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RNS Number:7809E
Galahad Gold Plc
03 November 2004
GALAHAD GOLD PLC ("Galahad")
Preliminary Assessment of the Pebble project, Alaska, USA
Galahad Gold PLC (AIM:GLA) announces that Northern Dynasty Minerals Limited (TSX
Venture: NDM), in which Galahad holds a 35.81% interest, today released a
Preliminary Assessment for the Pebble project in Alaska, USA, which shows
excellent potential for a long life mine, having large-scale, low cost metal
production. The NDM News Release is set out in full below.
Highlights:
* Pebble's estimated Inferred Mineral Resource is 2.74bn tones, containing
26.5m oz gold and 16.5bn lbs copper.
* Three production rate scenarios: 100,000 tpd (tonnes per day),
200,000 tpd and a phased expansion from 100,000 tpd to 200,000 tpd.
* At 200,000 tpd, the project would produce an annual average of
470 million pounds of copper, 674,000 ounces of gold, 2.5 million
ounces of silver and 15 million pounds of molybdenum during the
first 10 years of a 31 year mine life.
* At US$0.95/lb copper, US$395/oz gold, US$5.00/oz silver and
US$5.00/lb molybdenum the Pebble project could generate an IRR
(Internal Rate of Return) of between 15.3% and 20.3% and an NPV
(Net Present Value), discounted at 5%, of between US$1.047 billion and US$2.091
billion (assuming 100% equity financing).
* At recent metals prices of US$1.25/lb copper, US$415/oz gold, US$7.00/oz
silver and US$15/lb molybdenum, the IRR would increase to between 33.0% and
40.8% and the NPV, discounted at 5%, to between $3.511 billion and $5.972
billion (assuming 100% equity financing).
Commenting on the report, Ian Watson, Galahad Gold's Chairman, said:
"As by far the largest single shareholder in Northern Dynasty, we are delighted
with the Preliminary Assessment, which indicates excellent potential for a long
life mine, having large-scale, low cost metal production".
Enquiries to:
GALAHAD GOLD PLC
Ian Watson/Alastair King Tel: 020 7408 2002
PARKGREEN COMMUNICATIONS
Simon Robinson/Justine Howarth Tel: 020 7493 3713
SEYMOUR PIERCE
Mark Percy/Jeremy Porter Tel: 020 7107 8000
Notes to Editors:
Galahad Gold plc is an international mining development company quoted on the
AIM Market of the London Stock Exchange under the symbol GLA. It has three
current projects, all in politically safe locations:
* 35.81% of Northern Dynasty Minerals Limited the owner of the Pebble project in
Alaska which contains the largest gold deposit in North America and the second
largest copper deposit;
* 100% of Skaergaard in Greenland, one of the largest palladium deposits outside
South Africa and Russia; and
* 100% of Malmbjerg in Greenland, one of the largest primary molybdenum
deposits in the world.
Galahad's attributable Inferred Mineral Resources:-
* 20.12m ounces of gold;
* 3m ounces of platinum;
* 35.1m ounces of palladium;
* 8.74bn lbs of copper; and
* 313.2m lbs of molybdenum
These figures exclude Malmbjerg's molybdenum and the extensive vanadium and
titanium deposits in Skaergaard.
Further information on Galahad may be found at www.galahadgold.com
The announcement below was released by Northern Dynasty Minerals Limited ("NDM")
today. Galahad Gold PLC has not sought to verify any of the contents of the
press release below.
Northern Dynasty Minerals Ltd.
1020 - 800 West Pender Street
Vancouver, BC
Canada V6C 2V6
Tel 604 6846365
Fax 604 6848092
Toll Free 1 800 6672114
http://www.northerndynasty.com
PRELIMINARY ASSESSMENT INDICATES ROBUST ECONOMICS
FOR PEBBLE GOLD-COPPER-MOLYBDENUM PROJECT
November 2, 2004, Vancouver, BC - Ronald W. Thiessen, President and CEO of
Northern Dynasty Minerals Ltd. (TSX Venture-NDM; OTC.BB-NDMLF) is pleased to
announce the completion of a Preliminary Assessment of the Pebble
gold-copper-molybdenum project located in southwestern Alaska. The Preliminary
Assessment indicates excellent potential for a long life mine, having
large-scale, low cost metal production. The full text of the Preliminary
Assessment will be available for review at www.sedar.com.
