~ F.Y.I ~ ~News Release~ November 14, 2013 Avanti Mining Further Optimizes Kitsault Feasibility Study -------------------------------------------------------------------------------- Vancouver, British Columbia: Avanti Mining Inc. (TSX-V:AVT) (Pink Sheets: AVNMF) (Avanti) is pleased to provide the results of the most recent study to further optimize the February 2013 Feasibility Study Update (FSU) prepared by AMEC on its 100% owned Kitsault Molybdenum-Silver property in northwest British Columbia, Canada. The optimization started with a new mine plan including new capital and operating cost estimates intended to bring cash flow forward thereby improving the project economics. This optimized FSU will become the basis for discussions with financial institutions regarding the projects debt and equity financing needs. We are pleased to present an optimized version of our 2013 Feasibility Study Update by AMEC and other contributors on the Kitsault Molybdenum Project. stated Mark G. Premo, Avantis President and CEO. Kitsaults projected cash costs are in the lowest quartile of primary molybdenum producers worldwide. Because there were no material changes to mineral reserves or mineral resources, the technical report summarizing this update will be filed with Avantis Annual Information Form on SEDAR and Avantis web site, avantimining in the second quarter of 2014. All economic figures contained in this press release are expressed in Canadian dollars except where noted. (USD exchange rate varies in the model between 0.95 to 0.93 per CAD$, details are provided in table 4) Highlights of the project include: Initial capital costs including working capital have been revised and are estimated at $812 million and the life of mine (LOM) sustaining capital at $132 million (+/- 15% accuracy). This represents a reduction of $126 million for initial capital and an overall reduction to total capital of $67 million over the LOM. Cash operating cost at the mine site are estimated at $6.58 per pound of molybdenum (Mo) produced. It drops to $5.60 (US$ 5.21), when a Silver by-product credit of $0.98 per pound of Mo is realized. Total cash cost including transportation and smelter charges would be $7.07 (US$ 6.57) per pound of Mo. The new mine plan based upon the resource model developed in 2012 calls for a total of 226 million tonnes of proven and probable reserves grading 0.083% Mo and 5.3 g/t silver to be mined over a 14-year mine life, producing 367 million pounds of Mo and 15.3 million ounces of silver. The Mo grade to the mill over the first five years of production averages 0.101% Mo; At a long term price Mo price of US$14.50/lb, (long term price projections are supported by CPM July 2013 commodity report), the project has an after tax Net Present Value (NPV) at an 8% discount rate of $417 million and a 17.3% IRR. Sensitivity analysis to Mo prices is provided in this report. The mine has certain infrastructure in place with road access and will be serviced by the existing BC Hydro transmission grid; The reopening of the mine is projected to create over 300 high paying local jobs during its 14-year life, and at the peak of construction, over 700 jobs. The construction period is estimated at 25 months; The Project received the BC Environmental Assessment Certificate in March 2013 and subsequently applied for the British Columbia permits for construction in April 2013. The permitting process is well advanced and the permits are expected by the end of this year. The Kitsault Project underwent a comprehensive study as required by the Comprehensive Studies Regulation of the Canadian Environmental Assessment Act (CEAA), with key triggers being the requirement for a Fisheries Act permit and explosives permit under the Explosives Act. The federal review of Avantis Environmental Impact Statement (EIS) was completed on September 22, 2013. The federal Minister of Environment will render a decision on the EIS before the end of 2013. Optimization approach Early in 2013 Avanti engaged a group of engineering and consultancy firms including Whittle Consulting, Ausenco, AMEC and Knight Piésold to further optimize the Kitsault Molybdenum Project. The optimization initiative is aimed to rationalize the initial capital expenditure while providing higher returns in early stages of the project as well as the maximization of metal recovery at the later stages. The main aspects incorporated into the project as part of the optimization include: Fully variable elevated cutoff grades during the life of mine paired with the dynamic use of the ore stockpiles. Implementation of a flexible mineral processing regimen based on