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RED MOUNTAIN MINING LIMITED Capital/Financing Update 2014

Mar 19, 2014

65719_rns_2014-03-19_a44070d3-de84-450b-b505-ccaef7a5d22c.pdf

Capital/Financing Update

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RED MOUNTAIN MINING LTD (ASX:RMX)

ASX ANNOUNCEMENT

20 MARCH 2014

==> picture [169 x 46] intentionally omitted <==

SCOPING STUDY CONFIRMS LOW COST, EARLY PAYBACK, GOLD PROJECT

  • Projected life of mine revenue from gold sales of A$134 million (at current A$1500/oz Au price)

  • Projected net cash flow including all capital and taxes of A$40 million (no debt financing)

  • Production of 90,000 oz of gold over 4.5 year initial mine life

  • Low ¹C1 cash operating cost of A$769 per oz of gold recovered (US$690/oz)

  • Capital cost of A$16.7 million (US$15 million) with potential 1.2 year payback

  • Over A$8 million in royalties and taxes to Philippines Government and local communities

  • Study based on existing, high-grade, open pit mineable resources only, 90% Indicated

Scoping Study Required Cautionary Statement:

The Scoping Study is based on low level technical and economic assessments and is insufficient to support estimation of Ore Reserves or to provide assurance of an economic development case at this stage, or to provide certainty that the conclusions of the Scoping Study will be realised. The Scoping Study is partly based on Inferred Resources that comprise less than 10% of the total mining inventory. There is a low level of geological confidence associated with Inferred Mineral Resources and there is no certainty that further exploration will result in the conversion of Inferred Mineral Resources to Indicated Mineral Resources or that the production target will be realised.

Perth-based Red Mountain Mining Ltd is pleased to announce the results of the Scoping Study into the viability of mining and processing existing gold resources at the Batangas project, 120km south of Manila, in the Philippines.

The Scoping Study has confirmed a strongly viable, low capital, low operating cost, initial gold mining and processing project with the $16.7m pre-production capital cost potentially recovered in just 14 months.

The Scoping Study is entirely based on open pit mining and carbon in leach (CIL) processing of existing, high grade resources, of which 90% of the resources to be mined are in the Indicated Mineral Resource category. The processing plant is intended to be located at Lobo, close to the very high grade South West Breccia (SWB) resource and local infrastructure, and 2km east of Lobo township (See Figure 1).

The project is expected to yield free cash for Red Mountain Mining of approximately $40m over the initial mine life of 4.5 years. This includes capital payback, taxes, royalties and all other operating costs.

Red Mountain Mining Managing Director Jon Dugdale said “The results from the Scoping Study are very positive for us. It shows we can establish the project relatively quickly, generate early cashflow and payback the up-front capital within a short timeframe based only on known existing resources.”

“We’ll continue our exploration drilling campaign testing high grade targets at the Lobo prospect and anything we find there could improve the bottom line even further.” said Mr Dugdale.

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ASX code: RMX COMPANY DIRECTORS CONTACT DETAILS ABN 40 119568106 Neil Warburton Michael Wolley RED MOUNTAIN MINING LTD Non-Executive Chairman Non-Executive Director Head Office Jon Dugdale Shannon Coates Unit 1, 2 Richardson Street Managing Director Company Secretary West Perth Western Australia 6005 www.redmm.com.au [email protected]

Average annualised production is estimated at 20,000 oz gold (Au) and 46,000 oz silver (Ag) per annum over an initial mine life of 4.5 years.

¹C1 cash operating costs (World Gold Council guidance June 2013 including royalties and site taxes, refining charges and by-product silver credits) are forecast to average A$769 per recovered gold oz (US$690/oz Au).

Average operating cash flow, after C1 cash costs, is estimated to be approximately A$14.5 million per annum, to return pre-production capital of $16.8 million within a short time frame of just 14 months from initial production.

