, 2019. Gran Colombia also announced today that SRK Consulting (U.S.), Inc. (“SRK”) has completed preliminary results of a Preliminary Economic Assessment (“PEA”) for the Marmato Project, focused on the Zona Baja mining operations, effective July 31, 2019, and is currently finalizing the technical report to be filed on SEDAR and Gran Colombia’s website by the end of November 2019.
Serafino Iacono, Executive Chairman of Gran Colombia, commenting on the preliminary results of the Marmato technical study, said, “We are very pleased to have reached the point at which we can see a path forward to significantly expand production from our Marmato Project and, through the recently announced spin out, create value for our shareholders while protecting our capital structure and balance sheet. The PEA charts a course whereby the immediate implementation of an optimized mine plan in the upper existing mine at Marmato, much like we did a few years ago at Segovia, will increase production and free cash flow starting in 2020. Concurrently, we will commence the development and construction activities in the new Deep Zone, which should come on stream in 2023, further increasing total gold production which reaches more than 150,000 ounces annually from 2024 through 2027 and then averages more than 100,000 ounces annually over the next nine years of operation. We expect to complete the transaction with Bluenose and the equity private placement in December and we are proceeding with the prefeasibility study to be finalized by mid-2020.”
On October 7, 2019, Gran Colombia announced that it had entered into a letter of intent with Bluenose Gold Corp. (TSX-V: BN.H) in respect of the proposed acquisition by Bluenose of certain mining assets at Gran Colombia’s Marmato Project located in the Department of Caldas, Colombia. The mining assets principally comprise the existing producing underground gold mine, including the right to mine in the lower portion of the Echandia license area, the existing 1,200 tons per day (“tpd”) processing plant and the area encompassing the Deep Zone mineralization, all located within the mining license area referred to as Zona Baja. Gran Colombia will retain its existing ownership of the mining licenses in the areas known as Zona Alta and Echandia.
Mineral Resource Estimate (“MRE”) Update Effective July 31, 2019
The table below summarizes the updated MRE effective as of July 31, 2019 (the “2019 MRE”) for each of Zona Alta and Zona Baja at Marmato:
|Measured and Indicated||6.3||4.2||860||30.6||6,236|
|Measured and Indicated||17.3||3.7||2,039||13.0||7,214|
Highlights of July 31, 2019 MRE
- Total Measured Resources in Zona Baja of 2.1 million tons at a grade of 4.9 g/t totaling 0.3 million ounces of gold are limited to vein material within the current levels being mined by Gran Colombia.
- Total Indicated Resources in Zona Baja of 15.2 million tons at a grade of 3.5 g/t totaling 1.7 million ounces of gold have been delineated primarily between Levels 16 and 21 in the existing mine, including areas in the lower portion of the Echandia license accessible from the current mining operation, and includes 0.5 million ounces of gold in the new Deep Zone, reflecting the exploration drilling completed to the end of July 2019.
- Total Inferred Resources in Zona Baja of 44.9 million tons at a grade of 2.3 g/t totaling 3.3 million ounces of gold have been delineated primarily in the Deep Zone and will be the subject of further drilling to upgrade Inferred to Indicated Resources for the prefeasibility study (“PFS”) expected to be completed by mid-2020.
- The 2019 MRE incorporates an additional 12,765 channel samples since the last MRE in 2017 (the “2017 MRE”) as part of the ongoing validation and capture of historical sampling and current grade control practices. In addition, there has been an increase in the drilling database of 152 additional holes since the 2017 MRE, which is split between 35 exploration holes (16,076 m) and 117 mine holes (9,172 m) inclusive of grade control sampling.
- The 2019 MRE reflects a reduction in material from the porphyry domain as gold cut-off grades used to report the porphyry domain increased from 1.2 g/t in the 2017 MRE to 1.9 g/t in the 2019 MRE, which is in line with the current cut-off grades used for the veins within the same areas.
- Additional Deep Zone mineralization has been defined in the 2019 MRE as a result of infill drilling.
- The Deep Zone is continuous along strike for approximately 500 m and has a confirmed down dip extent that reaches up to 800 m with a thickness that varies between 35 m and 150 m. The Deep Zone remains open at depth and to the east.
The following table provides further detail regarding the Mineral Resource estimate for gold in the Marmato Project as of July 31, 2019:
|Deposit||Type||Measured||Indicated||Measured & Indicated||Inferred|
|Zona Alta (3)||Veins||0.6||5.6||109||3.6||4.6||542||4.2||4.8||650||5.3||4.1||688|
|Zona Baja (4)||Veins||2.1||4.9||325||7.2||4.5||1,037||9.2||4.6||1,362||3.3||4.4||466|
- Mineral resources are not mineral reserves and do not have demonstrated economic viability.
- All figures are rounded to reflect relative accuracy of the estimate. All composites have been capped where appropriate.
- Zona Alta includes mineral resources from the Echandia license above 1,340 masl.
- Zona Baja includes mineral resources from the Echandia license below 1,340 masl and above 1,025 masl and are accessible from the current mining operation.
- Vein and Porphyry mineral resources are reported at a cut-off grade of 1.9 g/t. Cut-off grades have been based on a price of US$1,500 per ounce of gold, suitable benchmarked technical and economic parameters and gold recoveries of 95% for underground resources, without considering revenues from other metal.
