La Mina PEA Highlights
bellhaven copper & gold inc
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Preliminary Economic Assessment

 

PEA Study Highlights La Mina as One of the Lowest Cost Gold Development Projects with Total Cash Costs of $408/oz (Net of By-Product Credits)

 

The PEA Study defines a standard, truck-and-shovel, open-cut mining operation to produce gold-copper-silver commercial concentrates by conventional milling and concentrating.  The PEA concludes that the Project is financially robust with an estimated NPV@ 8% of US$262 million/$171 million (before/after tax) and an internal rate of return (“IRR”) of 33.5%/27.2% (before/after tax).  A key highlight of the Study is the $408/oz total cash cost (net of by-product credits, life of mine), making La Mina one of the lowest cost gold development projects in the Americas.  Project highlights are summarized in Table 1 below.

 

    Table 1.  Project Production and Financial Highlights

 

Resource and Production  

 

Whittle Pit Resource and Avg. Gold & Copper Grades

42.5 Mt @ 0.74 g/t Au, 0.24% Cu

Mine Life

9.7 years

Milling Rate (Plant Capacity)

12,500 mtpd

Total Gold / Copper Production

907,400 oz Au / 200.4 million lbs Cu

Average Annual Gold / Silver Production

93,409 oz Au / 80,367 oz Ag

Average Annual Copper Production

20.6 million lbs Cu

Costs, Revenues, and Profits  (based on $1400/oz gold, $20/oz silver, and  $3.25/lb copper prices)

Total Cash Cost (net credits):  1st5 Yrs & LOM Avg.

$178/oz gold  /  $408/oz gold

Initial Capital Expenditures including Contingency

$320.00 million

Average Annual Gross Revenue*

$189.40 million

Average Annual After-Tax Net Profit*

$32.99 million

Financial Summary (based on $1400/oz gold, $20/oz silver, and  $3.25/lb copper prices)

NPV @ 8% discount rate (before taxes/after taxes)

$262 million / $171 million

IRR (before-tax/after-tax)

33.5% / 27.2%

Payback (years)**

4.57 years

* for periods with sales revenue;  ** from start of mine construction; All $ are US$;  Mt = million metric tonnes;  mtpd = metric tonnes per day. 

 

Introduction

 

The Company’s flagship project is the 100%-owned La Mina porphyry gold-(copper) porphyry deposit in the Middle Cauca belt of Colombia. The La Mina resource contains 1.6 Moz gold and 419 million pounds of copper (or 2.55 Moz gold equivalent) contained in sulphide at two prospects, La Cantera and Middle Zone, located within 0.5 km of each other. The average grade of 1.0 g/t gold equivalent makes La Mina one of the highest grade gold-(copper, silver) porphyry deposits in the Americas. 
 
The Company is currently working to advance and to grow these resources through mine development and exploration.  One of the exploration prospects located within one km of the La Cantera/Middle Zone resource is La Garrucha where Bellhaven recently announced a 271-m long intercept averaging 1.03 g/t gold and 0.13% copper (1.23 g/t gold equivalent;  see press release of September 10, 2013).
 
The PEA Study
 
Bellhaven commissioned InterPro Development Inc, Lakewood, Colorado ("InterPro") under the direction of Mr. Gregory Chlumsky to prepare a preliminary economic assessment of its 100%-owned La Mina gold-(copper, silver) project located in Antioqua, Colombia. The PEA Study is based on the mineral resource estimate prepared in 2012 by Scott E. Wilson Consulting, Inc (now Metal Mining Consultants) in accordance with the definitions in Canadian National Instrument 43-101 (“NI 43-101”) (see press release dated July 9, 2012).  InterPro undertook the other aspects of the PEA including potential environmental and community impacts (Dr. Terry Brown), geotechnical, metallurgy, flow sheets, process plant, project infrastructure, capital/operating costs and financial analysis (Mr. Gregory Chlumsky) to complete the Study.
 
