Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
VANCOUVER, BRITISH COLUMBIA–(Marketwire – Dec. 8, 2011) – Lincoln Mining Corporation (TSX VENTURE:LMG) (‘Lincoln” or the “Company”) is pleased to announce that it has received a positive preliminary economic assessment (“PEA”) on the proposed open-pit mining and heap leach operation at its Pine Grove Gold Project located in the Pine Grove Hills approximately 20 miles south of Yerington, Nevada. The PEA was completed by Telesto Nevada Inc. (“Telesto”) in Reno, Nevada. The PEA reports that “A detailed economic analysis was completed for the Pine Grove Project utilizing information from Cost Mine for labour rates and some capital items, quotations from vendors and Telesto experience with projects of similar size and nature. The project is relatively sound with a free cash flow of US$32 million dollars at a gold price of US$1425 (all dollars referred to herein are $US), an IRR of 31% and Net Present Value of $21 million at a 5% discount rate . These amounts include all preproduction costs, capital, operating costs and such items as royalties and the Nevada Net Proceeds Tax”. Under the PEA, mining will be conducted by a contract miner. Lincoln will be responsible for crushing, agglomeration, stacking and processing. The gold will be stripped from the loaded carbon by an offsite independent refiner.
Base Case Highlights:
Base Case Economics:
The proposed mining operation would commence with the Wheeler deposit which contains the higher grades and lower stripping ratios and then mining would shift to the Wilson deposit.
Other Case Considerations:
A sensitivity analysis was also carried out in the PEA. This involved assessing the change in the IRR and the NPV by applying varying parameters such as the operating and capital costs as well as gold price. Examples of various parameters are listed below:
Summary tables of Pine Grove Total Resources and Resources Within A Designed Pit Shell are presented below:
Total Measured and Indicated Gold Resources at Pine Grove at 0.007 opt Au cutoff (as at December 8, 2011)
| Tons (000s) |
Cutoff Grade Gold (opt) |
Average Gold Grade (opt) |
Contained Ounces Gold |
|
| Measured | 4,043 | 0.007 | 0.035 | 141,500 |
| Indicated | 2,012 | 0.007 | 0.031 | 62,400 |
| Measured & Indicated | 6,055 | 0.007 | 0.034 | 203,900 |
Measured and Indicated Resources Within Pit Shell (included in Total Resources above) at 0.007 opt Au cutoff (as at December 8, 2011)
| Tons (000s) |
Cutoff Grade Gold (opt) |
Average Gold Grade (opt) |
Contained Ounces Gold |
|
| Measured | 2,806 | 0.007 | 0.041 | 115,100 |
| Indicated | 663 | 0.007 | 0.046 | 30,200 |
| Measured & Indicated | 3,469 | 0.007 | 0.042 | 145,300 |
Note: Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability
Capital Cost Parameters
Permitting, Engineering and Bonding $3.7 million
Condemnation Drilling $1.0 million
Leach Pad Construction $2.8 million
Crushing, Conveying Equipment $2.7 million
Process Plant $1.7 million
Earthwork and prestripping $9.4 million
Site layout $1.6 million
Contingency $4.5 million
Operating Cost Parameters
Average Mining Cost per ton material $2.33
Crushing, Leaching and Processing Cost per ton ore $14.26
G&A Cost at $2.95 per ton ore
Total average cost per ton ore $25.07
Economic Analysis
The economic viability of Pine Grove was assessed using a pre-tax cash flow model, various production parameters including operating and capital costs, estimated gold production and revenues by year, and various other inputs.
Parameters for the Base Case
Conventional open pit mining up to 1,000,000 tons per year
Ordinary heap leaching process with agglomeration
Average head grade of 0.042 ounces per ton
Average heap leach recovery of 75%
Gold price of $1425 per ounce
Total gold recovered of 108,575 ounces
Gold royalty of 2.5% on part of the ore body and 7% on another
Gross revenue from gold sales of $154.7 million
Net production Revenue of $68 million
Capital costs of $27.4 million
Sustaining capital for first four years of operations $5.5 million
Environmental and Social
Lincoln is in the early stages of community engagement and is reviewing environmental permitting requirements with the applicable regulatory authorities. Future permitting will require ore and waste samples to be tested for acid rock drainage and the release of other potentially harmful constituents into the environment. It is possible that future updates to the PEA may extend the operating life and value of the open pit operation.
Recommendations
The PEA also recommended, among other things, the following actions:
The authors of the PEA are as follows: Patricia A. Maloney, P.E., John D. Welsh, P.E., Douglas W. Willis, C.P.G., Thom Seal, Ph.D., P.E. Patricia A. Maloney, the principal author of the PEA and a Qualified Person under National Instrument 43-101, has reviewed and approved the scientific and technical information in this news release and consented to the inclusion of extracts and summaries from the PEA contained herein.
The PEA for the proposed open pit mining operation on the Pine Grove property will be posted on SEDAR within 45 days of the date of this news release as required under NI 43-101.
About Lincoln
Lincoln Mining Corp. is a Canadian precious metals exploration and development company with several projects in various stages of exploration and development which include the Pine Grove gold property, the Oro Cruz gold property in California and the La Bufa gold-silver property in Mexico. In the United States, the Company operates under Lincoln Gold US Corp., a Nevada corporation.
On behalf of Lincoln Mining Corporation
Paul Saxton, President & CEO
