Zinc * USD/lb
0.00
Lead * USD/lb
0.00
Moly * USD/lb
0.00

Pine Point Zinc-Lead Project

History

The Pine Point lead-zinc project has a storied history, having been first discovered in 1898 by prospectors heading to the Klondike gold rush. Cominco Ltd. began exploration at Pine Point in 1929, with test-pitting, drilling and shaft sinking. In 1948, Cominco began major exploration work, using the Mississippi-Valley-type model to guide exploration. It was a mega-project for it’s time, costing $133 million (more than $1 billion in today’s dollars), and included a railroad, hydro-electric dam and a town where up to 2000 people could live.

Cominco commenced large-scale mine production in 1964 with reported reserves of 21.5 million tonnes averaging 4% lead and 7.2% zinc (a historical figure reported by Giroux and McCartney, 2001). The mine eventually ramped up to 10,000 tonnes of ore per day. The “Pine Point mine” was actually an assemblage of 50 separate open pits and two underground deposits, lying along a 60-km trend. Some 64 million tonnes of ore at a grade of 7.0% zinc and 3.1% lead was mined between 1964 and 1987. The mine was expensive to operate, as Cominco spent about 30% of its costs maintaining the town, and during a period of weak metal prices, the decision was made to close the mine in 1987. About 90 deposits in total were discovered by Cominco and several others were discovered by another base metal mining company, Westmin, east of the Buffalo River. Previous drilling on the property totals approximately 1.3 million metres in 18,422 holes by Cominco, Westmin and Tamerlane.

Preliminary Economic Analysis

The PEA was undertaken by Pine Point Mining in early 2017, and completed in April. It shows a robust economic return with a relatively low capital cost compared to similar projects and an after-tax payback of only 1.8 years. The PEA was prepared under the direction of JDS Energy & Mining Inc. (“JDS”), an industry-leading, international engineering firm, with extensive experience in planning, construction and operation of mining projects in the Canadian north. The PEA examined several development scenarios and settled on a mining plan where 10 open pit deposits would be developed using dense media separation plants followed by traditional grinding and flotation to upgrade mineralized material into lead & zinc concentrates, similar to the methods employed by Cominco when the mine was in production in the past. The study confirms that the Project has robust economics at the assumed parameters.

PEA Study Highlights

  • Pre-Tax Net Present Value (NPV) of $340.8 million at a discount rate of 8%, and Internal Rate of Return (IRR) of 47.8%, with a payback period of 1.4 years;
  • After-Tax Net Present Value of $210.5 million and Internal Rate of Return of 34.5%, with a payback of 1.8 years. Sensitivity analyses are included in Tables 5 and 6;
  • Pre-production capital costs of $153.8 million, including a 15% contingency, with sustaining capex of $117.5 million over the life of the mine. It is assumed that sustaining capex will be entirely funded out of cash flow;
  • The Pine Point project is envisioned as a series of 10 open pit deposits mined in sequence. Total mineral resources included in the PEA mine plan are 25.8 million tonnes of measured and indicated resources grading 2.94% zinc and 1.12% lead, and an additional 3.7 million tonnes of inferred resources grading 2.90% zinc and 0.77% lead.
  • A 13-year mine life with total life-of-mine production of 1.35 billion pounds of zinc and 536 million pounds of lead. Total shipments of 1.23 million tonnes (dry) of zinc concentrate grading 58.9% zinc, and 394,000 tonnes (dry) of lead concentrate grading 65% lead. Net of by-products, the average cash cost to produce zinc is US$0.60 per pound;
  • The assessment estimates net smelter return over the life of the mine at $2,020 million, with gross pre-tax income of $908 million (Table 8);
  • Total on-site operating costs of $37.64 per tonne processed, and total transport and refining costs of $23.07 per tonne material mined and processed; and
  • A LOM average manpower of 321 persons including staff and contractors at full production.

Table 1: Summary of Economic Results

ParameterUnitValue
Pre-Tax NPV @ 8%C$M340.8
Pre-Tax IRR%47.8
Pre-Tax PaybackYears1.4
After-Tax NPV @ 8%C$M210.5
After-Tax IRR%34.5
After-Tax PaybackYears1.8

Table 2: Sensitivity Analysis: Pre-Tax NPV @ 8% (C$M)

Parameter-20%-10%Base+10%+20%
Price29185341496652
CAD:US FX73051434119981
Mill Feed Grade100220341461582
Recovery7181341497652
OPEX469405341276212
CAPEX385363341319297

Table 3: Sensitivity Analysis: Pre-Tax IRR (%)

Parameter-20%-10%Base+10%+20%
Price1332486275
CAD:US FX8163483420
Mill Feed Grade2236485969
Recovery932486275
OPEX5953484236
CAPEX6254484238

Table 4: Sensitivity Analysis: Discount Rate

Discount Rate0%5%8%10%12%
Pre-Tax NPV (C$M)637428341294254

Table 5: Sensitivity Analysis: After-Tax NPV @ 8% (C$M)