The Company also announced that the Board has today approved a Definitive Feasibility Study (DFS) based on the outcomes of the Scoping Study will be commenced immediately. It is anticipated that the DFS will cost A$1.1 million and be completed by December 2014. Based on a successful DFS, funding options will then be evaluated and finalised prior to anticipated commencement of construction in early 2015.

The Scoping Study was compiled with the assistance of Sedgman Ltd in Perth on process engineering and design, supported by a number of Philippines based consultants and coordinated by management.

Initial production is planned to be open pit mining inventory from the South West Breccia (SWB) resources on the granted Lobo mining permit (Mineral Production Sharing Agreement - MPSA), following which the higher grade mining inventory from Kay Tanda West resources will be transported from the granted Archangel MPSA, a distance of 15km by road to the planned Lobo plant. Low grade mining inventory (using a cut-off grade of 0.85 g/t Au) from the Kay Tanda West mine will be stockpiled.

Project parameters and financial model outputs are summarised below:

Batangas-Lobo Gold Project Unit A$ US$
Mine Life(Processing) Years 4.5
Tonnes Processed T 880,000
Head Grade Gold(Au) Aug/t 3.4
Head Grade Silver(Ag) Ag g/t 9.2
Head Grade(Au Equ.) Au Equ.g/t 3.6
Recovered Ounces Gold(Au) Oz Au 90,000
Total Net Revenue from Gold Sales A$M $135 $120
Total C1 Cost/Oz(inc. Royalties, Production Taxes) A$/Oz $769 $690
OperatingC1 Cash Flow A$M $65 $60
SustainingCapital Life of Mine A$M $4.1 3.7
Corporate Admin and Taxes A$M $5.4 4.8
Pre Production Capital includingContingency A$M $16.7 15.0
Payment to Vendors and Recoverable Capital A$M -$0.8 -$1.6
Total C3 Cost/Oz(inc. Capital, Corporate costs, Taxes) A$/oz $1,050 $950
Total C3 Cash Flow Life of Mine A$M $40 $36
IRR % 70%
PayBack(no debt) Years 1.2
Gold Price A$/Oz $1,500 $1,350
Silver Price A$/Oz $24 $22
Exchange Rate A$/US$ 0.9 0.9

ASX code: RMX COMPANY DIRECTORS ABN 40 119568106 Neil Warburton Non-Executive Chairman Jon Dugdale Managing Director

Michael Wolley Non-Executive Director Shannon Coates Company Secretary

CONTACT DETAILS RED MOUNTAIN MINING LTD Head Office

Unit 1, 2 Richardson Street West Perth Western Australia 6005

www.redmm.com.au [email protected]

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Revenue and cash flow at different gold prices are shown below:

-10.0% Current +10.0% +20.0%
Gold Price A$ $1,350 $1,500 $1,650 $1,800
Gold Price US$(A$/US$ 0.9) $1,215 $1,350 $1,485 $1,620
Total Net Revenue from Gold Sales $120 $134 $147 $170
Total C3 Cash Flow Life of Mine $27 $40 $53 $74
PayBack(Years) 1.5 1.2 1.0 0.8

Mineral Resources and Mining Inventory

The two Mineral Resource areas the subject of the Scoping Study are located on the Lobo and Archangel MPSA’s (the Philippines equivalent of Mining Leases), located 2km and 10km east of the city of Lobo respectively (see Figure 1 below).

The Mineral Resources that form the basis of the Scoping Study were released on 30 January 2013 in accordance with the guidelines of the JORC Code (2004 edition) and are summarised below:

Deposit Resource Tonnes Au Au Ag Ag
Category **g/t ** Oz **g/t ** Oz
Inferred 3,004,000
2.0
197,000
1.3
124,000
Archangel
(Kay Tanda)
Indicated 2,582,000
2.0
165,000
5.7
471,000
Total 5,586,000 2.0 363,000 3.3 595,000
Lobo (SWB) Inferred 16,000 5.3 3,000 1.7 1,000
Indicated 178,000
7.4
42,000 1.8 10,000
Total 194,000 7.2 45,000 1.8 11,000
Total Inferred 3,020,000 2.1 200,000
1.3
125,000
Total Total Indicated 2,760,000 2.3 208,000
5.4
481,000
Total 5,780,000 2.2 408,000 3.3 606,000

Note: Batangas Gold Project Mineral Resource Estimates at a 0.85 g/t Au lower cut off.