The Preliminary Assessment was prepared in order to quantify the Pebble
project's cost parameters and to provide guidance for the on-going engineering
work that will ultimately define the optimal scale of production. Preliminary
forecasts and estimates in the report were developed to an order of magnitude
level and are not based on systematic engineering studies. As is normal at this
stage of a project, data is incomplete and estimates were developed based on the
expertise of the engineers involved. The Preliminary Assessment was
lead-authored by independent qualified person Derek Barratt, P.Eng., and
co-authored by Northern Dynasty's in-house qualified person Peter Beaudoin,
P.Eng.
The Preliminary Assessment indicates that the Pebble gold-copper-molybdenum
porphyry deposit would be developed by conventional, large-scale, open pit
mining methods. Four open pit stages were designed using the block model
established by Norwest Corporation for their February, 2004 inferred mineral
resource estimate of the Pebble deposit. The estimated inferred mineral resource
is 2.74 billion tonnes grading 0.55% copper-equivalent (0.30 g/t Au, 0.27% Cu
and 0.015% Mo above a cut-off grade of 0.30% copper-equivalent(1)), containing
26.5 million ounces of gold and 16.5 billion pounds of copper. Processing of
mill feed from the open pit will produce a flotation copper sulphide concentrate
with gold and silver values as well as a separate molybdenum sulphide
concentrate. Estimated metal recoveries of 88% for copper, 76% for gold and
silver, and 60% for molybdenum were utilized in the financial modeling. These
estimates are based upon on-going testwork by Northern Dynasty, and are in-line
with other comparable large gold-copper porphyry mines. In the Preliminary
Assessment, copper concentrate was estimated to grade 28% copper, 26.6 g/t gold,
and 100 g/t silver, whereas molybdenum sulphide flotation concentrate was
estimated to grade 50% molybdenum. In the Preliminary Assessment, copper
concentrate was assumed to be transported to a storage/dewatering/port facility
on tidewater via a concentrate pipeline. Molybdenum sulphide concentrate was
also to be recovered, then packaged and shipped to market separately.
The Preliminary Assessment examined three production rate scenarios: 100,000
tonnes per day, 200,000 tonnes per day, and a phased expansion from 100,000
tonnes per day to 200,000 tonnes per day in year six. These analyses show that
at the lowest production rate considered (Case 1 - 100,000 tpd), the Pebble
project has the scope to produce an annual average of 256 million pounds of
copper, 365,000 ounces of gold, 8 million pounds of molybdenum, and 1.4 million
ounces of silver during the first ten years of a 62 year mine life. At the
largest scale studied (Case 2 - 200,000 tpd), the project would produce an
annual average of 470 million pounds of copper, 674,000 ounces of gold, 15
million pounds of molybdenum, and 2.5 million ounces of silver during the first
ten years of a 31 year mine life. Key parameters for the three production rate
scenarios assessed are summarized in the tables below.
Key Production Parameters
Production Parameters Case 1 Case 2 Case 3
100,000 tpd 200,000 tpd 100,000 to 200,000
tpd
Milling Rate (Million
Tonnes/Year) 35 70 35 to 70 in year 6
Mine Life (Years) 62 31 33
Resource Tonnage
(Billion Tonnes) 2.1 2.1 2.1
Stripping Ratio 0.23:1 0.23:1 0.23:1
Production Summary - First Ten Years
Production Parameters Case 1 Case 2 Case 3
100,000 200,000 100,000 to 200,000
tpd tpd tpd
Average Grade Gold (g/t) 0.43 0.39 0.40
Copper (%) 0.38 0.35 0.35
Silver (g/t) 1.64 1.47 1.51
Molybdenum (%) 0.018 0.017 0.017
Metal Recovery Gold (%) 76 76 76
Copper (%) 88 88 88
Silver (%) 76 76 76
Molybdenum (%) 60 60 60
Average Annual Gold (ounces) 365,000 674,000 514,000
Production
Copper (M lbs) 256 470 357
Silver (M 1.4 2.5 1.9
ounces)
Molybdenum (M 8 15 12
lbs)
Cash Production Cost Copper ($/lb) 0.24 0.19 0.22
-Net of Au, Ag, Mo
Credits
Notes: All currency amounts are in 2004 US dollars. Cash costs include on-site
and off-site operating costs, including concentrate transportation, smelter
charges and credits.
