Karmin Exploration : files Aripuanã PEA and Examines Strategic Alternatives
10/19/2017 | 09:22am EDT
NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES
October 19, 2017 - Preliminary Economic Assessment ('PEA') of Karmin Exploration Inc.'s ('Karmin') 30% owned Aripuanã Zinc Lead Silver Project ('Aripuanã') filed on SEDAR and on the Karmin website as http://www.karmin.com/wp-content/uploads/2017/10/RPA-Karmin-VMH-Aripuana-Zinc-NI-43-101-Report-Oct-16-2017.pdf
The PEA outlines;
the initiation of mining at Aripuanã in 2020 with a mine life of 24 years.
production of 1.8 million tonnes per year (5,000 tonnes per day) will process 37 million tonnes from the measured and indicated resources of 21.8 million tonnes and the inferred resources of 24.6 million tonnes.
pre-production capital costs totaling US$354 million.
using life of mine metal prices of US$1.06/lb. Zn, US$0.88/lb. Pb, US$2.74/lb. Cu, US$18.95/oz. Ag, and US$1,278/oz. Au, Aripuanã's economics are:
pre-tax IRR of 19%,
US$461 million pre-tax NPV at 7% discounting,
after-tax IRR of 17% using a 34% tax rate, and
US$321 million after-tax NPV at 7% discounting.
Project Sensitivity; a 10% increase in the metal prices or head grades increases the NPV by approximately 75%. The current market prices for zinc, lead and copper are significantly higher than the prices used in the PEA.
The PEA is based upon a mineral resource dated December 23, 2016 but Nexa Resources S.A. ('Nexa' *) has identified incremental resource expansion which will be executed with an additional 15,000 meter drill program in 2017. The current resources are based on the results from 533 drill holes totalling 142,080 meters.
Nexa; (70% owner of Aripuanã) filed a prospectus on October 10, 2017 for listing on the NYSE & TSX that indicates;
targeted completion of a feasibility study for Aripuanã in the second quarter of 2018, and
approximately US$209 million of the net proceeds from the sale of Nexa common shares will be used to advance development of Aripuanã of which US$59 million will be used in 2018 and US$150 million in 2019.
Financing & Strategic Review; Karmin is advancing discussions with several mining capital groups to arrange the financing for its participation in the development of Aripuanã as outlined by Nexa. Karmin is also reviewing strategic alternatives with the purpose of enhancing shareholder value through a corporate sale or the sale of all or a material portion of Karmin's assets.
Karmin has a 30% carried interest in Aripuanã and is not required to contribute to the project costs until one year after the completion of a feasibility study and notification from Nexa that the development of Aripuanã will proceed.
Karmin has commercial rights proportional to its 30% interest in Aripuanã's lead, copper silver and gold production. Nexa has rights of first refusal on Karmin's 30% of the zinc production. As part of its strategic alternatives Karmin would consider the use of its participation rights on the silver and gold production to provide flexibility to potentially raise capital in the form of stream financing for future funding requirements and/or maximizing Karmin shareholder's value.
TORONTO, Ontario, October 19, 2017 - Karmin Exploration Inc. ('Karmin') (TSXV and the Lima Stock Exchange: KAR) is pleased to announce the filing on October 19, 2017 of a NI 43-101 PEA on Aripuanã, 30% owned by Karmin. The PEA was prepared by RPA Inc. ('RPA') and is available on SEDAR under Karmin's profile or http://www.karmin.com/wp-content/uploads/2017/10/RPA-Karmin-VMH-Aripuana-Zinc-NI-43-101-Report-Oct-16-2017.pdf
. Karmin had previously announced the filing of the PEA by Nexa in its release dated September 28, 2017.
Nexa indirectly owns 70% of Aripuanã and is a company controlled by Votorantim S.A. Nexa has filed a registration statement on Form F-1 in the United States and a preliminary long form prospectus in Canada in connection with a proposed initial public offering and the proposed listing of Nexa's shares on the New York Stock Exchange and the Toronto Stock Exchange.
David Brace, Karmin's CEO commented; 'the release of the Aripuanã PEA highlights the value of this asset to Karmin and consequently the Company is reviewing all strategic alternatives to maximize its value to Karmin's shareholders.'
The Aripuanã project is owned by Mineração Dardanelos Ltda., a joint venture between Nexa (which holds a 63.3% interest), Milpo (which holds a 7.7% interest) and Mineração Rio Aripuanã Ltda., a subsidiary of Karmin Exploration Inc. (which holds the remaining 30%). Aripuanã is an underground polymetallic project containing zinc, lead and copper, with an anticipated mine life of 24 years and a projected start date in 2020. The estimated aggregate capital expenditure required for this project is US$354.3 million. It is currently estimated that the Aripuanã project, if and when it is fully developed and begins operation, could produce an annual average of approximately 51.0 thousand tonnes of zinc in concentrate, 20.0 thousand tonnes of lead in concentrate, 4.0 thousand tonnes of copper in concentrate, 1.0 million ounces of silver and 25.0 thousand ounces of gold over a 24-year life of mine.
Aripuanã is an underground polymetallic project located in the State of Mato Grosso, Brazil, exhibiting characteristics of a Volcanogenic Massive Sulfide, or VMS, deposit similar to those found at Cerro Lindo. During 2016 and 2017, the Worley Parsons Company was engaged to develop a conceptual engineering study on development of an operation with 5,000 tpd ore mining and processing capacity. The environmental impact study for this project has been submitted to the SEMA/MT and is expected to be in its approval phase by the second quarter of 2018.
