Press Releases

 July 19, 2012
Treasury Metals Receives Updated Preliminary Economic Assessment


+2.8 g/tonne Au Eq. Open Pit at Goliath Gold Project, Ontario


TORONTO, July 19, 2012 /CNW/ - Treasury Metals Inc. ("Treasury Metals" or the "Company") is pleased to announce the results of a National Instrument 43-101 Preliminary Economic Assessment ("PEA" or the "Study") on its 100% owned Goliath Gold Project ("Goliath Gold" or the "Project") located about 20 kilometres east of the City of Dryden, Ontario. The PEA was compiled by the Company's engineering team and by independent consultant A.C.A. Howe International Limited ("A.C.A. Howe"). The PEA is an update to the July 2010 PEA and it incorporates the most recent resource report.

The results demonstrate low initial capital requirements with underground ("UG") development expenditures being funded by cash flow from open pit operations during the initial three years. The PEA is based on 51% of the gold ounces outlined in the NI 43-101 Mineral Resource Estimate released on November 9th, 2011. The 2011 Mineral Resource Estimate is re-summarized in this release and the technical report is available on the Company's website.


  • 10+ year combined open pit and underground mine life with processing throughput averaging 2,500 tonnes per day ("tpd");

  • Avg. annual production of 80,000 oz Au Eq. with a LOM head grade of 3.05 g/tonne (Au Eq.);

  • Average operating cash cost of $698 per equivalent gold ounce;

  • At US$1,375 per ounce (base case - 3 year trailing average gold), the Life of Mine pre-tax net present value (NPV) of $199.0 million based on a 5% discount rate, internal rate of return (IRR) of 39.3% and a payback of 2.2 years, payback impacted as a result of funding UG development costs;

  • At current Au spot, capital payback period is 1.5 years;

  • Initial capital expenditure (based on new equipment) of $90 million incl. 20% contingency;

  • High recoveries of greater than 95% using standalone gravity/C.I.L with 70% by gravity;

"The PEA has confirmed management's targets for the Project. On a very conservative basis we have defined a profitable open pit mine allowing for rapid recovery of all of the initial capital costs while generating good margins and free cash flow for development of the underground operation," said Martin Walter, President and Chief Executive Officer of Treasury Metals.

"The Project has good grade and is located right here in Ontario surrounded by world-class infrastructure; this all makes for good business sense" he noted. "We also have significant exploration potential to increase the project's gold inventory both at depth, along strike and within other areas across the 49 km2 land package that the Company controls. Additional exploration successes can further enhance project economics and extend the current ten year mine life. We look forward to continued development of our mining project in the Dryden area."

Project Description

The Goliath Gold Project, located in northwestern Ontario, lies 125 kilometres east of the City of Kenora, 20 kilometres east of the city of the Dryden and 325 kilometres northwest of the port city of Thunder Bay. The total area of the Project is 49 km2 and is held 100% by the Company.

The main zones of mineralization of the Goliath Gold Deposit consist of the Main Zone, Footwall Zones and Hangingwall Zones. Mineralized zones strike approximately east-west and dip 70-80 degrees to the south-southeast. The focus of exploration activities on the main area of the mineralization thus far has been concentrated on the current defined resource area, which extends to a depth of approximately 600 m below the surface, over a strike-length of approximately 2,300 m.

The staged mining operation would have a five-year open pit that will feed 2,500 tpd (875,000 tpa) to the carbon-in-leach (C.I.L.) process plant. Mining would feed a life of mine average head grade of 3.05 g/tonne (Au Eq) to the plant. With up to 70% recovery rates by gravity, a greater than 95% total gold recovery would be achieved by low leach times, both of which may reduce capital costs and lower operating costs.

Goliath Gold Project Base Case Metrics and Financial Model

The following table presents a list of the Project parameters and assumptions derived from the PEA and financial model. All amounts are in Canadian Dollars except the realized gold and silver price, which is quoted in US dollars.  All grade and oz. values are quoted as gold equivalent ounces, with 1 oz Au = 50.9 oz Ag, calculated by base case metal prices as listed in the following table.

Project Parameters Unit Amount
Gold Resources    
Gold and Silver Production - Resources Mined Oz 835,000 and 2,703,000
Gold Price - Optimized Pit Model US $/Oz $1,175
Cut-off Grade - Open Pit and Underground Au g/tonne 0.45 and 2.5
Average Mill Feed Gold Grade (Au Equivalent) Au (g/tonne) 3.05
Operating Metrics    
Total Tonnes Ore Produced Tonnes 9,039,000
Open Pit Ore Production Rate tpd/tpa 2,500 tonne/day or 875,000/yr
Total Strip Ratio Waste:Ore 9.3:1
Gold and Silver Recovery (Processing) % 95% and 70%
Average Gold Production (Au Equivalent) Oz/year 80,000
Mine life years 10.3 years
Financial Metrics    
Realized Gold and Silver Price (Base Case) US$/Oz $1,375 and $27
Total Initial Capital Expenditures C$M $92.5
Total Sustaining Capital (Including U/G) C$M $128.0
Cash Operating Cost C$/Oz $698
Mining Costs - Open Pit and UG $/tonne Open pit $3.01 and UG $60
Milling Costs and G & A costs $/tonne $15.81 and $2.05
Average NSR % 0.7%
Exchange Rate C$ C$1.02:US$1.00

