Unlocking Value for Shareholders
Exeter Resource Corporation is a Canadian public company listed on the TSX and NYSE Amex exchanges. Our focus is the discovery, evaluation and development of gold deposits in the Maricunga district in Chile.
Exeter’s 100% owned Caspiche Project in Chile (with a 3% Net Smelter Royalty to Anglo American Chile Limitada) is a gold-copper porphyry system, a type of deposit common to many of the world's largest open pit gold-copper mines. It is located in the prolific Maricunga mineral belt which is currently undergoing massive expansion and investment in mineral projects from some of the worlds largest gold miners. The project is located 15 kilometres (8 miles) south of Kinross Gold's operating Refugio mine (+9 million ounce gold reserve), and 10 kilometres (6 miles) north of the very large Cerro Casale gold-copper deposit (26 million ounce gold reserve), owned by Kinross Gold (25%)and Barrick Gold (75%).
The Caspiche deposit is one of the largest new discoveries in South America in the last decade and represents the potential to be a very high tonnage, long life mining operation. Caspiches location in the heart of Chiles northern mining regions is important strategically. Chile attractiveness as an investment jurisdiction is universally acknowledged as it provides a mining friendly climate with a politically stable government and a clear and transparent development process.
In October 2010 with Jacobs Engineering (formerly AKER solutions) as the lead consultant Exeter commenced prefeasibility studies (PFS) over the deposit with two concurrent studies run in parralell.
- The first is focused on the outcropping 1.5M oz gold only oxide portion of the depositwhich responds very favorably to heap leaching treatment (similar to the nearby Maricunga mine).
- The second study considers extraction of the entire deposit and considers a flotation flowsheet for the gold copper sulphide ore at depth, with additional leaching for selected low copper-gold rich sulphide ore contained within in a discrete area known as the MacNeill zone.
In June, 2011 Exeter announced the results of the economic analysis from the pre-feasibiity level study on the oxide only portion of the deposit. This outcropping +100 metre thick oxide “blanket” provided very encouraging first pass economics with an NPV(5) of US$329.5 million and net operating costs of US$524/ounce gold. Average annual production over the five year mine life would be 210,000 ounces gold and 364,000 ounces silver.
Several opportunities to materially improve the project economics which were not incorporated into this version of the PFS including further drilling to upgrade the current 6Mt of inferred material within the current pit to allow its consideration in extraction scenarios and including the supply of power from the grid rather than from self generation.
This study is considered important as although it only exploits a small fraction of the total mining reserve, it represents a low risk, short payback mining operation using proven technology currently in use in the region. Further the project is essentially preparation for the larger gold-copper deposit beneath as it removes overlying materail. Importantly the investment required places it firmly within the realms of a small to mid cap company or junior minor. This gives Exeter flexibility when deciding the best path forward for the Caspiche project to unlock value for shareholders.
January, 2012 marked an important milestone for the project with the results of the second and most important PFS study being made available for the entire gold-copper Caspiche Porphyry deposit following 14 months of detailed metallurgy, engineering and infrastructure studies. A detailed NI43-101 compliant report report on this work is available on SEDAR.
The key highlights of this study were:
Financial Summary and Study Highlights:
The project showed robust economics and strong leverage at current gold prices to generate significant revenue with a a pre-tax Net Present Value (5% discount), calculated from the time of commencement of the project, of US$ 2,800 million and average operating costs of US$ 606 per ounce gold equivalent1. The gold production cost drops to US$ 18 per ounce when copper and silver by-product credits are considered.
| Prefeasibility Study Highlights | |
|---|---|
| Net Present Value using a 5% discount (“NPV5”) | US$ 2.8 Billion |
| Internal Rate of Return (“IRR”) | 11.5% |
| Proven + Probable Gold Reserves | 19.3 Million Ounces |
| Revenue | US$ 27,419 M |
| Proven + Probable Copper Reserves | 4.6 Billion Pounds |
| Average Annual Gold Production | 696,000 Ounces |
| Average Annual Copper Production | 244 Million Pounds |
| Mine Life | 19 Years |
¹ Gold Equivalent was calculated by simple mathematical proportion. Gold, silver and copper revenues were calculated using production multiplied by relevant metal price used in the study, these values were totalled and the total revenue was divided by the gold price used in the study. This was repeated for each year of operation and then averaged over the life of project.