The SWB Mineral Resources at Lobo are associated with a linear, steeply dipping, epithermal lode with highgrade “shoots” of mineralisation. The Kay Tanda Mineral Resources at Archangel are associated with a low to moderate grade stockwork gold deposit in andesitic volcanics.

An open pit mining inventory has been derived from the Mineral Resource estimates above after the application of mining and processing parameters generated by independent expert Dallas Cox of Crystal Sun Consulting, a Chartered Professional (CP) mining engineer contracted by the Company.

The mining inventory that forms the basis of the initial Scoping Study includes 880,000 tonnes grading 3.4 g/t Au, 9.2 g/t Ag (3.6 g/t Au equivalent). This includes 150,000t grading 6.4 g/t Au from the upper 80m of the SWB Mineral Resources at Lobo, to be mined then processed within the first 18 months of production. A further 730,000t grading 2.8 g/t Au, 11 g/t Ag (3 g/t Au equivalent) from Kay Tanda West at Archangel is to be mined and transported to Lobo by road then processed over the subsequent three years. Over 90% of the mining inventory is in the Indicated Mineral Resource category.

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ASX code: RMX COMPANY DIRECTORS CONTACT DETAILS ABN 40 119568106 Neil Warburton Michael Wolley RED MOUNTAIN MINING LTD Non-Executive Chairman Non-Executive Director Head Office Jon Dugdale Shannon Coates Unit 1, 2 Richardson Street Managing Director Company Secretary West Perth Western Australia 6005 www.redmm.com.au [email protected]

Average mining cost is A$3.40/t mining inventory and $2.60/t waste. Transportation of mining inventory from Kay Tanda West to the Lobo processing plant is estimated at A$7.20/t. The total cost is A$37 per mining inventory tonne (includes all high grade, low grade and waste mining and transport).

There remains an opportunity to extend high grade production through identifying further high grade resources. There is also an opportunity to mine and process further lower grade resources from the Archangel project, based on higher prevailing gold price or lower cost processing on site.

Processing

Metallurgical testing (see release 24 January 2014) indicates that the two mining inventory resource types need to be processed at different grind sizes and leaching residence times for optimum recovery and cost.

It is planned that SWB mining inventory will be processed at 12.5 t/hour with 80% passing 45µm and 48 hours leaching residence time. Kay Tanda West mining inventory will be processed at 32.3 t/hour with 80% passing 106µm and 24 hours leaching residence time.

This translates to a processing rate for SWB mining inventory of 100,000 tonnes per annum (tpa) and average gold recovery of 95% and a processing rate for Kay Tanda West mining inventory of 258,000tpa and average gold recovery of 90% for a total life of mine average processing rate of 196,000tpa and average gold recovery of 92%. Average silver recovery is 80%.

The processing plant, to be located at Lobo, includes a preliminary circuit design produced by Sedgman Ltd based on the SWB production rate. The processing plant comprises two stage crushing, ball milling, cyanide leach and carbon adsorption (CIL), carbon elution and regeneration, gold room incorporating electrowinning, cyanide detoxification, reagent mixing and distribution, power distribution and associated infrastructure. Process plant residues will be gravity fed to a Residue Storage Facility (RSF) close to the processing plant.

Capital and operating cost estimates for the processing plant are to an accuracy of +/-30%.

Processing costs are summarised below for the different mining inventory categories.

SWB Kay Tanda West
Process Plant Location Lobo Lobo
MiningInventoryCategory transition oxide transition fresh
Operating Cost A$44/t A$22/t A$24/t A$23/t

Total average processing cost is A$27 per mining inventory tonne processed.

The estimated capital cost of the processing plant is A$10.7 million, including direct costs of A$8.6 million and indirect costs, commissioning and contingency of $2.1 million.

