P&E Mining Consultants Inc. (“P&E”) were engaged to complete a Preliminary Economic Assessment on the Sugar Zone Project. The PEA studied a phased development approach with a goal of achieving near-term cash flow while minimizing initial underground development work, starting at 540 tpd at the Sugar Zone, increasing to 1,400 tpd by year 2021 as access to the Middle Zone Mineral Resources are incorporated into the mine plan.
Phased Mine Production Schedule
Annual gold production is expected to increase to 75,000 ounces by year 2020 and is expected to average approximately 106,000 ounces after Phase 3 expansion in year 2021 and beyond.
Sugar Zone Project Production Forecast
Longitudinal longhole retreat stoping was selected as the mining method based on a favourable geometry, geotechnical understanding and the success of the Bulk Sample program completed in 2017. Both the mineralized material and the host rock are sufficiently competent to support the void sizes required for effective longhole stoping. Paste backfill will be the primary fill type.
A level-by-level, bottom up stope sequence was applied to the stopes within each mining block. The Sugar Zone stope design was based on 15 metre levels, 50 metre lengths and factoring in 38% dilution. The Middle Zone stope design was based on 20 metre levels, 30 metre lengths and factoring in 28% dilution.
The Sugar Zone North and South ramp stopes are targeted first, to maximize near-term production and minimize pre-production development costs. These areas are lower in grade for the first 18 months and will be mined before reaching higher grade stopes below. Average diluted grade over the first 18 months of production is 5.5 g/t Au.
During years 2020 to 2025, the higher grade areas of both the Sugar and Middle Zones will be accessible, providing access to high grade stopes averaging a diluted head grade of 7.3 g/t Au during this period.
From 2025 onward, the Inferred Mineral Resource currently classified as lower grade are mined at an assumed diluted grade averaging 5.3 g/t Au.
Longitudinal projections illustrating the diluted mining grades and mining sequence by year are provided below.
Mine Design – Grade Distribution
Mineable Mineralization for Mine Planning Purposes
For purposes of mine planning, and after factoring in planned dilution, varying cut-off grades for stope and low grade development material, the Potentially Mineable Mineralization is comprised of 4.5 million tonnes at a diluted grade of 6.5 g/t Au, containing 941,000 ounces of gold.
Potentially Mineable Mineralization for Mine Planning
Approximately 534,000 ounces of the Mineral Resources were excluded from the PEA mine plan due to drill density and lower grade mineralization. A majority of the mineralization excluded is classified as Inferred Mineral Resources, located below the Sugar Zone North Ramp at 500 metres depth and the Middle Zone Ramp at 750 metres depth, illustrated in the following longitudinal projections.
Processing and Recovery
800 tpd Process Plant
The process plant design was sized to support the initial Phase 1 mining rate of 540 tpd and Phase 2 increase of the mining rate to 800 tpd. The process plant commences by producing both a doré bar and a bagged gold concentrate through gravity concentration and flotation circuits, respectively. This process plant is currently under construction and is over 80% complete. The major process steps are as follows:
Primary and Secondary crushing;
- Fine feed storage (stockpile);
- Grinding (ball mill);
- Gravity concentration;
- Filtration; and
- Tailings thickening.
Increasing to 1,400 tpd
Harte Gold commissioned Halyard Inc. (“Halyard”) to prepare a study examining the Phase 3 process plant expansion to 1,400 tpd and incorporation of a flotation concentrate leaching circuit that would allow the Project to produce only a doré, rather than a combined doré and flotation concentrate output.
The study concluded that an additional process plant building is necessary to house a parallel ball mill and gravity circuit, a concentrate leaching circuit and a cyanide leach solution handling/gold recovery circuit, adjacent to the existing process plant facility. Other areas such as crushing, feed storage and flotation equipment can be successfully combined. Construction of the expanded process plant facility and flotation concentrate leaching circuit is expected to be completed by the end of year 2020 and operational for 2021.
The following charts illustrate the positive impact of increased production.
Throughput and Diluted Head Grade
The Project economics are summarized in the following table. A 2.0% net smelter royalty (“NSR”) is payable over mine life. The existing 3.5% NSR can be reduced to 2.0% on payment of $1.5 million. The Company expects to buy down the NSR in August 2018.
NPV figures calculated on an after-tax basis factor in a 25% corporate income tax rate and 10% Ontario Mining Tax rate.
NPV and IRR Summary
Opportunities to Enhance Project Value
Several opportunities have been identified to further enhance value.
The Company’s 2018 drill program has been tailored to support these value enhancement strategies:
Targeted Drill Areas
Technical Report & Preliminary Economic Assessment on the Sugar Zone Property – June 6, 2018