Production Summary - Life of Mine
Production Parameters Case 1 Case 2 Case 3
100,000 200,000 100,000 to 200,000
tpd tpd tpd
Average Grade Gold (g/t) 0.33 0.33 0.33
Copper (%) 0.30 0.30 0.30
Silver (g/t) 1.24 1.24 1.24
Molybdenum (%) 0.016 0.016 0.016
Metal Recovery Gold (%) 76 76 76
Copper (%) 88 88 88
Silver (%) 76 76 76
Molybdenum (%) 60 60 60
Average Annual Gold (ounces) 276,000 543,000 510,000
Production
Copper (M lbs) 199 392 368
Silver (M 1.1 2.1 1.9
ounces)
Molybdenum (M 7 14 13
lbs)
Cash Production Cost Copper ($/lb) 0.42 0.29 0.30
-Net of Au, Ag, Mo
Credits
Notes: All currency amounts are in 2004 US dollars. Cash costs include on-site
and off-site operating costs, including concentrate transportation, smelter
charges and credits.
The Preliminary Assessment estimated the project's construction capital costs,
sustaining capital, operating costs, and off-site charges (such as concentrate
transportation and smelter/refining charges) as well as revenues all using 2004
US dollars. Capital and operating cost estimates for the three production
scenarios examined were developed from initial estimates by the major company
which was the previous operator, as well as site specific data, current major
equipment costs and reported costs at similar operating mines throughout the
world. Capital cost estimates range from $1.0 billion for a 100,000 tpd facility
(Case 1) to $1.5 billion for a 200,000 tpd facility (Case 2). Life of mine
sustaining capital estimates range from a total of $276 million for a 100,000
tpd project (Case 1) to a total of $197 million for a 200,000 tpd project (Case
2). Operating cost estimates range from $5.06 per tonne milled for a 100,000 tpd
production rate (Case 1) to $4.36 per tonne milled for a 200,000 tpd production
rate (Case 2).
Capital Costs, Sustaining Capital, and Operating Costs Summary
Area Case 1 Case 2 Case 3
100,000 200,000 100,000 tpd to 200,000
tpd tpd tpd
Capital Costs (Millions) Yr -1-2 Yr 5 Total
Direct Capital Cost $ 621 $ 929 $ 621 $ 308 $ 929
Indirect Capital Costs $ 205 $ 301 $ 205 $ 96 $ 301
15% Contingency $ 130 $ 182 $ 130 $ 52 $ 182
Working Capital $ 44 $ 88 $ 44 $ 44 $ 88
Total Construction
Capital $1,000 $1,500 $1,000 $ 500 $1,500
Sustaining Capital (Millions) Yr 1-5 Yr 6-33 Total
Life of Mine
Expenditure $ 276 $ 197 $ 12 $ 213 $ 225
Operating Costs (per tonne of Yr 1-5 Yr 6-33 Average
mill feed)
Mining $ 1.06 $ 1.06 $ 1.06 $1.06 $ 1.06
Milling $ 2.00 $ 1.51 $ 2.00 $1.51 $ 1.56
Power $ 1.00 $ 1.00 $ 1.00 $1.00 $ 1.00
Other $ 1.00 $ 0.79 $ 1.00 $0.79 $ 0.80
Total Operating Costs $ 5.06 $ 4.36 $ 5.06 $4.36 $ 4.42
Notes: All currency amounts are in 2004 US dollars. Capital costs in the above
summary include road and port costs of $103 million. For Case 3, $500 million in
construction capital is expended during operations year 5 for production
expansion in year 6. A power cost of 5.4c per kWh was estimated for the project.