Infrastructure and Administration

It is anticipated a total of 232 personnel will be employed in the Batangas operation, including all mining, processing and other personnel. This includes 144 personnel from the local area, 86 from elsewhere in the Philippines and 2 senior expatriates.

CONTACT DETAILS Michael Wolley RED MOUNTAIN MINING LTD Non-Executive Director Head Office Shannon Coates Unit 1, 2 Richardson Street Company Secretary West Perth Western Australia 6005 www.redmm.com.au [email protected]

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ASX code: RMX COMPANY DIRECTORS ABN 40 119568106 Neil Warburton Non-Executive Chairman Jon Dugdale Managing Director

Accommodation for the workforce will be in the nearby Lobo township, with transport by Company bus to the Lobo mine and processing site within 2km to 3km of Lobo or the Archangel mine site approximately 12km east of the Lobo. Site offices and other administration facilities will be shared with the Lobo processing plant, with the exception of mining related facilities.

Permanent access roads will be established to the Lobo and Archangel sites totaling approximately 9km and the existing roads will be refurbished from Lobo to the Lobo mine and processing plant access and to the Archangel mine access, a total distance by road of 15km.

Power generation for the processing plant and associated infrastructure will be via a leased diesel generating facility with 1.3 megawatt generating capacity and operating costs of US$0.24 (A$0.27) per kw hour. There is an opportunity to utilise grid power from Batangas by extending high voltage facilities within 30km’s of the processing plant site.

A residue storage facility (RSF) will be established close to the Lobo processing plant with the initial lift catering for 2 years production then a second lift for the remaining 2.5 years. The RSF will be lined and built to required environmental and seismic standards. The RSF will be capped and rehabilitated with vegetation at completion of the project.

Capital Expenditure

The capital expenditure required to first gold production totals A$16.7 million, including initial land access costs, processing plant contingency, value added taxes (VAT) and duties as summarised below. Financing costs are not included.

The sustaining capital life of mine totals A$4.1 million, including RSF lifts and mine closure rehabilitation.

Capital Cost Estimate Pre Production Sustaining
**A$ 000's ** **A$ 000's **
Land Access 590 468
ProcessingPlant inc. Contingency 10,660 In Opex
Site Infrastructure
Residue Storage Facility 1,000 1,706
Site Preparation Earthworks 2,650 390
Building Construction and Fitout 370 -
Vehicles and Mobile Equipment 670 -
Power Connection (Diesel, lease) 80 -
Mine Rehabilitation 1,519
Total Development Capex 16,020 4,083
VAT and Duties 700 41
Total Project Development and SustainingCapital 16,720 4,124
Netpayments and capital cost recoverycredits -0.8

This capital expenditure estimate assumes that the majority of plant and equipment is purchased new. A definitive feasibility study will assess the opportunity of purchasing refurbished second hand equipment and/or the opportunity to carry out a higher proportion of construction locally using the high quality engineering and construction facilities at nearby Batangas city.

CONTACT DETAILS Michael Wolley RED MOUNTAIN MINING LTD Non-Executive Director Head Office Shannon Coates Unit 1, 2 Richardson Street Company Secretary West Perth Western Australia 6005 www.redmm.com.au [email protected]

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ASX code: RMX COMPANY DIRECTORS ABN 40 119568106 Neil Warburton Non-Executive Chairman Jon Dugdale Managing Director

Operating Expenditure

A breakdown of the C1 operating cost estimate, totaling A$769 per recovered gold ounce (US$690/oz) for the Batangas Gold Project life of mine, are presented below:

Life of Mine Operating Costsper Tonne A$/t processed
Miningand Rehandle 37
Plant and Processing 27
Technical & Administration 14
Total 78
Life of Mine Operating Costsper Gold Ounce Produced A$ / Au Oz
Miningand Rehandle 365
Plant and Processing 262
Technical & Administration 139
Total Site Costs 766
Additional costs includingroyalties,refiningand net silver credits 3
Total C1 Costs/ Au oz A$769

Financial Model

The financial cashflow model for the Batangas Gold Project was prepared by consultants on behalf of the Company and independently verified and audited by Michael Conan-Davies FAusIMM(CP), a qualified person with over 15 years relevant experience.