Parameter-20%-10%Base+10%+20%
Price6111211310410
CAD:US FX45932121112041
Mill Feed Grade54133211287364
Recovery-11108211210410
OPEX294252211169127
CAPEX254233211189167

Table 6: Sensitivity Analysis: After-Tax IRR (%)

Parameter-20%-10%Base+10%+20%
Price923354555
CAD:US FX6046352414
Mill Feed Grade1626354351
Recovery623354555
OPEX4339353025
CAPEX4740353026

Table 7: Sensitivity Analysis: Discount Rate

Discount Rate0%5%8%10%12%
Post-Tax NPV (C$M)423273211177149

Table 8: Pre-Tax and After-Tax Cash Flows

ParameterUnitValue
Revenue (net of treatment charges and transportation)C$M2,020.8
Operating CostsC$M1,112.1
Capital CostsC$M271.3
Pre-Tax Cash FlowC$M637.5
Income TaxesC$M214.3
After-Tax Cash FlowC$M423.2

Note: All dollar amounts other than metal prices are quoted in Canadian dollars (“$”). The study assumes a zinc price US$1.10 per pound and a lead price of US$1.00 per pound, and a US$-C$ exchange rate of $0.75-$1.00.

PEA DETAILS

Mineral Resources

Table 9: Summary of Open Pit Resources

PitMeasured & IndicatedInferred
 Feed
(kt)
Pb
(%)
Zn
(%)
Pb
(M Lb)
Zn
(M Lb)
Feed
(kt)
Pb
(%)
Zn
(%)
Pb
(M Lb)
Zn
(M Lb)
J683042.254.901533-----
HZ1,5492.763.5894112-----
W853,9831.983.46174304-----
X655,4300.802.4195288560.003.6705
O533810.912.90251210.832.7927
N20410,0050.802.981776573,5270.782.8961224
M671,3650.843.5525107-----
K681,1930.812.772173-----
L651,5780.701.952568-----
M62633521.422.131116-----
Total25,8411.122.946401,6743,7030.772.9063236

Notes to Table:

  1. The effective date for the open pit mineral Resource is March 27, 2017.
  2. Mineral Resources which are not mineral reserves do not have demonstrated economic viability. The estimate of Mineral Resources may be materially affected by environmental, permitting, legal, title, taxation, sociopolitical, marketing, or other relevant issues.
  3. The quantity and grade of reported Inferred Resources in this estimation are uncertain in nature and there has been insufficient exploration to define these Inferred Resources as an Indicated or Measured Mineral Resource and it is uncertain if further exploration will result in upgrading them to an Indicated or Measured Mineral Resource category.

The Pine Point Project, located 65 kilometres east of Hay River, N.W.T., was purchased in late December 2016 by Darnley Bay. It was operated as a successful zinc mine for several decades by Cominco Ltd., producing from 49 separate open pit and two underground mines lying along a 35-kilometre trend. Approximately 64 million tonnes of ore at a grade of 7.1% zinc and 3.1% lead were mined between 1964 and 1987. Previous drilling on the property totals approximately 1.3 million metres in 18,422 holes by previous operators.

The PEA envisions the use of conventional open pit mining and processing methods. Mining rates will range from 4,000 to 6,800 tonnes per day of mineralized material for processing over the life of the mine using a fleet of 90-tonne trucks, 8.0 m3 shovels and 8.0 m3 front end loaders.

Mineral processing will include a combination of portable and fixed crushers and dense media separation plants located near each deposit which will concentrate the mineralized material from the initial head grades averaging 2.93% and 1.08% lead-zinc, and a pre-concentrate will then be trucked to a central 1,800 tonne per-day milling facility where it will be subject to standard grinding and flotation methods to produce a final concentrate. The concentrate will then be trucked to the Hay River railway facility approximately 65 km west, from which it will be shipped to markets.

JDS engaged Knight Piésold Ltd. (KP) to develop tailings and water management plans for the Project. Tailings will be conveyed from the centralized milling facility and deposited within historic and new open pits. There will be no need to construct a new on-surface tailings facility. Dewatering of the open pits was an important component of the historic mining at Pine Point. The substantial historic site-specific data set related to pit dewatering and pumping tests provided a unique opportunity to calibrate an appropriate pit dewatering and management system for the Project, such that inflow estimates are based on past site experience rather than models. The Project includes $19.7 million in pre-production and sustaining capital costs for water management equipment, and an additional $32.2 million over the life of the project in operating costs directly related to dewatering.

Currently, the company is working with local First Nations groups to identify opportunities of local employment and business opportunities.

The next steps for the project include the launch of a feasibility study and the initiation of permitting. Provided the feasibility study supports the results of the PEA, and subject to financing and permitting, construction of a mine at Pine Point would be expected to take 12-18 months.


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