Mineral Resources
 
The mineral resource estimate was prepared in accordance with National Instrument 43-101 by Scott E. Wilson Consulting, Inc and was previously announced on July 9th, 2012.  The resource used in this PEA Study is unchanged from the July, 2012 resource (see Table 2).
 

Table 2.  Total Inferred Resources for the La Mina Project (Cut-off Grade: 0.3 g/t Au)

Deposit

Tonnes

('000)

Au (g/t)

Cu  (%)

AuEq (g/t)

Contained

Au Oz

Contained

Cu lbs (‘000)

Contained

AuEq Oz

La Cantera

40,560

0.77

0.31

1.26

1,009,000

279,800

1,639,000

Middle Zone

39,310

0.47

0.16

0.72

594,000

139,400

913,500

 

 

 

 

 

 

 

 

Total

79,870

0.62

0.24

0.99

1,603,000

419,300

2,553,000

 

Mine Plan / In-Pit Resources

 

The mine plan is based upon developing two open pits over La Mina’s La Cantera and Middle Zone deposits that extract a total of 42.5 Mt of mill feed and 239.8 Mt of waste over an initial 9.7-year mine operating life based on a $1,200 gold price (see Table 3).  Additional mineral resources remain within the two deposits.  As well, there may be future resources at the exploration prospect called La Garrucha located 0.5 km away.
 

Table 3.  Mine Plan / In-Pit Resources for La Mina Project, Colombia

Deposit

Metric

Tonnes

In-Situ Grades

Contained Metal

Au (g/t)

Ag

(g/t)

Cu (%)

AuEq (g/t)

Au Oz

Ag Oz

Cu lbs (‘000)

La Cantera

24,224,688

0.87

2.06

0.32

1.36

678,122

1,601,417

171,539,26

Middle Zone

18,257,147

0.57

1.70

0.14

0.78

333,808

1,000,310

54,521,347

 

 

 

 

 

 

 

 

 

Total

42,481,835

0.74

1.91

0.24

1.11

1,011,930

2,601,727

226,060,60

 

Cautionary Statement: The PEA Study is preliminary in nature and includes Inferred Mineral Resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as Mineral Reserves. There is no certainty that the conclusions reached in the PEA Study will be realized.  Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability.
 

Capital Costs

 

InterPro prepared a detailed equipment list for the mine and the processing plant based upon delivering 42.5 Mt to a 12,500 mtpd processing pit over a 9.7-year initial mine life (see Table 4).  All estimates are based on consultant experience with similar projects and are not definitive estimates based on vendor quotes.
 

Table 4.  Estimated Capital Costs for La Mina Project, Colombia

Total Capital Expenditures

US$ millions

Initial Capital

 

   Mine

$43.00

   Processing Plant

$242.00

   Tailings Ponds

$11.00

   Owner’s Cost & Contingency

$24.00

Total Initial Capital

$320.00

 

 

Sustaining Capital

$27.68

 

 

Closure (Environmental / Reclamation) Costs

$27.50

 

 

Total Life-of-Mine Capital

$379.18

 

Mining and Production

 

Resource material from the La Cantera and the Middle Zone pits will be treated in a moderately-sized conventional concentrator to produce a commercial copper concentrate containing gold and silver (see Table 5).  The concentrator will initially treat a nominal 12,500 mtpd of resource material supplied from the higher grade La Cantera pit to be followed by resource material received from the Middle zone pit.
 

Table 5.  Estimated Production and Mill Recoveries for La Mina Project, Colombia

Production

LOM

Avg / Yr

Mining

 

 

   Total Tonnes Mined (Ore + Waste)

282,300,000 mt

29,050,000 mt

   Total Ore Mined

42,500,000 mt

4,375,000 mt

   Total Waste

239,800,000 mt

24,675,000 mt

   Stripping Ratio (waste to ore)

5.6

5.6

Mill Recoveries

 

 

   Gold Recovery

90%

90%

   Copper Recovery

88%

88%

   Silver Recovery

30%

30%

Metal Production

 

 

   Gold in Concentrate

907,400 oz

93,409 oz

   Copper in Concentrate

200,368,886 lbs

20,626,209 lbs

   Silver in Concentrate

780,703 oz

80,367 oz

 

Operating-, Total Cash-, and All-In Costs

 

Table 6.  Estimated Operating Costs for La Mina Project, Colombia

 

Mine-site operating costs are summarized in Table 6.  The concentrate will be trucked from the La Mina mine site to Puerto Buenaventura or Cartagena.  From these coastal locations in Colombia the concentrate will be shipped to smelters located either in Peru or Mexico (see Table 7).

