Le Lézard
Classified in: Mining industry, Business
Subject: MINING EXPLORATION UPDATE

Darnley Bay Announces Robust Preliminary Economic Assessment at Pine Point


TORONTO, ONTARIO--(Marketwired - April 18, 2017) - Darnley Bay Resources Limited (TSX VENTURE:DBL) ("Darnley Bay" or the "Company") is pleased to announce the results of an independent Preliminary Economic Assessment ("PEA") of the 100% owned Pine Point Project ("Pine Point" or the "Project") located near Hay River, Northwest Territories. 

The PEA 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 study is being summarized into a Technical Report (the "Darnley Technical Report") to be filed on SEDAR in accordance with National Instrument 43-101 ("NI 43-101") within 45 days. The PEA examined several development scenarios and settled on a mining plan where a number of 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.

Darnley Bay President and Chief Executive Officer Jamie Levy remarked that, "This Preliminary Economic Assessment supports that management's confidence in this project was well-placed when it was purchased this past December. What is also very encouraging is that there are multiple opportunities, including underground mining, to enhance the economics and extend the project life. The Company plans to initiate a feasibility study in the near future while drilling to add additional resources to the mine plan." 

Darnley Bay Chief Operating Officer John Key adds, "We had faith that the project would demonstrate healthy economic potential which this very thorough study by JDS supports. Darnley Bay looks forward to working closely with the stakeholders in the South Slave region to advance Pine Point to the benefit of the region." 

PEA Study Highlights - Base Case

Table 1: Summary of Economic Results

Parameter Unit Value
Pre-Tax NPV @ 8% C$M 340.8
Pre-Tax IRR % 47.8
Pre-Tax Payback Years 1.4
After-Tax NPV @ 8% C$M 210.5
After-Tax IRR % 34.5
After-Tax Payback Years 1.8

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

Parameter -20%   -10%   Base   +10%   +20%
Price 29   185   341   496   652
CAD:US FX 730   514   341   199   81
Mill Feed Grade 100   220   341   461   582
Recovery 7   181   341   497   652
OPEX 469   405   341   276   212
CAPEX 385   363   341   319   297

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

Parameter -20%   -10%   Base   +10%   +20%  
Price 13 % 32 % 48 % 62 % 75 %
CAD:US FX 81 % 63 % 48 % 34 % 20 %
Mill Feed Grade 22 % 36 % 48 % 59 % 69 %
Recovery 9 % 32 % 48 % 62 % 75 %
OPEX 59 % 53 % 48 % 42 % 36 %
CAPEX 62 % 54 % 48 % 42 % 38 %

Table 4: Sensitivity Analysis: Discount Rate

Discount Rate 0%   5%   8%   10%   12%
Pre-Tax NPV (C$M) 637   428   341   294   254

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

Parameter -20%   -10%   Base   +10%   +20%
Price 6   111   211   310   410
CAD:US FX 459   321   211   120   41
Mill Feed Grade 54   133   211   287   364
Recovery -11   108   211   210   410
OPEX 294   252   211   169   127
CAPEX 254   233   211   189   167

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

Parameter -20%   -10%   Base   +10%   +20%  
Price 9 % 23 % 35 % 45 % 55 %
CAD:US FX 60 % 46 % 35 % 24 % 14 %
Mill Feed Grade 16 % 26 % 35 % 43 % 51 %
Recovery 6 % 23 % 35 % 45 % 55 %
OPEX 43 % 39 % 35 % 30 % 25 %
CAPEX 47 % 40 % 35 % 30 % 26 %

Table 7: Sensitivity Analysis: Discount Rate

Discount Rate 0%   5%   8%   10%   12%
Post-Tax NPV (C$M) 423   273   211   177   149

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

Parameter Unit   Value
Revenue (net of treatment charges and transportation) C$M   2,020.8
Operating Costs C$M   1,112.1
Capital Costs C$M   271.3
Pre-Tax Cash Flow C$M   637.5
Income Taxes C$M   214.3
After-Tax Cash Flow C$M   423.2