The financial model outputs (no rounding) are summarised below. The Company has adopted the World Gold Council (WGC) guidance on cost reporting measures released June 2013.

AUD $ /
Oz
USD $
/Oz
Total Project
A$,000
Total Project
US$,000
Batangas Gold Project
Total Revenue from Gold Sales 1,500 1,350 133,707 120,336
On Site Operating Costs
Refining and Smelting
By Product Credits
Royalties(inc. Excise and other taxes/fees)
766 690 68,300 61,470
3 3 295 266
-56 -51 -5,021 -4,519
56 50 4,989 4,490
Total C1 Site Operating Cost 769 692 68,564 61,707
Operating C1 Cash Flow 731 658 65,143 58,629
Corporate Tax
Corporate Admin Costs
SustainingCapex
37 33 3,318 2,986
23 21 2,044 1,840
46 42 4,124 3,711
Total C2 Sustaining Cost 876 788 78,049 70,244
Operating C2 Sustaining Cash Flow 624 562 55,658 50,092
Capex Pre Production
Other Payments and Credits
188 169 16,717 15,046
-10 -9 -935 -842
Total C3 All in Cost 1,053 947 93,832 84,448
Total C3 all in Cash Flow 447 403 39,875 35,888
Gold Price
Silver Price
1,500 1,350
24 22
A$/US$ 0.90 0.90

ASX code: RMX COMPANY DIRECTORS ABN 40 119568106 Neil Warburton Michael Wolley Non-Executive Chairman Non-Executive Director Jon Dugdale Shannon Coates Managing Director Company Secretary

CONTACT DETAILS RED MOUNTAIN MINING LTD Head Office Unit 1, 2 Richardson Street West Perth Western Australia 6005 www.redmm.com.au [email protected]

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Next Steps and Timeline to Production

Based on the Scoping Study demonstrating a profitable Batangas gold mining and processing project, Red Mountain will now commission a Definitive Feasibility Study (DFS).

The DFS will be completed in parallel with submission of an expanded 10 year mining plan to meet the requirements for Declaration of Mining Project Feasibility (DMPF) and related permit applications to be submitted to the Philippines Government Mines and Geosciences Bureau (MGB) of the Department of Environment and Natural Resources (DENR).

The DFS and permitting process is expected to cost A$1.1 million and be completed by December 2014. The Scoping Study contemplates commencement of construction Q2 (June Quarter) 2015, and processing/gold production commencing Q1 (March Quarter) 2016, subject to financing.

==> picture [511 x 384] intentionally omitted <==

Figure 1: Batangas Gold Project Mineral Resources (JORC 2004) and planned project infrastructure

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ASX code: RMX ABN 40 119568106

COMPANY DIRECTORS Neil Warburton Non-Executive Chairman Jon Dugdale Managing Director

CONTACT DETAILS Michael Wolley RED MOUNTAIN MINING LTD Non-Executive Director Head Office Shannon Coates Unit 1, 2 Richardson Street Company Secretary West Perth Western Australia 6005 www.redmm.com.au [email protected]

________________ For further information about Red Mountain please visit www.redmm.com.au or contact:

Company Investors Media Jon Dugdale Matt Birney Managing Director Birney Corporate (+61) 402 298 026 (+61) 419 217 090 (+61) 8 9226 5668 (+61)8 9226 5668 E : [email protected] E : [email protected]


About Red Mountain Mining Limited and the Batangas Gold Project

Red Mountain Mining (ASX: RMX) is primarily a gold explorer and project acquisition company which listed on the ASX in September 2011. The Company’s strategy is to unlock the potential of ‘under-developed’ gold and polymetallic projects in the greater Asian region by introducing Australian exploration and mining methods and improving efficiencies to gain significant exploration and production upside.