Off-site costs and realization charges related to transportation costs
associated with the concentrates, and the treatment and refining charges
affecting the net return from metal contained in the concentrates, were included
into the financial model in the net smelter return (NSR) calculation. Costs,
charges and payables used in the NSR analyses from the Preliminary Assessment
are listed below.
Off-Site Costs
Item Units Amount
Concentrate Grade % Cu 28.00
Transportation $/wmt conc. 61.28
Smelter Treatment $/dmt conc. 57.50
Copper Refining Charge $/lb Cu 0.058
Copper Unit Deduction Units or (%) 1
Copper Payable % 96.75
Gold Refining Charge $/oz 3.00
Gold Deduction g/t conc. 1.0
Gold Payable % 98.00
Silver Refining Charge $/oz 0.30
Silver Payable % 90.00
Molybdenum Payable % 98.00
Molybdenum Freight/Processing $/lb 0.75
Insurance/Representation $/dmt conc. 0.45
Notes: $/wmt conc. = US$ per wet metric tonne; $/dmt conc. = US$ per dry metric
tonne.
Financial models were developed on a pre-tax, 100 percent equity financed basis
for each of the three production rates assessed. For the Preliminary Assessment,
long-term average metal prices were estimated to be $0.95/lb copper, $395/oz
gold, $5.00/oz silver, and $5.00/lb molybdenum. In addition, for each production
rate scenario, financial analyses were completed over a range of metal prices.
The tables below summarize the sensitivity of the internal rate of return (IRR)
and Net Present Value (NPV) to the variables of metal prices and the discount
rate used for Cases 1, 2 and 3. Although a capital cost of $103 million was
estimated for construction of the sea port and access road for the Pebble
project, the financial analyses in this Preliminary Assessment do not include
these costs on the assumption that the State of Alaska will parallel the
implementation of its Southwest Alaska Regional Transportation Plan with project
development. The results of financial analyses for the three production rates
under consideration indicate that at the long-term average metal prices used in
the Preliminary Assessment, the Pebble project could generate an IRR of between
15.3% and 20.3%, and an NPV, discounted at 5%, of between $1.047 billion and
$2.091 billion. At recent metal prices of $1.25/lb Cu, $415/oz Au, $7.00/oz Ag,
and $15/lb Mo, the IRR would increase to between 33.0% and 40.8% and the NPV,
discounted at 5%, to between $3.511 billion and $5.972 billion.
These financial analyses are preliminary in nature and are based entirely on
inferred mineral resources which are considered too speculative geologically to
be categorized as mineral reserves and to have economic considerations applied
to them. There is no assurance that the operating and financial projections in
the Preliminary Assessment will be realized.
Financial Analyses Using Varying Metal Prices - Case 1 (100,000 tpd)
Metal Prices IRR NPV@ 0% NPV@ 5%
(%) (Billion $) (Billion $)
Copper Gold Silver Molybdenum
$/lb $/oz $/oz $/lb
0.85 350 5.00 5.00 10.1 2.242 0.462
0.95 395 5.00 5.00 15.3 4.073 1.047
1.00 350 5.00 6.00 15.9 4.367 1.123
1.00 400 5.00 6.00 18.0 5.148 1.376
1.25 415 7.00 15.00 33.0 12.215 3.511
Notes: All currency amounts are in 2004 US dollars. Analyses are on a pre-tax,
100% equity financed basis.
Financial Analyses Using Varying Metal Prices - Case 2 (200,000 tpd)
Metal Prices IRR NPV@ 0% NPV@ 5%
(%) (Billion $) (Billion $)
Copper Gold Silver Molybdenum
$/lb $/oz $/oz $/lb
0.85 350 5.00 5.00 14.4 3.297 1.189
0.95 395 5.00 5.00 20.3 5.128 2.091
1.00 350 5.00 6.00 21.0 5.422 2.219
1.00 400 5.00 6.00 23.3 6.203 2.607
1.25 415 7.00 15.00 40.8 13.271 5.972
Notes: All currency amounts are in 2004 US dollars. Analyses are on a pre-tax,
100% equity financed basis.
