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Timmins Gold Corp.: Updated Mine Plan and Increased Production Schedule for the San Francisco Mine, Sonora, Mexico
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Press Release Source: Timmins Gold Corp. On Friday January 14, 2011, 10:37 am
VANCOUVER, BRITISH COLUMBIA--(Marketwire - 01/14/11) - Timmins Gold Corp. ("Timmins" or the "Company") (TSX-V:TMM - News) announces the completion and filing of the technical report titled NI 43-101 F1 updated resources and reserves and mine plan for the San Francisco Gold Mine, Sonora, Mexico, dated November 30, 2010, prepared by Micon International Limited of Toronto (Micon). The Technical Report was prepared to update the previous technical report dated March 31, 2008 (as amended on January 13, 2009), and to provide a base case scenario for increased production at the San Francisco Mine as a result of rising gold prices and a 28% increase in the estimated mineral reserves at the mine.
Highlights
1. Total gold production of 539,699 ounces from 2011 to 2016
2. Average annual production of approximately 100,000 ounces of gold
3. Base case life of mine cash costs of USD 489 per ounce
4. Strip ratio of 1.73
5. Increase of crushing capacity to 18,000 tonnes per day
Commenting on the Technical Report results, Timmins Gold President Arturo Bonillas said: "The Technical Report confirms the robust economics of the San Francisco Mine. The increase in the mineral reserves at the San Francisco Mine has been obtained from the successful drilling undertaken up to June 30, 2010 and higher gold prices. The decision to increase the capacity of the crushing system to 18,000 tonnes per day by adding one more module has been derived from a number of factors including the successful startup of the mine, rising gold prices and the commensurate decrease in cutoff grade, and management's conviction that additional reserves will be established in and around the pit as a result of the extensive drilling program planned for 2011. We are confident that the base case scenario is conservative and that we will be able to achieve lower cash costs in actual operations."
RESOURCE AND RESERVE ESTIMATES
Mineral Resource
The updated mineral resource estimate was initially published on November 16, 2010. Figures have been rounded to reflect that they are estimations. Mineral Resources that are not Mineral Reserves do not, however, have demonstrated economic viability.
Mineral Resource Estimate (Inclusive of Mineral Reserves)
(Cut-off Grade 0.131 g/t Gold, USD 1,100 Gold Price)
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Gold Contained
Tonnes Grade Gold
Resource Classification (x 1,000) (g/t) (oz)
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Measured 19,089 0.797 489,000
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Indicated 23,442 0.658 495,000
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Total Measured and Indicated 42,531 0.720 984,000
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Inferred 10,308 0.628 208,000
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For open pit resources, Timmins utilized Lerchs Grossman pit shell geometry at reasonable long term prices, costs and recovery assumptions. The resource is based on a pit shell constructed at a gold price of USD 1,100 per ounce. Pit optimization was based on Measured, Indicated and Inferred resources which includes undiluted mineral reserve material based on data available as at August 31, 2010.
Mineral Reserve
Proven and Probable Reserves derived from the Measured and Indicated mineral resources including mine recovery and a dilution factor of 12% have been estimated within the ultimate pit outline commensurate with a gold price of USD 900 per ounce. Figures have been rounded to reflect that they are estimations.
Mineral Reserves after Mining Recovery and Dilution
(Cut-off Grade 0.16 g/t Gold at USD 900/oz)
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In Pit Reserves In Pit Waste
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Waste Total
Tonnes Grade Contained Tonnes Tonnes Stripping
Classification (x 1,000) (g/t) Ounces (x 1,000) (x 1,000) Ratio
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Proven 17,194 0.756 418,000
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Probable 17,738 0.635 362,000
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Total 34,932 0.695 780,000 60,417 95,349 1.73
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The strip ratio is estimated to be 1.73.
ECONOMIC EVALUATION
Metal Price Forecast
Revenue projections are based on a constant gold price of USD 1,000/oz in real terms, closely approximating the 3-year trailing average price but significantly lower than current spot prices. Accordingly, the sensitivity of the project to a gold price in a range of up to USD 1,400/oz has also been evaluated. For minor silver content, a price of USD 17/oz has been used.
The undiscounted base case cash flow evaluates to approximately USD 273.6 million before tax and USD 207.1 million after tax. The base case Net Present Value (NPV) at a discount rate of 8%/y (NPV) evaluates to approximately USD 216.8 million before tax and USD 163.1 million after tax. As pre-2011 capital costs have been treated as sunk, no internal rate of return has been calculated. The average cash cost of production equates to USD 489 per ounce of gold, or USD 7.88 per tonne treated.
Base Case
The base case evaluation has been made for a nominal through put rate of 18,000 tonnes per day, which is expected to be achieved by July, 2011. A summary of the base case life-of-mine statistics and annual cash flows are summarized in the table below.