- Deep Zone mineral resources are reported at a cut-off grade of 1.3 g/t. Cut-off grades have been based on a price of US$1,500 per ounce of gold, suitable benchmarked technical and economic parameters and gold recoveries of 95% for underground resources, without considering revenues from other metal within a limiting pit shell. The Deep Zone includes mineral resources an elevation of 1,025 masl.
Marmato PEA and Life-of-Mine (“LoM”) Plan
A mining study and schedule was prepared by both SRK’s and Gran Colombia’s technical professionals to create a LoM production schedule for the Mining Assets at Marmato. The Marmato mine in Zona Baja will ultimately comprise two distinct operations, the existing Upper Zone operation and a new Deep Zone operation which sits directly below the Upper Zone vein system. The Zona Baja contract was awarded to Gran Colombia’s wholly-owned subsidiary, Gran Colombia Gold Marmato S.A.S. (formerly Mineros Nacionales S.A.S.) in October 1991 and is valid for 30 years until October 2021. In October 2017, Gran Colombia commenced the process to renew the contract for another 30-year term, which is progressing well and is expected to be completed in 2020.
The PEA LoM production schedule foresees a total of 26.4 million tons of mineralized material being processed over a 19-year mine life resulting in a total of 2.2 million ounces of gold produced at an average LoM total cash cost of US$799 per ounce and an average LoM AISC of US$882 per ounce. The initial capital cost, to be incurred between 2020 and 2022, required for the Deep Zone mining operation is estimated to total US$269 million. At an expected long-term gold price of $1,300 per ounce, total LoM undiscounted after-tax free cash flow from mining operations amounts to US$448 million. At a 5% discount rate, the net present value of the total LoM after-tax free cash flow amounts US$207 million. Before financing, the project has a 20% internal rate of return and payback by 2026.
The annual production profile over the LoM in the PEA from both the Upper and Deep Zones is shown in the headline chart, above.
The Upper Zone is the existing operating gold and silver mine that extends from 1,350 m elevation down to 1,025 m elevation. The Upper Zone extends approximately 300 m vertically and approximately 900 m along the vein structure. The mine has been developed with level accesses proceeding horizontally from the main portal as the surface to horizontal cross cuts to provide access to the veins. There are currently six production levels, the highest being Level 16 and the lowest being Level 21. The mine uses the conventional cut and fill stope mining technique that supplies approximately 1,000 tpd of material to a 1,200 tpd capacity mill which uses a Merrill-Crowe process to produce gold/silver dore bars.
In the PEA, the Upper Zone is envisioned to produce 5.5 million tons of mineralized material, primarily from the vein system, over a 16-year life with an average LoM head grade of 3.8 g/t resulting in total gold production of 0.6 million ounces, or about 27% of total gold production from both the Upper and Deep Zones. This will be accomplished through the immediate implementation of an optimized mine plan, including the strict control of dilution and mine recovery, that will see annual production increase from the current approximately 25,000 ounces/year to a range between 35,000 and 40,000 ounces/year starting in 2020.
To accomplish the optimized mine plan, Gran Colombia will need to invest approximately US$12 million over the next two years in mine development and equipment. As a result of the implementation of the optimized mine plan, the PEA also envisions an approximately 25% reduction in total cash costs per ounce to a LoM average of $803 per ounce and a LoM AISC averaging US$872 per ounce of gold produced from the Upper Zone.
Deep Zone Mining Operation
The Deep Zone area is currently in the exploration phase and has not been developed. Mineralization is located approximately 600 to 1,200 m below surface (530 masl to 1,015 masl) and can be mined using an underground longhole stoping method. The stopes will be 10 m wide and stope length will vary based on mineralization grade. A spacing of 25 m between levels will be used. The deposit will be mined in blocks where mining within a block occurs from bottom to top with the use of paste backfill. Sill pillars are left in situ between bocks. The backfill will have sufficient strength to allow for mining adjacent to filled stopes. The mine will be accessed by a decline drift with mineralization transported from stopes to surface by underground trucks. Internal intake and exhaust raises will be developed using raisebore machines and air will flow into dedicated intake and exhaust ventilation drifts to surface.
A new 4,000 tpd plant facility using gravity concentration and cyanidation of the gravity tailing will be constructed to process material from the Deep Zone. In the PFS stage of the project, Gran Colombia will evaluate the potential to reduce capital costs by incorporating suitable elements into this new plant from the Pampa Verde processing plant currently in storage. In addition, a new “dry stack” tailings storage facility will be constructed to receive approximately 55% of the total LoM tailings from the plant. The other 45% of tailings will go back underground in cemented paste backfill into the mine.
In the PEA, the Deep Zone is envisioned to produce 20.8 million tons of mineralized material over a 16-year life commencing in 2023 with an average LoM head grade of 2.5 g/t resulting in total gold production of 1.6 million ounces, or about 73% of total gold production from both the Upper and Deep Zones.
The initial investment to be incurred in 2020 through 2022 totals approximately US$269 million comprising development of the Deep Zone (including the main decline drift and ventilation raises), mining and other equipment, construction of the new processing plant and the tailings storage facility. The PEA estimates the LOM total cash costs and AISC in the Deep Zone will average US$797 per ounce and US$885 per ounce, respectively.