Financial Analyses Using Varying Metal Prices - Case 3 (100,000 to 200,000 tpd)
Metal Prices IRR NPV@ 0% NPV@ 5%
(%) (Billion $) (Billion $)
Copper Gold Silver Molybdenum
$/lb $/oz $/oz $/lb
0.85 350 5.00 5.00 12.5 3.144 0.948
0.95 395 5.00 5.00 17.7 4.974 1.757
1.00 350 5.00 6.00 18.3 5.269 1.872
1.00 400 5.00 6.00 20.3 6.049 2.219
1.25 415 7.00 15.00 35.3 13.116 5.234
Notes: All currency amounts are in 2004 US dollars. Analyses are on a pre-tax,
100% equity financed basis.
As previously announced, Northern Dynasty is systematically advancing its 2004
US $25 million work programs. These programs involve the comprehensive
collection of engineering, environmental and socio-economic data for completion
of a Bankable Feasibility Study in 2005 and to fulfill the requirements for an
Environmental Impact Statement as well as applications for State and Federal
permits. At site, a six rig drill program that commenced in April 2004 is
currently being completed. This drill program is designed to systematically
define a significant portion of the Pebble deposit's inferred mineral resources
to measured and indicated categories and to determine the deposit's full lateral
and depth extent. In addition, geotechnical drilling has tested sites for
tailings impoundment, surface facilities and open pit mine design. Extensive
large diameter core drilling has also been conducted to collect larger composite
samples for metallurgical and process testing. A wide variety of activities
associated with multi-disciplinary environmental and socio-economic programs are
also underway.
Infrastructure requirements for the Pebble project are now quite well defined
and significant progress has been made on specific infrastructure development
plans. Development of a mine at Pebble will require the construction of an 86
mile road to connect the project to tidewater at Cook Inlet and a deep sea port
facility. The State of Alaska's Southwest Regional Transportation Plan includes
the construction of transportation facilities from Cook Inlet to the town of
Iliamna, 17 miles from the Pebble project. Northern Dynasty and the State are in
discussion to integrate this sector of the State's plan with the Pebble
project's potential development schedule. A recent transportation corridor
analysis, commissioned by the State's Department of Transportation and Public
Facilities, identified a preferred road corridor and port option.
Pre-feasibility level engineering studies for the port site and the road
transportation corridor have now been commissioned by the State, with results
expected to be reported in early 2005. Northern Dynasty's environmental
consulting team is in the field collecting the necessary data for road and port
permit applications. The State and Northern Dynasty plan to continue their
co-operation under a Memorandum of Understanding to be negotiated in the coming
months.
A number of options for the provision of electric power to the project and
neighbouring villages have been identified and are currently being evaluated.
These options include connection to the State's existing power transmission
grid, either through a 41 mile submarine connection to the Kenai Peninsula or an
overland route on the west side of Cook Inlet. An alternative to a transmission
grid connection would involve the establishment of new generation facilities
close to the mine or port area. Existing power costs for industrial consumers
connected to the State's power transmission system are $0.03 per kilowatt hour
(kWh) north of Anchorage and $0.04 per kWh to the south. For the purposes of the
financial analyses made in the Preliminary Assessment, a price of $0.054 per kWh
has been utilized. In June 2004, Northern Dynasty issued a "Request For
Proposals" for the provision of power to the Pebble project and is expecting to
receive responses before year end.
For further details on Northern Dynasty and the Pebble project please visit the
Company's website at www.northerndynasty.com or contact Investor Services at
(604) 684-6365 or within North America at 1-800-667-2114 or review Northern
Dynasty's Canadian public filings at www.sedar.com and US public filings at
www.sec.gov.