A.C.A. Howe concludes that under base case assumptions of 2,500 tpd production and US$1,375 per ounce gold, and assuming 100% equity financing, the Project has potential economic viability with a pre-tax Internal Rate of Return ("IRR") of 39.3%, a 5% discounted Net Present Value ("NPV") of $199.0 million and an estimated payback period of 2.2 years. The following table summarizes the base case compared to near spot metal process of US$1599 per ounce of gold:

Gold Price
NPV (5%)
NPV (10%)
IRR Payback
Pre-tax Base Case - $1,375* $199.0 119.9 39.3% 2.2
After-tax Base Case - $1,375** $144.3 83.5 32.4% 2.8
Pre-tax Near Spot - $1,599*** $306.6 $193.3 53.5 1.5

*The 10% Ontario Mining Tax is only included in the pre-tax calculations.
** The effective tax rate used was 31%.
***Near Spot price is provided for informational purposes only. 

Cautionary statement required by NI 43-101
According to the cautionary statement required by NI 43-101, it should be noted that this assessment is preliminary in nature as it includes inferred mineral resource that cannot be categorized as reserves at this time and as such there is no certainty that the preliminary assessment and economics will be realized. The full Study will be available at the Company's website and on Sedar ( within 45 days.

Proposed Mining Plan

The staged approach to mining would begin by the extraction of an open pit with three distinct pit bottoms with an average undiluted grade of 2.80 g/tonne (Au Eq). By selectively mining higher grade material, a consistent head grade of 3.3 g/tonne (Au Eq) can be fed to the mill throughout the 5 year open pit mine life while the remainder of ore above the 0.45 g/tonne (Au Eq) cut-off would be stored in a 1.8 million tonne low-grade stockpile. Excavating the distinct pits in sequence will also allow for the backfilling of completed pits as mining progresses.

A portal would be established outside of the pit limits and UG development would commence year one, being wholly completed using incoming cash flows. Production from the longhole open stoping operations would begin in year three, and would benefit from the construction of a backfill plant which would allow higher mining recoveries and lower dilution rates. UG material would continue to be blended with the low-grade stock until the stockpile's eventual exhaustion in year 10, at which point the UG operations would continue until the end of mine life.

Metallurgy and Processing

Plant operations would use a jaw crusher and associated SAG and Ball mills to process 2,500 tpd of mill feed that would report to a gravity circuit followed by a C.I.L. process.  All metallurgical testing to date - which includes Teck Resources previous 2,375 tonne bulk sample and the most recent 420 kg representative sample - has shown extremely positive results for this proposed circuit. Recoveries are indicated to be greater than 95% with up to 70% coming from gravity and very low leach times of 8-12 hours.

Upside Potential

  1. The stripping ratios in the center and west pits are approximately 5.5:1, with the east pit running 15:1. The Company believes adding ounces in the C-Zone eastern part of the resource will lead to a significantly lower stripping ratio in the eastern pit (see press release dated July 9, 2012). There is also an opportunity of small ore lenses in the hanging wall side that could be sent to low grade stockpile or mill that could also reduce the overall stripping ratio.

  2. Availability of used equipment on the market has potential to significantly reduce capital costs.  For example, used Open Pit, UG equipment, and used cone crushers could be sourced and would replace more expensive and long lead time SAG Mill expenses used in the Study.

  3. Presently the UG development costs in the Study are based on contractor rates for certain equipment and personnel. With the purchase of equipment and use of company personnel, the overall UG development cost could be significantly reduced in the sustaining capital section.

Exploration Potential

The Company has an ongoing extension and infill drilling program designed to augment the 2011 Resource Estimate that was completed in November 2011. The program has focused on pursuing strike extensions of previously identified mineralization as well as following potential new ore shoots down dip. Most recently the program has concentrated on delineating the C-Zone mineralization, now largely in the inferred category, both within and to the east of the proposed open pit boundary. Initial results were demonstrated in the Company's 1st Phase of the 2012 exploration program (see press release dated July 9, 2012) where modest grade, but substantial widths, were identified in the C-Zone.

There is also potential for additional open pit resources towards the west where several hundred meters of Hanging Wall and Main Zone mineralization have largely been tested only on a wide-spaced drilling pattern to date.

Though this was not the focus of the present PEA, there is also the potential to expand the UG exploitable resources of the Goliath Gold deposit by means of eventual deep drilling, or by an exploration program carried out from UG drill stations.

The Company also has an active exploration program to test additional targets projected along over 11 km of strike extension, principally to the northeast and east of the Goliath Gold deposit, in its 49 km2 property block. Significant gold values intercepted in previous drilling campaigns, as well as re-interpreted airborne EM and aeromag geophysics, are being used to guide the present drilling program. The objective of this program is to locate satellite open-pitable mineralization along strike from the main resource, or in the best case, to locate a significant new ore deposit.

