(Troy 100% through Troy Resources Guyana Inc.)

PRELIMINARY ECONOMIC ASSESSMENT (PEA)

On 21 January 2014, the Company announced results of the PEA for development of the Karouni project (Project). The PEA considers a combination of two open cut and one underground mine feeding a conventional carbon-in-leach gold plant with a nominal capacity of 750,000tpa. The PEA assumes a total of 5.2 million tonnes of material will be processed with an average grade of 4.13g/t with recovered gold production of 633,000 ounces over a 7 year mine life.

Highlights from the PEA*, assuming a gold price for the base case of US$1250/oz, are as follows (all figures in US$ unless otherwise stated):

  • Seven year mine life with annual average gold production of 90,000 ounces, with production in the first 12 months of 102,000 ounces gold.
  • Conventional CIL plant augmented with gravity gold recovery treating a nominal 750,000tpa configured to allow easy low cost expansion at a later date.
  • A Production Target of approximately 5.2 million tonnes of material to be processed with an average grade of 4.13g/t. The sources in terms of tonnes are: Smarts Open Cut (42%), Hicks Open Cut (25%) and Smarts Underground (33%).
  • In terms of contained gold, the sources are: Smarts Open Cut (45%), Hicks Open Cut (15%) and Smarts Underground (40%).
  • The Smarts pit would produce 2,175,000 tonnes of plant feed at 4.5g/t, have a mining strip ratio of 9.9:1 and be mined to a depth of 140m.
  • The Hicks pit would produce 1,300,000 tonnes of plant feed at 2.4g/t, have a mining strip ratio of 5.5:1 and be mined to a maximum depth of 90m.
  • The Smarts underground would produce 1,713,000 tonnes of plant feed at a grade of 5.0g/t and extend for a vertical depth of 400m below natural surface.
  • Initial capital of $86.8 million (including pre-production mining costs of $9.3 million and contingency of $7.0 million) and sustaining capital over the life of mine of $8.6 million.
  • Underground development costs of $21.6 million and underground mining fleet $10.3 million (including contingency).
  • Assumed metallurgical recovery of 92%.
  • LOM average C1 Cash Costs (excluding royalties) of $653/oz.
  • LOM All in Cash Costs of $805/oz.
  • After tax payback of 1.8 years.
  • After tax NPV at 6% of $101.5 million.
  • After tax IRR of 44.2%.

* The results of the PEA, including the Production Targets reflected in this announcement are preliminary in nature and are based on Indicated Mineral Resources (being 45% of the Production Target) and Inferred Mineral Resources (being 55% of the Production Target).  The PEA is based on low-level technical and economic assessments, which are insufficient to: (i) support estimation of Mineral Reserves or to provide assurance of an economic development case at this stage, or (ii) provide certainty that the conclusions of the PEA will be realised. There is a low level of geological confidence associated with inferred mineral resources and there is no certainty that further exploration work will result in the determination of indicated mineral resources or that the production target itself will be realised. In particular, Inferred Mineral Resources are considered too speculative geologically to have the economic considerations applied to them that would enable them to be classified as Mineral Reserves. Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability. The Company has concluded that it has a reasonable basis for providing the forward looking statements. The detailed reasons for that conclusion are outlined in the Company’s announcement dated 21 January 2014.

CAPITAL COSTS

The estimated capital cost to construct and commission the Project and inclusive of the open pit mining fleet is US$77.5 million, including a contingency of US$7.0 million. A further US$9.3 million is required for pre-production mining, including waste pre-strip and building a high grade stockpile ahead of treatment through the processing plant. Sustaining capital over the life of mine is estimated at US$8.6 million, US$10.3 million (including contingency) is assumed for the underground mining fleet to be acquired in Year 3 of the mine life and a further US$21.6 million for underground development. These costs include all procurement, delivery and construction direct and indirect costs. The estimates are based on the PEA design and are considered to have an accuracy of +20 to -30%.

CAPITAL COST SUMMARY US$M
Drilling & metallurgical testwork 0.72
Design & engineering 0.67
Concrete & road construction 3.44
Power plant 7.51
Plant & site infrastructure 22.13
Mining equipment - opencut 8.70
Dams & water 2.35
Salaries, oncosts & overheads 10.48
Unallocated sundry costs 12.95
Startup consumables 1.50
Subtotal 70.45
Contingency 7.05
Total Cost to Construct & Commission US$ 77.50

OPERATING COSTS

Operating costs have been developed from first principles following a review of local market conditions and are shown in the table below.