Project Base Case Annual Cash Flows at USD 1,000 Per Ounce of Gold
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LOM
USD 000 2011 2012 2013 2014 2015 2016 total
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Revenue Gross Sales 94,272 103,502 103,042 103,913 86,217 48,744 539,689
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Bullion
delivery 274 305 278 280 236 124 1,497
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Bullion
refining 112 123 120 121 101 52 629
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Net Sales
Revenue 93,885 103,074 102,644 103,513 85,880 48,567 537,564
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Cash Op. Mining
Costs costs 35,528 33,279 29,418 24,260 23,722 13,572 159,779
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Crushing
costs 8,525 9,455 9,454 9,454 9,439 2,709 49,036
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Leach
costs 5,666 6,340 6,340 6,340 6,337 1,380 32,405
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ADR costs 1,442 1,576 1,576 1,576 1,570 428 8,168
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Metallurgy
& Lab
costs 441 451 451 451 446 193 2,434
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G&A costs 1,923 1,997 1,997 1,997 1,977 781 10,672
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Total Cash
Operating
Costs 53,526 53,098 49,236 44,077 43,491 19,065 262,494
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Net Cash Operating
Margin (EBITDA) 40,359 49,975 53,408 59,435 42,389 29,502 275,070
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Capital Initial/
expansion
capital - - - - - - -
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Sustaining
capital 6,143 690 2,729 393 302 302 10,559
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Changes in
working
capital 5,915 1,013 -375 -321 -2,247 -13,090 -9,107
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Net cash flow
before tax 28,302 48,273 51,055 59,363 44,335 42,291 273,618
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Taxation payable 9,082 12,706 13,195 14,370 9,512 7,658 66,523
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Net cash flow
after tax 19,220 35,567 37,859 44,993 34,823 34,633 207,095
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Discounted Cash Flow
(8%/y) Pre-Tax 27,234 43,010 42,119 45,345 31,357 27,696 216,760
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Cumulative DCF
(8%/y) Pre-tax 27,234 70,243 112,362 157,707 189,064 216,760
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Discounted Cash Flow
(8%/y) After tax 18,494 31,689 31,233 34,369 24,630 22,681 163,096
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Cumulative DCF
(8%/y) After tax 18,494 50,183 81,416 115,785 140,415 163,096
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Sensitivity Study
Sensitivity of the NPV to changes in gold price, operating and capital costs has been analyzed. Revenues are directly proportional to gold price, recovery and grade. With an adverse change of 30% (i.e., a reduction in gold price to USD 700 per ounce), NPV remains strongly positive; economic break-even occurs with a gold price of around USD 510 per ounce. At USD 1,300 per ounce, NPV before tax is estimated at approximately USD 349 million.
Sensitivity of the project NPV has also been determined for a specified range of gold prices.
Sensitivity of NPV to Gold Price
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Gold Price NPV before tax NPV after tax
US$/oz (US$ 000) (US$ 000)
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600 40,309 39,764
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700 84,422 75,151
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800 128,535 104,487
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900 172,648 132,981
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1,000 216,760 163,096
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1,100 260,873 193,292
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1,200 304,986 224,666
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1,300 349,099 256,040
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1,400 393,211 287,415
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The project is moderately sensitive to operating costs. As the bulk of project capital costs are already sunk, sensitivity to capital expenditures is negligible.
CONCLUSIONS
The following is a summary of Micon's conclusions:
"Micon has reviewed Timmins' operational plans for the San Francisco mine and believes that the mine plan and operational parameters have been well thought out. It is Micon's opinion that the San Francisco mine is a well-run operation. Micon supports the further economic studies to determine the impact of increasing the crusher throughput to 18,000 tonnes per day.
Micon has reviewed the proposed exploration program for San Francisco. It is Micon's opinion that Timmins' proposed exploration plans are properly conceived and justified for the San Francisco Mine and property.
Given the known extent of mineralization on the property, compared to the amount of mining activity, the San Francisco Mine and property has the potential to host further deposits or lenses of gold mineralization, similar in character and grade to those exploited in the past, outside the present resource base."
Qualified Person
This press release was reviewed and prepared by Lawrence A. Dick, Ph.D., P.Geo, a director of the Company, who is recognized as a Qualified Person under the guidelines of National Instrument 43-101 and by Miguel Soto, P. Geo., a director and the COO of the Company. Pursuant to National Instrument 43-101, Mr. William Lewis, B.Sc., P.Geo., Mr. Mani Verma, M.Eng., P.Eng., Ing. Alan J. San Martin, MAusIMM., from Micon International Ltd, (Micon), of Toronto, Ontario are the independent Qualified Persons responsible for the Mineral Reserve and Mineral Resource Estimate. Mr. Christopher A. Jacobs, CEng, MIMMM and Mr. Richard M. Gowans, B.Sc., P.Eng. of Micon International Ltd, (Micon), of Toronto, Ontario are the independent Qualified Persons responsible for the economic assessment and metallurgy. Each of Mr. Lewis, Mr. Verma, Mr. San Martin, Mr. Jacobs, Mr. Gowans, Mr. Dick and Mr. Soto have read and approved the contents of this news release. For further information please contact at 604-682-4002, or go to the website at www.timminsgold.com or contact our President Arturo Bonillas at arturo@timminsgold.com or 011-52-662-252-1132.
On behalf of the Board:
Bruce Bragagnolo, LLB, Chief Executive Officer
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