Environmental, permitting, local community and development activities

A number of exploration and development programs are running simultaneously to the PEA and the further advancement of the Goliath Gold Project. These include:

  • The Company's ongoing Environmental Baseline Studies, initiated in the fall of 2010, support the permitting process. Environmental studies to date suggest that "no fatal flaws" are indicated for Goliath Gold Project.

  • The Company expects to file its Project Description to initiate the environmental assessment process with the Canadian Environmental Assessment Agency ("CEAA") and Ministry of Northern Development and Mines ("MNDM") during the 3rd quarter of 2012.

  • Working with the Company's engineering team, an independent consultant: G&T Metallurgical Services Ltd. is providing oversight of the final advanced stage metallurgical test work. This testing will determine a detailed flow sheet for a gravity and C.I.L. process, including SAG and Ball Mill sizing, optimal grind size and process water balances to be completed in Q3 2012.

2011 Mineral Resource Estimate

The 2011 Resource Estimate, which uses a combination of historical and current drilling results, includes 134 additional holes up to drill hole TL11-228 - that was completed in November 2011 - primarily consisting of in-fill drilling in late 2010 and throughout 2011. The 2011 Resource Estimate was completed by Howe.

Resources were defined using a block cut-off grade of 0.3 g/tonne Au for surface resources (150 metres deep) and 1.5 g/tonne Au for underground resources (>150 metres deep). Surface plus underground Indicated Resources total 9.14 million tonnes with an average grade of 2.6 g/tonne Au and 10.4 g/tonne Ag for 760,000 ounces gold and 3,070,000 ounces silver for a total of 810,000 gold equivalent ounces. Surface plus underground Inferred Resources total 15.9 million tonnes with an average grade of 1.7 g/tonne Au and 3.9 g/tonne Ag for 870,000 ounces gold and 1,990,000 ounces silver for a total of 900,000 gold equivalent ounces. The Main Zone and C Zone contained the majority of resources from both categories and are the primary targets for underground mining. A summary of mineral resources by resource category is as follows:

Category Block Cut-
off Grade
Above Cut-
Average Gold
Ag Grade
Ounces of
Total Au
Surface 0.3 6,002,000 1.8 326,000 7.1 1,257,000 22,000 348,000
Underground 1.5 3,136,000 4.3 433,000 18.0 1,812,000 32,000 465,000
Subtotal, Indicated (Rounded)   9,140,000 2.6 760,000 10.4 3,070,000 54,000 810,000
Surface 0.3 11,093,000 1.0 352,000 3.3 1,184,000 21,000 374,000
Underground 1.5 4,789,000 3.3 514,000 5.2 807,000 14,000 528,000
Subtotal, Inferred (Rounded)   15,900,000 1.7 870,000 3.9 1,990,000 35,000 900,000

Mineral Resource Estimate Parameters and Assumptions:

  1. Cut-off grade for mineralised zone interpretation was 0.5 g/tonne.
  2. Block cut-off grade for surface resources (less than 150 metres deep) was 0.3 g/tonne.
  3. Block cut-off grade for underground resources (more than 150 metres deep) was 1.5 g/tonne.
  4. Gold price was $US 1500 per troy ounce.
  5. Zones extended up to 150 metres down-dip from last intercept. Along strike, zones extended halfway to the next cross-section.
  6. Minimum width was 2 metres.
  7. Non-diluted.
  8. Mineral resources that are not mineral reserves do not have demonstrated economic viability.
  9. Resource estimate prepared by Doug Roy, M.A.Sc., P.Eng.
  10. A specific gravity (bulk density) value of 2.75 was applied to all blocks (based on 30 samples).
  11. Non-cut. Top-cut analysis of sample data suggested no top cut was needed because of the absence of high-grade outliers.
  12. Silver equivalency parameters: Metallurgical recovery: Gold 95%, Silver 72%; Price: Gold $1500, Silver $35. I.E.: 1 ounce gold = 57 ounces silver.
  13. Totals have been rounded to show the correct number of significant digits, reflecting the accuracy of the estimate

Qualified Person
Technical information related to the PEA contained in this news release has been reviewed and approved by Doug Roy, M.A.Sc., P.Eng., an Associate Mining Engineer with A.C.A Howe, who is an independent Qualified Person as defined by NI 43-101, with the ability and authority to verify the authenticity and validity of this data. The PEA technical report will be filed on Sedar within 45 days. Technical information in the press release has also been reviewed and approved by John J. Chulick, a consulting geologist registered in the State of California, and Mark Wheeler, P. Eng., Senior Mining Engineer, who are both Qualified Persons for the Goliath Gold Project under the definitions established by National Instrument 43-101.

Forward-looking statements

This release includes certain statements that may be deemed to be "forward-looking statements".  All statements in this release, other than statements of historical facts, that address events or developments that management of the Company expect, are forward-looking statements. Actual results or developments may differ materially from those in forward-looking statements.  Treasury Metals disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, save and except as may be required by applicable securities laws. 

View News Release in PDF format:
 68 KB, approx. 14 seconds at 56.6Kbps

You can return to the main Press Releases page, or press the Back button on your browser.