OPERATING COST SUMMARY Life of Mine (US$/oz)
Mining (ore and waste) 355
Processing 239
Administration 45
Refining 14
C1 Cash Costs 653
   
Royalties 104
Sustaining capital 18
Underground level development 34
All in Sustaining Cash Costs US$805/oz

A summary of the total expenditure on a per annum basis, including capital and operating costs, is shown in the figure below.

TAXES & ROYALTIES

The payment of gross production royalties are provided for by the Guyana Mining Act and the amount of royalty to be paid is prescribed by the Minister. As such royalties may be varied from time to time. Based on currently prescribed royalties and recent mineral agreements, royalties on gold production have been assumed as follows:

  • 8% if the gold price is above US$1,000 per ounce; and
  • 5% at a gold price of US$1,000 and less;
  • The corporate tax rate in Guyana for gold companies is 30%.

ECONOMIC ANALYSIS

Pre and Post Tax NPV for the Project
Gold Price ($US/oz) $800 $1,000 $1,200 $1,250 $1,400 $1,600
Pre-tax NPV at 6% ($US) -$61,184,647 $32,924,933 $109,049,982 $131,828,021 $200,162,140 $291,274,297
IRR N/A 18.56% 43.67% 50.71% 71.31% 98.37%
Gold Price ($US/oz) $800 $1,000 $1,200 $1,250 $1,400 $1,600
Post-tax NPV at 6% ($US) -$61,184,647 $30,791,754 $85,461,400 $101,537,554 $149,640,230 $213,543,302
IRR N/A 17.97% 38.48% 44.20% 60.93% 82.21%
Sensitivity Analysis
Post-tax NPV (US$M) -20% -10% Base +10% +20%
Head Grade 18.36 61.45 101.54 141.49 181.31
Recovery (1) N/A 88.48 101.54 114.58 N/A
Operating Costs 147.45 124.52 101.54 78.51 55.40
Capital Costs 112.96 107.25 101.54 95.82 90.11
Gold Price 30.79 61.30 101.54 141.64 181.61

(1) Sensitivity Analysis for Recovery is calculated at 89% for the downside and 95% for upside.

MINING

The Project will be developed initially as an open cut operation at Smarts and Hicks followed by underground mining at Smarts.

Mining will commence six months before the processing plant is scheduled to be commissioned. This will enable adequate high grade stocks to be accumulated prior to the commencement of processing.  An initial fleet comprising two excavators will commence at Smarts and Hicks. There is sand overburden up to 30m thick covering much of Smarts, whereas the Hicks deposit outcrops. Initial production will be sourced from Hicks while Smarts overburden is removed. Production will then focus on the higher grade Smarts deposit. An additional fleet will be mobilised after 9 months to provide additional capacity for Smarts. Unless additional material is discovered, or an increase in the gold price justifies a change in the mine plan, part of the mining fleet will then be demobilised in month 30 with a second fleet demobilised in month 42 and open pit mining concluded in month 63.

Smarts Deposit
Smarts will be mined as a 5 stage pit. The first three stages will target shallow, higher grade pods with the final two stages amalgamating the pits into a single final pit. Mining will be via conventional backhoe configured excavators loading 30t rigid trucks. Mining will be done on 2.5m flitches over a 5m high blast. Initial sand overburden removal will be free dig with no blasting required.

 

 

 


Hicks Deposit
Hicks will be developed as a series of four discrete pits along the Hicks line of mineralization (see Figure below). Open pit mining will target higher grade, shallow mineralisation. The deepest pit, Stage 2, extends to 90m below natural surface. There is no overburden masking mineralisation at Hicks. Mining parameters will be the same as those used for designing the Smarts Pits.

 



 


Underground Mining Operations
An underground mine will be developed beneath the Smarts pit. The underground development will begin at the completion of the Stage 4 Smarts pit. Access will be via a 5.5m x 5.5m decline developed at a gradient of 1 in 7. Levels to access mineralisation will be developed at 20m vertical intervals. Development along mineralisation will be a nominal 4.5m x 4.5m.  Up-hole benching is proposed as the primary mining method with some areas using cut and fill and open stoping depending on ground conditions and stope dimensions. The mineralisation is sub-vertical with widths of between 3-10m and is amenable to this style of mining. Stopes will be backfilled with development waste and pillars left for support where required (see Figures below).

 

MINERAL PROCESSING AND METALLURGICAL TESTING

Hicks Deposit

Limited historical metallurgical testwork for the Hicks deposit was conducted by Cathedral Gold (1993 and 1994) and Cambior (1998).  However there is insufficient information to confirm that the metallurgical test work is representative of the entire deposit.  The majority of gold mineralisation is located in fresh rock at Hicks, but only a small number of metallurgical samples for fresh rock were tested.  