The Company holds a 100% direct and indirect contractual right interest in tenements in the Philippines that contain significant gold resources. Total Mineral Resources at Batangas, at a 0.85 g/t Au lower cut off, include Indicated Resources of 2.76 million tonnes @ 2.3 g/t Au, 208,000 oz Au and Inferred Resources of 3.02 million tonnes @ 2.1 g/t Au, 200,000oz Au for a total of 5.78 million tonnes at 2.2 g/t Au, 408,000oz Au (30 January 2013, JORC 2004).

The Company will continue exploration with the objectives of upgrading Mineral Resources at Batangas and complete a scoping study to demonstrate the potential viability of a gold mining and processing project.

Other gold opportunities will be reviewed on a continuous basis.

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ASX code: RMX ABN 40 119568106

COMPANY DIRECTORS Neil Warburton Non-Executive Chairman Jon Dugdale Managing Director

CONTACT DETAILS RED MOUNTAIN MINING LTD Head Office Unit 1, 2 Richardson Street West Perth Western Australia 6005 www.redmm.com.au [email protected]

Michael Wolley Non-Executive Director Shannon Coates Company Secretary

Appendix A – Further Information

Competent Person Statement

The mining inventory and production targets and other information in this announcement that relate to Mineral Resources are based on information compiled by Mr Jon Dugdale who is a Fellow of the Australasian Institute of Mining and Metallurgy and has sufficient experience which is relevant to the various styles of mineralisation under consideration to qualify as a Competent Person as defined in the 2004 and 2012 Editions of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Mr Dugdale is a full time employee and Managing Director of Red Mountain Mining Ltd. Mr Dugdale takes responsibility and consents to the inclusion in the report of the matters based on his information in the form and context in which it appears. The Mineral Resources in this announcement upon which the mining inventory and production targets are based was prepared and first disclosed under the JORC Code 2004. It has not been updated since to comply with the JORC Code 2012 on the basis that the information has not materially changed since it was last reported.

Gold Equivalent Reporting

Gold equivalent has been calculated using a gold (Au) price of $1,500 per oz and silver (Ag) price of $24 per oz, representing approximate current pricing of those metals at the time of this announcement. This represents a ratio of 48 g/t Ag/ 1 g/t Au. Metal recovery assumptions are 92% for Au and 80% for Ag, as reported in the scoping study model, based on actual metallurgical recovery data. This represents a recovery ratio of gold to silver of 1.15:1. It is the Company’s opinion that all the elements included in the metal equivalents calculation have a reasonable potential to be recovered and sold.

Forward Looking Statements

This announcement contains certain forward looking statements. These forward-looking statements are not historical facts but rather are based on Red Mountain Mining’s current expectations, estimates and projections about the industry in which Red Mountain Mining operates, and beliefs and assumptions regarding Red Mountain Mining’s future performance. Words such as “anticipates”, “expects”, “intends”, “plans”, “believes”, “seeks”, “estimates” “potential” and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and are subject to known and unknown risks, uncertainties and other factors, some of which are beyond the control of Red Mountain Mining, are difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forwardlooking statements. Red Mountain Mining cautions shareholders and prospective shareholders not to place undue reliance on these forward-looking statements, which reflect the view of Red Mountain Mining only as of the date of this presentation. The forward-looking statements made in this release relate only to events as of the date on which the statements are made. Red Mountain Mining will not undertake any obligation to release publicly any revisions or updates to these forward-looking statements to reflect events, circumstances or unanticipated events occurring after the date of this presentation except as required by law or by any appropriate regulatory authority.

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ASX code: RMX COMPANY DIRECTORS ABN 40 119568106 Neil Warburton Non-Executive Chairman Jon Dugdale Managing Director

CONTACT DETAILS RED MOUNTAIN MINING LTD Head Office Unit 1, 2 Richardson Street West Perth Western Australia 6005 www.redmm.com.au [email protected]

Michael Wolley Non-Executive Director Shannon Coates Company Secretary