grind-throughput-recovery (GTR) relationships for the three main rock types contained in the deposit. Selection of the ultimate pit and internal operational phases incorporating the results of the Enterprise Optimization study. Optimization of equipment selection and layout in the process plant. Optimization of the grinding circuit to maximize throughput Incorporation of improvements to the silver recovery circuit. Rationalization of the initial and sustaining capital requirements, including optimization to the project infrastructure and tailings management facilities. Project Description The Kitsault property is located about 140 km north of Prince Rupert, British Columbia, and south of the head of Alice Arm, an inlet of the Pacific Ocean. The property includes three known molybdenum deposits: Kitsault, Bell Moly, and Roundy Creek. The Kitsault mine was a producer of molybdenum between 1967 and 1972 and from 1981 to 1982 with total production on the property during both periods being approximately 31 million pounds of molybdenum. Kitsault has road access to the mine site and is serviced by the BC Hydro transmission grid. The November 2013 FS update estimates that the Kitsault Mine would operate at an annual mill throughput rate of 16.6 million tonnes, or 45,500 tpd, with an average strip ratio of 1:1 for a mine life of 14 years. The ore mined by conventional truck and shovel open pit methods will be crushed in a gyratory primary crusher, then ground using a SAG-ball mill configuration. Conventional flotation and five stages of cleaning will produce molybdenum concentrate that will be dried and packaged into bags for shipment. The life-of-mine molybdenum production is estimated at 367 million pounds of molybdenum contained in approximately 343 thousand wet tonnes of molybdenum concentrate produced from the processing of 226 million tonnes of ore grading 0.083% Mo. Total molybdenum recovery varies depending on mill head grade but is estimated to average 89% over the life of the mine. During the de-sulfidization of the tailings for environmental considerations, a process was developed to recover by-product silver that averages 5.3 g/t in the mill feed. Silver production of 15.2 million ounces is indicated at a metallurgical recovery of approximately 39%. Mineral Reserves Statement The Kitsault mine Mineral Reserves have been prepared by the consultants in accordance with NI 43-101 standards and CIM Definition Standards (2010). This statement was prepared by Mr. Ramon Mendoza Reyes (P.Eng.) of AMEC, a Qualified Person (QP) as defined in NI 43-101. These reserves are sufficient for 14 years of operation at a nominal production rate of 45,500 t/d. Mineral Reserves are summarized by category in Table 1. The notes accompanying Table 1 are an integral part of the Mineral Reserves and should be read in conjunction with the Mineral Reserve statement. Table 1. Kitsault Mineral Reserves, Effective Date November 05, 2013, Ramon Mendoza Reyes, P. Eng. (cut-off 0.029% Mo) Classification Tonnage (Mt) Mo (%) Ag (g/t) Contained Mo (M lb) Contained Ag (M Oz) Proven 130.7 0.092 5.2 264.2 21.7 Probable 95.6 0.071 5.5 150.0 17.0 Total Proven and Probable 226.3 0.083 5.3 414.2 38.7 Notes: Mineral Reserves are defined within a mine plan, with pit phase designs guided by Lerchs--Grossmann (LG) pit shells, and reported at a 0.029% Mo cut-off grade, after dilution and mining loss adjustments. The LG shell generation was performed on Measured and Indicated mineral resources only, using a molybdenum price of $13.44/lb, an average mining cost of $1.82/t mined, stockpile rehandling cost of $0.60/t moved, a combined ore based cost of $5.91/t milled, and a selling cost of $0.30/lb of Mo sold. Metallurgical recovery used was a function of the rock type, head grade and target grinding size and was defined as follows: Monzonites, assuming a target grind size of 356 microns (51% of the resources in the mine plan) Recovery = 0.952*(-282.21(Mo%)2 + 91.062(Mo%) + 87.97) with a cap of 90.75% Diorites, assuming a target grind size between 258 microns and 212 microns and a cap of 91.15% (28% of the resources in the mine plan) Recovery = 0.52*(0.952*(-282.21(Mo%)2 + 91.062(Mo%) + 87.52)) + 0.48*(0.952*(-282.21(Mo%)2 + 91.062(Mo%) + 89.33)) Hornfels, assuming a target grind size between 291 microns and 212 microns and a cap of 91.10% (20% of the resources in the mine plan) Recovery = 0.67*(0.952*(-282.21(Mo%)2 + 91.062(Mo%) + 87.79)) + 0.33*(0.952*(-282.21(Mo%)2 + 91.062(Mo%) + 89.41)) For other rock types (less than 1% of the resources in the mine plan) Recovery =7.5808*Ln (Mo %) +108.63 with a cap applied at 95% Revenue from silver was included in the LG shell generation assuming a price of $24.73/oz and an overall metallurgical recovery of 39% for all rock types. Overall pit slopes varied from 42 to 48 degrees. Dilution and Mining loss have been accounted for based on a contact dilution approach assuming a dilution band of one meter around the contact edges. 