Nexa has a strong track record of mine development and expansion in Peru and Brazil including the modular expansion of Cerro Lindo's processing capacity from an original 5,000 tonnes per day to the current capacity of 21,000 tonnes per day.
Mineral exploration activities continue to identify mineralized deposits in the Aripuanã project. The results from these activities indicate there is the potential to increase the mineral resources in the Aripuanã project, supporting continued investment in mineral exploration activities in the project. In particular, the large resource base in the project indicates the potential for a long mine life of up to 24 years. Exploration has identified incremental resource expansion at Arex, Link, Ambrex and Babaçu. In order to execute this expansion, a 15,000 meter drill program is planned in 2017 focused on resource growth. Geological mapping and preliminary exploration activities have helped identify additional, potentially mineralized bodies at Massaranduba, Boroca, Mocoto and Arpa. It may also be possible to selectively mine areas containing high-grade ore during the early years of the life of mine to improve capital returns. It is intended that trade-off studies will be carried out related to the mineral process in order to better identify the potential of the Aripuanã project.
Karmin also announces that it has granted to certain directors, officers and consultants of Karmin an aggregate total of 1,000,000 incentive stock options at the exercise price of $0.94 per share for a period of five (5) years from the date of issue, being October 19, 2017.
The common shares of Karmin are listed on the TSX Venture Exchange and the Lima Stock Exchange and trade in both markets under the symbol 'KAR'. The principal business of Karmin is to acquire, explore and develop resource properties.
Aripuanã covers an 820 square kilometre mineralized massive-sulphide district that includes five areas of mineralization (Ambrex, Arex, Babacu, Massaranduba and Mocoto) over a 25-kilometre strike length. Votorantim owns the remaining 70% of Aripuanã but is responsible for 100% of the project costs until 12 months after the completion of a feasibility study.
The summary of the resource estimate at Aripuanã is outlined in Table 1. This summary is detailed in the PEA prepared by RPA which conforms to NI 43-101 Standards of Disclosure for Mineral Projects and is dated July 31, 2017. To the best of the Karmin's knowledge, information, and belief, there is no new material scientific or technical information that would make the results of the PEA inaccurate or misleading. The PEA is preliminary in nature and includes Inferred Mineral Resources that are too speculative geologically to have economic considerations applied to them that would enable them to be categorized as Mineral Reserves. There is no certainty that PEA results will be realized. Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability.
Grade Contained Metal
Tonnage Zn Pb Cu Au Ag Zn Pb Cu Au Ag
Mt % % % g/t g/t M lb M lb M lb K Oz M Oz
Measured 8.6 5.88 2.16 0.19 0.23 52.65 1,109.0 407.1 36.0 64.2 14.5
Indicated 9.8 5.38 2.03 0.09 0.25 47.83 1,160.8 437.2 18.7 79.5 15.0
Measured and Indicated 18.3 5.61 2.09 0.14 0.24 50.08 2,269.9 844.3 54.7 143.7 29.5
Inferred 13.2 7.20 2.80 0.10 0.38 62.50 2,099.7 815.4 29.4 162.7 26.6
Measured 2.3 0.28 0.12 1.54 1.18 17.61 14.4 6.3 78.5 87.8 1.3
Indicated 1.2 0.11 0.05 0.97 1.28 11.21 2.7 1.4 24.5 47.5 0.4
Measured and Indicated 3.5 0.22 0.10 1.35 1.21 15.49 17.2 7.7 103.1 135.3 1.7
Inferred 11.4 0.08 0.05 0.78 1.55 9.31 19.3 13.5 197.0 569.7 3.4
Measured 10.9 4.68 1.72 0.48 0.43 45.18 1,123.5 413.5 114.6 152.0 15.8
Indicated 10.9 4.83 1.82 0.18 0.36 43.97 1,163.6 438.6 43.2 127.0 15.5
Measured and Indicated 21.8 4.76 1.77 0.33 0.40 44.58 2,287.0 852.0 157.8 279.0 31.3
Inferred 24.6 3.90 1.53 0.42 0.93 37.88 2,119.0 829.0 226.4 732.4 30.0
CIM definitions were followed for Mineral Resources.
Mineral Resources are reported using a US$46/t Net Smelter Return (NSR) block cut-off value for stratabound material and a US$42/t Net Smelter Return (NSR) block cut-off value for stringer material.
The NSR is calculated based on US$1.26 per lb Zn, US$1.01 per lb Pb, US$3.08 per lb Cu, US$1,471 per ounce Au, and US$21.80 per ounce Ag.
Mineral Resources are not Mineral Reserves and do not have demonstrated economic viability.
Numbers may not add due to rounding.
Karmin also owns 100% of the Aripuanã Gold Project, which encompasses the gold and silver mineralization associated with near-surface oxidized portions of numerous massive sulphide deposits in the 820 square kilometre Aripuanã Zinc Project in north-western Brazil.
Karmin owns 100% of the 25 square-kilometre Cushuro Gold Project located in the world-class Alto Chicama gold-mining district of northern Peru.
The technical information disclosed in this press release has been reviewed by Mr. Jason J. Cox P.Eng., an employee of RPA and independent of Karmin. Mr. Jason J. Cox P.Eng. has read and approved the contents of this press release as it pertains to the disclosed technical information.
For further information please contact:
Chief Executive Officer
Tel: (416) 367-0369
Chief Financial Officer
Tel: (519) 337-5302