Mine-Site Operating Costs

US$ / mt

Operating Costs

 

   Mining

$1.90

   Milling / Processing

$5.87

   G/A (Mine Site)

$0.92

Total Operating Costs

$8.69

 

 

Mine-site operating costs are summarized in Table 6.  The concentrate will be trucked from the La Mina mine site to Puerto Buenaventura or Cartagena.  From these coastal locations in Colombia the concentrate will be shipped to smelters located either in Peru or Mexico (see Table 7).
 
The La Mina concentrate is very clean, containing very low amounts of arsenic, antimony, lead, and other deleterious elements and thus no deductions or penalties were applied to the concentrate terms.
 

Table 7.  Estimated Concentrate Terms and Transportation Costs

Concentrate Commercial Terms

 

Payable Gold (%)

95%

Payable Copper (%)

96%

Payable Silver (%)

92%

 

 

Treatment Charge

$70/mt

 

 

Refining Charge – Gold

$5.50/oz

Refining Charge – Copper

$0.07/lb

Refining Charge – Silver (1% of metal price)

$2.00/oz

 

 

Concentrate Transportation

 

   Concentrate Trucking and Port Handling

$32/mt

   Concentrate Shipping

$45/mt

 

Table 8.  Royalty, Taxes and Exploration Deductable

 

Royalty

Amount

   Gold

4%

   Copper

5%

   Silver

4%

 

 

Tax Rates

 

   Colombian Tax Rate

33%

   Applicable Canadian Tax Rate

0%

 

 

Exploration Deductible

$33 million

 

Estimated royalties payable to the Republic of Colombia are shown in Table 8.  It is anticipated that all income tax will be paid to Colombia with no income taxes payable to Canada.  Colombia allows for exploration costs to be deducted against income and these accrued expenditures will be expensed in the first year of production.

 

Table 9.  Estimated Total Cash Costs (Net of Credits) for La Mina Project, Colombia

 

Cash Costs

 Years 1-5

Life of Mine

 

US$/oz

US$ million

US$/oz

US$ million

   Mining

 $           514

 $        268.9

 $           622

 $        536.4

   Milling / Processing

 $           245

 $        128.4

 $           289

 $        249.5

   G/A (Mine Site)

 $             38

 $         19.9

 $             46

 $         39.3

   Transportation

 $             30

 $         15.8

 $             27

 $         23.3

   Smelting & Refining (TCRC)

 $             52

 $         27.0

 $             47

 $         40.3

Cash Operating Costs

 $           879

 $        460.0

 $        1,031

 $        888.8

   Copper & Silver Credits

 $        (817)

 $     (427.3)

 $        (734)

 $   (633.00)

Cash Operating Costs (Net of Credits)

 $             62

 $         32.7

 $           297

 $        255.8

   Royalties

 $           116

 $         60.5

 $           111

 $         95.9

Total Cash Costs

 $           995

 $        520.5

 $        1,142

 $        984.7

Total Cash Costs (Net of Credits)

 $           178

 $         93.2

 $           408

 $        351.7

 

The estimated total cash costs ($408/oz, net of credits) and all-in costs ($1083/oz, net of credits) for the La Mina Project are very low and place the project in the lowest decile of estimated 2013 gold production (see Tables 9 and 10).  In fact, in a research report published on June 4th of this year, BMO Capital Markets estimates that less than 5% of the 69 gold producers and developers followed by BMO Research boast all-in costs below the spot gold price (spot gold as of June 4th was ~US1,406/oz).