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

Pit Measured & Indicated   Inferred
  Feed (kt)   Pb
(%)
  Zn
(%)
  Pb
(M Lb)
  Zn
(M Lb)
  Feed (kt)   Pb
(%)
  Zn
(%)
  Pb
(M Lb)
  Zn
(M Lb)
J68 304   2.25   4.90   15   33   -   -   -   -   -
HZ 1,549   2.76   3.58   94   122   -   -   -   -   -
W85 3,983   1.98   3.46   174   304   -   -   -   -   -
X65 5,430   0.80   2.41   95   288   56   0.00   3.67   0   5
O533 81   0.91   2.90   2   5   121   0.83   2.79   2   7
N204 10,005   0.80   2.98   177   657   3,527   0.78   2.89   61   224
M67 1,365   0.84   3.55   25   107   -   -   -   -   -
K68 1,193   0.81   2.77   21   73   -   -   -   -   -
L65 1,578   0.70   1.95   25   68   -   -   -   -   -
M6263 352   1.42   2.13   11   16   -   -   -   -   -
Total 25,841   1.12   2.94   640   1674   3,703   0.77   2.90   63   236

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 of 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.

Opportunities for Enhancement of the Project

The Company believes there are several potential opportunities to further improve the economics of the Pine Point Project through:

Cautionary Statement

Readers are cautioned that the Pine Point 2017 PEA is preliminary in nature and includes the use of 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 PEA will be realised. There is no certainty that the Inferred Resources will be converted to the Indicated or Measured categories, or that the potential Measured or Indicated Resources would be converted to the Proven or Probable Mineral Reserve categories. Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability.

The estimates of Mineral Resources in the PEA and the Mineral Resource statement may be materially affected by environmental, permitting, legal, title, taxation, socio-political, marketing, or other relevant issues. The Pine Point 2017 PEA recommends that the Project be advanced to a Feasibility level study in order to increase confidence in the estimates.

Darnley will be filing a National Instrument (NI) 43-101 Technical Report on the Pine Point PEA within 45 days of this news release.

Conference Call Details

PEA Study Conference Call

A conference call will be held on April 19, 2016 at 4:15pm EST to discuss the PEA Study.

Dial-In Number: 647-478-7145

Code: 437077

Qualified Persons

The Pine Point 2017 PEA was prepared by JDS and is based on a Mineral Resource estimate for the Pine Point Project published as a NI 43-101 Technical Report with an effective date of March 4, 2017. JDS has a long and successful track record of delivering high-quality technical engineering and economic studies for a wide range of mineral resource companies, both in Canada and internationally. JDS is a specialized, private mineral engineering, consulting and construction company focused on adding value to mineral projects with fit-for-purpose designs and exceptional execution. The JDS team has a long history of northern Canadian and diamond experience including the construction of the Gahcho Kué diamond mine and the Silvertip silver and base-metals mine.

The following Qualified Persons have participated in the development of the PEA, or are responsible for specific inputs into the PEA.

Forward-Looking Information

This release includes certain statements that may be deemed "forward-looking statements". All statements in this release, other than statements of historical facts, that address future production, reserve potential, exploration drilling, exploitation activities and events or developments that Darnley Bay expects are forward-looking statements. Although Darnley Bay believes the expectations expressed in such statements are based on reasonable assumptions, such statements are not guarantees of future performance and actual results or developments may differ materially from those in the statements. There are certain factors that could cause actual results to differ materially from those in forward-looking statements. These include market prices, exploitation and exploration successes, continued availability of capital and financing, and general economic, market or business conditions. Investors are cautioned that any such statements are not guarantees of future performance and actual results or developments may differ materially from those projected in the forward-looking statements. For more information on Darnley Bay, investors should review registered filings at www.sedar.com.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.


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