ON BEHALF OF THE BOARD OF DIRECTORS
Ronald W. Thiessen
President and CEO
Cautionary and Forward Looking Information Comments
All information contained in this press release relating to the contents of the
Preliminary Assessment, including but not limited to statements of the Pebble
project's potential and information under the headings "Production Parameters,"
"Capital Costs, Sustaining Capital Costs, and Operating Costs," "Production
Summary," "Off-site Costs," and "Financial Analyses," are "forward looking
statements" within the definition of the United States Private Securities
Litigation Reform Act of 1995. The information relating to the possible
construction of a port, road, power generating facilities and power transmission
facilities also constitutes such "forward looking statements." The Preliminary
Assessment was prepared to broadly quantify the Pebble project's capital and
operating cost parameters and to provide guidance on the type and scale of
future project engineering and development work that will be needed to
ultimately define the project's likelihood of feasibility and optimal production
rate. It was not prepared to be used as a valuation of the Pebble project nor
should it be considered to be a pre-feasibility study. The capital and operating
cost estimates which were used have been developed only to an approximate order
of magnitude based on generally understood capital cost to production level
relationships and they are not based on any systematic engineering studies, so
the ultimate costs may vary widely from the amounts set out in the Preliminary
Assessment. This could materially and adversely impact the projected economics
of the Pebble project. As is normal at this stage of a project, data is
incomplete and estimates were developed based solely on the expertise of the
individuals involved as well as the assessments of other persons who were
involved with previous operators of the project. At this level of engineering,
the criteria, methods and estimates are very preliminary and result in a high
level of subjective judgment being employed. The Preliminary Assessment uses
only inferred mineral resources which are considered too speculative
geologically to be categorized as mineral reserves and to have economic
considerations applied to them. There can be no assurance that the operating and
financial projections contained in the Preliminary Assessment will be realized.
The following are the principal risk factors and uncertainties which, in
management's opinion, are likely to most directly affect the conclusions of the
Preliminary Assessment and the ultimate feasibility of the Pebble project. The
mineralized material at the Pebble project is currently classified as an
inferred resource and it is not a reserve. The mineralized material in the
Preliminary Assessment is based only on the inferred resource model developed by
Norwest Corporation in February, 2004. That model includes only assay
information from drilling up to the end of 2003. Considerable additional work,
including in-fill drilling, additional process tests, and other engineering and
geologic work will be required to determine if the mineralized material is an
economically exploitable reserve. There can be no assurance that this
mineralized material can become a reserve or that the amount may be converted to
a reserve or the grade thereof. Final feasibility work has not been done to
confirm the pit design, mining methods, and processing methods assumed in the
Preliminary Assessment. Final feasibility could determine that the assumed pit
design, mining methods, and processing methods are not correct. Construction and
operation of the mine and processing facilities depends on securing
environmental and other permits on a timely basis. No permits have been applied
for and there can be no assurance that required permits can be secured or
secured on a timely basis. Data is incomplete and cost estimates have been
developed in part based on the expertise of the individuals participating in the
preparation of the Preliminary Assessment and on costs at projects believed to
be comparable, and not based on firm price quotes. Costs, including design,
procurement, construction, and on-going operating costs and metal recoveries
could be materially different from those contained in the Preliminary
Assessment. There can be no assurance that mining can be conducted at the rates
and grades assumed in the Preliminary Assessment. The project requires the
development of port facilities, roads and electrical generating and transmission
facilities. Although Northern Dynasty believes that the State of Alaska favours
the development of these facilities and may be willing to arrange financing for
their development, there can be no assurance that these infrastructure
facilities can be developed on a timely and cost-effective basis. Energy risks
include the potential for significant increases in the cost of fuel and
electricity. The Preliminary Assessment assumes specified, long-term prices
levels for gold, copper, silver and molybdenum. Prices for these commodities are
historically volatile, and Northern Dynasty has no control of or influence on
those prices, all of which are determined in international markets. There can be
no assurance that the prices of these commodities will continue at current
levels or that they will not decline below the prices assumed in the Preliminary
Assessment. Prices for gold, copper, silver, and molybdenum have been below the
price ranges assumed in Preliminary Assessment at times during the past ten
years, and for extended periods of time. The project will require major
financing, probably a combination of debt and equity financing. Interest rates
are at historically low levels. There can be no assurance that debt and/or
equity financing will be available on acceptable terms. A significant increase
in costs of capital could materially and adversely affect the value and
feasibility of constructing the project. Other general risks include those
ordinary to very large construction projects including the general uncertainties
inherent in engineering and construction cost, the need to comply with generally
increasing environmental obligations, and accommodation of local and community
concerns.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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