 

Table 10.  Estimated All-In Costs (Net of Credits) for La Mina Project, Colombia

 

Cash Costs

Years 1-5

Life of Mine

 

US$/oz

US$ million

US$/oz

US$ million

Total Cash Costs (Net of Credits)

 $            178

 $          93.2

 $            408

 $        351.7

   Corporate G/A

 $              61

 $          31.8

 $              73

 $          62.9

   Sustaining Capital

 $              30

 $          15.9

 $              37

 $          31.7

   Closure Capital

 $              27

 $          14.2

 $              32

 $          27.5

All-In Sustaining Costs

 $        1,113

 $        582.4

 $        1,284

 $    1,106.8

All-In Sustaining Costs (Net of Credits)

 $            296

 $        155.1

 $            550

 $        473.8

   Income-Tax Expense

 $            175

 $          91.5

 $            171

 $        147.0

   Initial (Development) Capital

 $            612

 $        320.0

 $            371

 $        320.0

All-In Costs

 $        1,900

 $        993.8

 $        1,826

 $    1,573.8

All-In Costs (Net of Credits)

 $        1,083

 $        566.5

 $        1,091

 $        940.8

 

The qualities of the Project contributing to the low-cost profile include significant by-product copper and silver credits, low initial strip (mineralized zones crop out on the surface at both La Cantera and Middle Zone), favourable metallurgical recoveries, and relatively low labour costs.

 

Financial Analysis

 

InterPro developed a cash-flow valuation model using long-term forecast metal prices of US$1,400/oz gold, US$3.25/lb copper, and US$20/oz silver (see Table 11).  All financial projections are calculated in constant US dollars with no inflation assumed to affect the capital amounts, the costs, metal prices, or NPV discount rates.  No leverage has been assumed—numbers reflect a 100% equity basis.
 

Table 11.  Key Financial Projections for the La Mina Project, Colombia

Key Financial Projections

LOM

Avg / Yr

Payable Metal

   Gold

862,030 oz

88,738 oz

   Copper

190,350,441 lbs

19,594,898 lbs

   Silver

718,247 oz

73, 937 oz

Gross Revenues    (based on $1400/oz gold, $3.25/lb copper, $20/oz silver  prices)

   Gold

 $      1,206.84 million

 $       124.23 million

   Copper

 $         618.64 million

 $         63.68 million

   Silver

 $           14.36 million

 $           1.48 million

Total Gross Revenues

 $    1,839.85 million

 $     189.40 million

 

Net Project Revenues

 $      1,689.95 million

 $       173.97 million

EBITDA 

 $         855.10 million

 $         88.03 million

Net Income (Before Tax)

 $         475.92 million

 $         48.99 million

Income Tax

 $         155.41 million

 $         16.00 million

Net Income (After-Tax)

 $         320.50 million

 $         32.99 million

 

Table 11 shows that the Project generates average annual net revenues of $174 million, EBITDA of $88 million, and net income (after-tax) of $33 million.  The base-case pre-tax NPV @ 8% is estimated at $262 million with an associated 33.5% IRR and a payback period of 4.57 years.  The base-case after-tax NPV @ 8% is calculated at $171 million with an associated 27.2% IRR and a payback period of 4.57 years.

 

Table 12.  Pre-Tax NPV, IRR, and Payback Projections at Various Gold Prices for La Mina, Colombia

 

Pre-Tax

$1,200/oz gold

$1,300/oz gold

$1,400/oz gold

$1,500/oz gold

 NPV @ 5%   (US$ million)

 $            204

 $            267

 $            329

 $            391

 NPV  @8%   (US$ million)

 $            155

 $            209

 $            262

 $            315

 NPV  @10% (US$ million)

 $            127

 $            176

 $            224

 $            273

 IRR (%)

              24.6%

              29.1%

              33.5%

              37.6%

Payback (Years)

               N/A

               4.79

               4.57

               4.37

 

Sensitivities were calculated by varying the gold and copper prices (Tables 13 and 14), estimated capital expenditures (Table 15), as well as operating mining costs (Table 16) and operating processing costs (Table 17).  Based on these figures it is apparent that the Project is most sensitive to gold and copper prices.    The Project continues to generate a positive NPV @ 8% until gold prices reach $1000/oz and copper prices drop below $3.00/lb (see Table 14).  Increases in capital expenditures do not alter the Project NPV’s much as shown in Table 15.  For instance, a 20% increase in capital expenditures still generates a pre-tax IRR of 27% for the Project.  Finally, the NPV and IRR of the Project are not sensitive to swings in operating mining and processing costs (see Tables 16 and 17).