An initial metallurgical program comprising eleven samples from Hicks was completed at ACME Metallurgical Laboratories in Vancouver, Canada in February 2012. The metallurgical program tested the amenability of gold-bearing material to both cyanide leach and gravity recovery methods. The composites were chosen to represent a range of grades from both oxidised and fresh material. In addition, one composite of fresh material representing a spread of grades from spatially diverse locations within the deposit was also tested.

The leach tests were conducted for 72 hours at a target grind size of P80 = 75 microns and at 40% solids pulp density with industry standard reagent addition rates maintained. For the leach program, the average recovery for the 11 composites was 93%. The high extraction rates (recoveries) achieved in both oxidised and fresh materials indicates that gold mineralisation at the Hicks deposit is not refractory and both oxide and fresh material will be amenable to treatment by conventional CIP or CIL.

Further metallurgical testwork was also undertaken at AMMTEC in Perth during 2013 as a part of the PEA. The Karouni gold ore was found to be free milling and gravity gold recovery was necessary to achieve high overall gold recoveries.  A gravity gold recovery of 40 to 50% could be expected.  The ore has approx. 0.5% sulfur is low in silver and contains no deleterious elements. The oxide ore is relatively soft whilst the primary ore has a range of Bond Ball Work Indices from 14.6 to 18.4kWh/t which is moderately hard. The Abrasion Index was low so crushing liners and ball consumption should be low.

Metallurgical test work to date suggest the mineralisation is non-refractory and roasting will not be required.  Apart from the metallurgical test work results described above there are no other processing factors or deleterious elements known that could have a significant impact on potential economic extraction.

Smarts Deposit
The Smarts deposit metallurgical test-work comprised 11 composites and was tested at ACME Metallurgical Laboratories in Vancouver in October 2011. The metallurgical program targeted definition of Leaching and Gravity performance as separate processes. The composites were chosen to represent a range of grades from both oxidised and fresh material. In addition, two composites each of oxide and fresh material representing a spread of grades from spatially diverse locations within the deposit were also tested. The leach tests were conducted for 72 hours at a target grind size of P80 = 75 microns and at 40% solids pulp density. For the leach program, the average recovery for the 11 composites was 93%. Not all samples displayed complete leaching at 72 hours, indicating the possible presence of free gold. This presents opportunities for further improvement of recoveries with the integration of gravity and leaching processes.

The results and conclusions of the cyanide test work will be integrated into future metallurgical test work programs.

In the gravity amenability program, by average, 35% of gold was recovered to concentrate with 5 of the 11 tests yielding recoveries greater than 45%.  The majority of the gravity tests exhibited these levels of recovery at the low mass recovery rates of 0.1 – 0.2% of feed mass.

The Company considers that the results from both of these series of metallurgical tests will assist in moving towards a relatively simple flow sheet solution for the Project.  This will form the focus of the next phase of metallurgy definition test work.  

Metallurgical test work to date suggest the mineralisation is non-refractory and roasting will not be required.  Apart from the metallurgical test work results described above there are no other processing factors or deleterious elements known that could have a significant impact on potential economic extraction. Additional testwork is currently underway.

Description and Flowsheet of Process Plant
The proposed method of gold recovery is via a conventional Carbon in Leach (CIL) gold processing facility. This will involve crushing, grinding, leaching and electrowinning. Final product will be gold doré bars. Plant throughput is 750,000 tonnes per annum. The processing plant will require chemical, electrical energy and water to operate. The expected level of electrical energy use is ~4.5MW with electricity supplied from a Company owned and operated diesel powered generating facility of ~10MW capacity consisting of a number of smaller units delivering power to be distributed over a 13,800 volt net-work at 60Hz. This will provide back up power and room for expansion capacity. The water usage will initially be high until the tailings return water has stabilized and expected use of process water is ~800,000m 3/year to cover wash down, camp, mine and other uses. ~60% is expected to be returned from the tailings dam. The remainder from pit de-watering, bore field and possibly small dams. Guyana is a very high rain fall area and lack of water is not seen as an issue.

In terms of chemicals the project will require ~400t of CN, ~750t of lime, ~800t of grinding balls, ~7,200t of diesel fuel/year, acids, SMBS, flocculants, caustic soda and a number of smaller quantities of other chemicals. None of the products required are available in Guyana so these will need to be imported.