2.6Mt of Measured and Indicated mineral resources above cut-off was routed as waste. 1.4Mt of Measured and Indicated material below cut-off has been included as dilution material at the grade of those blocks. The 0.3Mt of Inferred dilution material had its grades set to zero. Tonnages are rounded to the nearest 100,000 tonnes; grades are rounded to three decimal places for Mo and one decimal place for Ag. Rounding as required by reporting guidelines may result in apparent summation differences between tonnes, grade and contained metal content. Tonnage and grade measurements are in metric units; contained molybdenum is in imperial pounds and contained silver is in troy ounces. The life-of-mine strip ratio is 1:1 Capital Costs Initial capital costs are estimated at $812 million compared with $938 million in the February 2013 update to the FS for a reduction of approximately 14%. Life-of-Mine sustaining capital (including reclamation bonding) was estimated to be $166 million, which is comprised mainly of mobile mine equipment replacement, ongoing Tailings Management Facility (TMF) embankment construction. This compares with $106 million in the 2013 update for an increase of about 56%. All capital costs are [+/-15%] accuracy in this estimate. The capital costs for the mine, plant and TMF and comparison with the February 2013 FSU are given in Table 2 below. Table 2. Capital Cost Summary Comparison Kitsault Capital Costs Preproduction Capital 2013 Feb Update 2013 Nov Update % Difference 1000 Mining $000 111,269 122,675 10% 2000 Site Preparation and Roads $000 44,318 26,857 -39% 3000 Process Facilities $000 238,665 226,153 -5% 4000 Tailings Management and Reclaim Systems $000 120,936 81,329 -33% 5000 Utilities $000 37,521 36,042 -4% 6000 Ancillary Buildings and Facilities $000 49,896 33,856 -32% 8000 Owners Costs $000 22,069 31,811 44% 9000 Indirects, excluding contingency $000 173,951 150,642 -13% 9900 Contingency $000 139,597 102,135 -27% Total Pre-Production Capital $000 938,221 811,500 -14% Sustaining Capital Bonding $000 33,960 33,960 0% Sustaining Capital Operating Years $000 72,357 132,294 83% Total Sustaining Capital $000 106,317 166,254 56% Total Capital Cost $000 1,044,538 977,754 -6% Operating Costs LOM cash mine site operating costs are estimated at $6.58 per pound of Mo (±15% accuracy). Total cash cost are $7.07 per pound of Mo, this includes a silver credit of $0.98 and transportation and smelter charges of $1.47. These costs are about 3% higher than the February 2013 FS Update. The LOM unit cash operating costs are also summarized in Table 3 below: Table 3. Cash Operating Costs Summary Comparison (LOM average) Kitsault Operating Cost Area Feb 2013 Update Nov 2013 Update % Difference Total LOM $000 Cash Cost $/lb Mo Total LOM $000 Cash Cost $/lb Mo Mine Operations 933,896 2.50 940,101 2.56 1% Processing Operations 1,244,879 3.33 1,206,207 3.29 -3% G&A 307,166 0.82 270,075 0.74 -12% Subtotal Mine Site 2,485,941 6.65 2,416,383 6.58 -3% Ag Credit (340,878) (0.91) (359,908) (0.98) 6% Transportation and Smelter Charge 371,195 0.99 537,936 1.47 45% Total 2,516,259 6.73 2,594,411 7.07 3% Project Economics The Feasibility Study economic results utilized assumptions summarized in the Table 4 below: Table 4 Financial Analysis Parameters Parameters Inputs General Assumptions Mine Life 14 years Mill operating days per year 365 Mill Availability 92% Production Rate (average) 45,500 tpd Average Process Recovery (Mo) 89% Average Process Recovery (Ag) 39% Molybdenum Concentrate Production - LOM 343 kwmt Concentrate Grade (% Mo) 52% Capital costs US$ to CDN$ exchange rate 0.951 Cash flow revenue US$ to CDN$ exchange rate 0.932 Market Discount Rate 8% Base Case LOM average molybdenum price3 US$14.56/lb Base Case LOM average silver price US$23.38/oz Royalty Amax Zinc (Newfoundland) Ltd Net profits Interest 9.22% Alcoa Royalty NSR 1.0% The economic model for the base case in this study update assumes a long-term average molybdenum price of $14.50/lb for revenue purposes. The after-tax NPV at an 8% discount rate over the estimated mine life is $417 million. The after-tax IRR is 17.3%. Payback of the initial capital investment is estimated to occur in 4.4 years after the start of production. Sensitivity Sensitivity analysis for key economic parameters is shown in Table 5. This analysis suggests that the project is most sensitive to exchange rates followed by Mo prices. The project is least sensitive to operating and capital costs. ______________________ 1 0.95 FX rate reflects a rate close to current and applies to capex as most of it will occur early in the project life. 2 0.93 FX rate reflects a long term rate considered to be a consensus of bank estimates and applies to the revenues from metal sales over the life of the project which is over a period of 16 years. 