The project as a long life, but most importantly large tonnage operation shows strong leverage to current and rising metal prices. The base case economics are further enhanced if one were to consider using todays metal prices. The tables below outline key sensitivities for the pre-tax NPV and IRR for the Super Pit.
| Gold Price (Copper and Silver Price fixed) US$ / oz | $1,100 | $1,200 | $1,300 | $1,500 |
|---|---|---|---|---|
| IRR | 8.7% | 10.4% | 12.0% | 15.2% |
| NPV @ 0% (US$ millions) | 5,731 | 6,989 | 8,247 | 10,764 |
| NPV @ 5% (US$ millions) | 1,617 | 2,407 | 3,196 | 4,775 |
| NPV @ 7.5% (US$ millions) | 429 | 1,072 | 1,715 | 3,002 |
| Copper Price (Gold and Silver Price Fixed) US$/ lb. | $ 2.25 | $ 2.75 | $ 3.25 |
|---|---|---|---|
| IRR | 9.1% | 11.5% | 13.7% |
| NPV @ 0% (US$ millions) | 5,507 | 7,447 | 9,387 |
| NPV @ 5% (US$ millions) | 1,658 | 2,800 | 3,943 |
| NPV @ 7.5% (US$ millions) | 536 | 1,438 | 2,340 |
The following metals prices were used to calculate the economic evaluation.
A new Geological Resource for the Caspiche Project was completed by AMEC in August 2011, which served to upgrade the classification of some material previously considered inferred to higher categories. The new resource contains 1.36 billion tonnes in the measured and indicated categories containing 22 million ounces of gold, 6093 million pounds copper and 49 million ounces of silver. A further 286 million tonnes is in the inferred category containing 2.85 million ounces of gold, 1281 million pounds copper and 8.18 million ounces silver. The resource is inclusive of the project mineral reserves. (Follow the attached link to the latest mineral resource)
The Pre-feasibilty study used proven and probable mining reserves in the development of the mine plan and financial evaluation (based on measured and indicated resources). Total proven and probable ore reserves, generated from an updated resource estimate for the Super Pit are 1.091 billion tonnes containing 19.3 million ounces gold, 4.62 billion pounds copper, 41.5 million ounces silver. This represents on of the largest mineral endowments for any deposit to be held by a junior explorer. Further its location within a developed mining region within a politically stable country serve to highlight to value of this giant deposit, making it attractive to all medium to large scale producers who desire a stable, low risk metal production stream. A key component of the PFS is the inclusion of high tonnage IPCC systems for the movement of waste rock. This achieves greater efficiencies in the movement of the pit overburden, not only to address rising operating costs for mining waste, but also the capital and operating costs involved in the construction of tailings dam walls using conventional methods. The mine reserves and key mine production characteristics are:
The mine reserves and key mine production characteristics are:
The PFS has considered a conventional concentrator process route for the sulphide ore but includes a roaster to reduce arsenic levels in the final copper concentrate to commercially acceptable levels and also a flotation tailings leach process to maximise gold recovery from the sulphide ore. In parallel with the concentrator a valley fill heapleach will be operated to recover gold from the near surface heap leachable material which is extracted as part of the overall mine development and operation.
Currently The company is fast tracking
- Ongoing metallurgical programs designed to improve metal recoveries which if successful would positively impact the project economics,
- Detailed geotechnical studies to support the infrastructure placement
- Hydrology and hydrogeological studies both at Caspiche and locations with potential to act as viable water sources for the operations
- Environmental base line programs to support an eventual EIA
All of which is designed to feed into a full feasibility study for the oxide stand alone portion of the project and a timely update the prefeasibility study on the larger project which is expected to both improve the already robust economics and address critical project development areas.
NB
For details on the Cerro Moro Gold-Silver Project, the Don Sixto Project and other Argentinean exploration projects following the March 2010 spinout of these assets, please now proceed to the XG website.