 

Table 13.  After-Tax NPV, IRR, and Payback Projections at Various Gold Prices for La Mina, Colombia

 

After-Tax

$1,200/oz gold

$1,300/oz gold

$1,400/oz gold

$1,500/oz gold

 NPV @ 5%  (US$ million)

 $            137

 $            179

 $            220

 $            262

 NPV  @8%   (US$ million)

 $            99

 $            135

 $            171

 $            207

 NPV  @10% (US$ million)

 $            78

 $            110

 $            143

 $            175

 IRR (%)

              20.2%

              23.8%

              27.2%

              30.4%

Payback (Years)

               N/A

               4.79

               4.57

               4.37

 

Table 14.  NPV Sensitivity to Long-Term Metal Prices.

 

Project Pre-Tax NPV at Various Metal Price Assumptions  (NPV @ 8% discount)

Metal

Prices

Gold Price (US$/oz)

 $1,000

 $1,200

$1,300

$1,400

$1,500

 $1,600

Copper Price (US$/lb)

 $2.50

$(41)

$66

$119

$172

$226

$279

 $2.75       

$(11)

$96

$149

$202

$256

$309

 $3.00       

$19

$125

$179

$232

$286

$339

 $3.25             

$49

$155

$209

$262

$315

$369

 $3.50

$78

$185

$239

$292

$345

$399

All NPV values are shown in US$ millions.

 

Table 15.  NPV and IRR Sensitivity to Estimated CapEx.

 

pre‐tax

Variance from Base Case—CapEx Estimate

-20%

-10%

Base

+10%

+20%

NPV (0%)

$524

$500

$476

$452

$428

NPV (5%)

$379

$352

$329

$306

$283

NPV (8%)

$306

$284

$262

$240

$218

NPV (10%)

$267

$246

$224

$203

$181

IRR (%)

42%

37%

33%

30%

27%

 

Table 16.  NPV and IRR Sensitivity to Mine OpEx.

 

pre‐tax

Variance from Base Case—Mine OpEx Estimate

-20%

-10%

Base

+10%

+20%

NPV (0%)

$589

$532

$476

$420

$363

NPV (5%)

$412

$320

$328

$287

$246

NPV (8%)

$332

$297

$262

$227

$192

NPV (10%)

$287

$256

$224

$193

$161

IRR (%)

38%

36%

33%

31%

28%

 

Table 17.  NPV and IRR Sensitivity to Processing OpEx.

 

pre‐tax

Variance from Base Case—Processing OpEx Estimate

-20%

-10%

Base

+10%

+20%

NPV (0%)

$528

$502

$476

$450

$424

NPV (5%)

$368

$348

$329

$309

$290

NPV (8%)

$295

$278

$262

$246

$229

NPV (10%)

$254

$239

$224

$209

$195

IRR (%)

36%

$35%

33%

32%

31%

 

Mr. Gregory Chlumsky, Principal for InterPro, and a Qualified Person as defined by NI 43-101, has reviewed and approved the process and economic information contained in this release. 

The PEA is preliminary in nature, it includes inferred mineral resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves and there is no certainty that the preliminary economic assessment will be realized.

The Company also wishes to clarify that, in light of the long-term average metal prices currently used in economic analysis (“Current Prices”), the base-case financial results in the Company’s 2013 PEA are out of date. As detailed in the sensitivity analysis contained in the Company’s 2013 PEA (see Tables 22.2 - 22.4), the use of Current Prices would lower the 2013 PEA financial results.