3 Long term Mo price projections are supported by CPM July 2013 commodity report Table 5. Base Case Sensitivity to After-Tax NPV at 8% Discount Rate SENSITIVITY OF AFTER-TAX NPV @ 8% Change in Factor Factor -30% -20% -10% 0% 10% 20% 30% Factor Exchange rate 1 1,189 870 619 417 248 105 (19) Capital expenditure 2 586 530 474 417 359 300 241 Operating expenditure 3 692 601 509 417 324 231 137 Metal price 4 (167) 38 229 417 601 783 964 The financial model also examines the primary financial outputs at various LOM realized Mo prices and various discount rates. These results are displayed in Table 6. Table 6. Sensitivity of NPVs, IRR and Payback of the Project at Various Metal Prices Moly Price (US$/lb) CNCF (Undisc.) (CDN $M) NPV @ 6% (CDN $M) NPV @ 8% (CDN $M) NPV @ 10% (CDN $M) IRR % Payback (Years) 9.00 (88) (305) (350) (386) 0.0% 16.0 12.00 656 215 118 36 11.0% 5.6 15.00 1,303 653 507 386 20.4% 3.6 18.00 1,948 1,079 885 723 28.6% 2.7 Financing and Environmental Assessment Update Avanti continues to advance its strategy to finance the development of the Kitsault Mine. Toward that end it has signed an off-take agreement with ThyssenKrupp Metallurgical Products, a German steel maker, for 50% of the production of Kitsault for the life of the mine. Contract volumes will be established annually based upon the mine plan and reference a market based monthly price for molybdenum. Based upon the strength of this off-take agreement and an application made by KfW IPEX-Bank GmbH (KfW), a member of Avantis mandated banking syndicate, the project has received approval in principle for German government debt guarantee for up to US$300 million. Avanti also continues discussions with a potential strategic partner that will assist in providing the equity component of the project financing. The Project received the BC Environmental Assessment Certificate in March 2013 and subsequently applied for the British Columbia permits for construction in April 2013. The permitting process is well advanced and the permits are expected by the end of this year. The Kitsault Project went through a comprehensive study as required by the Comprehensive Studies Regulation of the Canadian Environmental Assessment Act (CEAA), with key triggers being the requirement for a Fisheries Act permit and explosive permit under the Explosives Act. The federal review of Avantis Environmental Impact Statement (EIS) was completed on September 22, 2013. The federal Minister of Environment will render a decision on the EIS before the end of 2013. The QPs reviewed and approved the content of this news release summarized from the November 2013 Feasibility Study Optimization. The consultants (QPs) with their responsibilities are as follows: AMEC Americas Limited, Mr. Ramon Mendoza Reyes (P.Eng.) for matters relating to mineral reserve statements, mining plan, mining capital, and mine operating costs. AMEC Americas Limited, Mr. Tony Lipiec (P.Eng.) for matters relating to the metallurgical testing review, mineral processing, and process operating costs. AMEC Americas Limited under the supervision of Mr. Simon Allard (P.Eng.) for financial analysis. AMEC Americas Limited under the supervision of Mr. Scott Fulton (P.Eng.) for matters relating to infrastructure and cost estimates. SRK Consulting (Canada) Inc. (SRK Canada) under the direction of Mr. Peter Healey (P.Eng) for matters and costs relating to mine closure and reclamation. Knight Piésold Ltd. (KP) under the direction of Mr. Bruno Borntraeger (P.Eng.) for matters and costs relating to plant site geotechnical conditions, surface water diversions and the Tailings Management Facility (TMF). Avanti Mining Inc. is focused on the development of the past producing Kitsault molybdenum mine located north of Prince Rupert in British Columbia. Mr. Mark Premo, Chief Executive Officer for the Company has reviewed and approved the scientific or technical information in this press release including the financing update. For further information, please visit avantimining, or contact:
Posted on: Sun, 01 Dec 2013 05:43:45 +0000
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