Trevali reports positive Preliminary Economic Assessment of Halfmile-Stratmat zinc-lead-silver deposits in New Brunswick
Tuesday, Nov 07, 2017
Trevali Mining Corporation ("Trevali" or the "Company") (TSX:TV)(OTCQX:TREVF)(LMA:TV)(FRANKFURT:4TI) announces results of a jointly prepared Preliminary Economic Assessment ("PEA") led by SRK Consulting (Canada) Inc. ("SRK") for its wholly-owned Halfmile-Stratmat massive sulphide zinc-lead-silver deposits in the Bathurst Mining Camp of New Brunswick, Canada.

Under the base case PEA both the Halfmile and Stratmat deposits are fed to a new 3,000 tonne-per-day Concentrator plant located at the Stratmat site. Results indicate positive economics with a pre-production capital expenditure of Cdn$231 million, a post-tax Internal Rate of Return ("IRR") of 19%, post-tax Net Present Value ("NPV") of Cdn$99 million at an 8% discount rate, a mine life of 13 years with peak annual payable production of approximately 117 million lbs. zinc, 35 million lbs. lead, 2 million lbs. copper and 766,000 oz. silver. The alternative case PEA examined the feasibility of transporting pre-concentrated dense media feed ("DMS") to the Company's Caribou concentrator plant. This study indicates economic results with an estimated pre-production capital expenditure of Cdn$156 million, a post-tax IRR of 25%, post-tax NPV of Cdn$116 million at an 8% discount rate.

The economic analysis and estimated plant feed is preliminary in nature and is partly based on Inferred Mineral Resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as Mineral Reserves, and there is no certainty that the preliminary economic assessment based on these Mineral Resources will be realized. Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability. All monetary amounts are presented in 2017 Canadian dollars (CAD), except as otherwise stated.

Commodity price assumptions: Zinc price of US$1.15/lb, lead price of US$0.95/lb, copper price of US$2.72/lb, silver price of US$19.00/oz, gold price of US$1,283.90/oz but no credit, and a Canadian dollar exchange rate of US$0.79. Many costs within the models are based on Caribou Mine 2016 actual cost data and supplier/contractor quotations.

OPPORTUNITIES

The following opportunities are identified within the Preliminary Economic Assessment:

- Exploration potential to increase the Mineral Resources of both the Halfmile and Stratmat deposits at depth, and the Stratmat S1 Shallow Zone that is not currently included in the mine plan.
   
- Further stope design optimization is expected to lead to reduced internal dilution and increased plant feed head grades.
   
- Further detailed mine planning work could possibly bring more mineralized material into the mine plan.
   
- There is a potential to improve the predicted metallurgical forecast for the project plant feed, in particular lead, through additional metallurgy test work and optimization of the plant flow sheet.
   
- There is a potential using different technology to construct a precondition plant to reject more percentage of waste with lower metal losses to increase mill feed head grade and improve project economics. Trevali scheduled additional test work using "Sorting" technology that is currently on-going.
   
- Further definition drilling may convert some of the existing Inferred Mineral Resources to higher-confidence categories. This will be a benefit for future higher-level technical studies.
   
- There is a potential to bring Halfmile North Zone mineralization into future mine plan studies (61.5% Trevali ownership). It was excluded from the current study.

RISKS

The following risks are identified within the Preliminary Economic Assessment:

- Approximately 32% by NSR value of the plant feed is from Inferred Mineral Resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as Mineral Reserves, and there is no certainty that the PEA based on these Mineral Resources will be realized.
   
- There is a risk of increased external dilution beyond the planned amount.
   
- There is a risk that the predictive metallurgy associated with DMS and/or mill will not be consistently achieved.

RECOMMENDATIONS

-- Additional diamond drilling, specifically:
       
- Carry out additional metallurgical testing of mineralized zones to determine recoverability.
       
- Target approx. 10 holes on the S1 Shallow Zone at Stratmat to better define the geological continuity of this narrow, higher-grade mineralization.
       
- Drill approx. 8-10 holes on the S1 Deep Zone at Stratmat to better identify mineralization in the north limb.
       
- Target an additional approx. 10 holes on Halfmile Lower Zone to better define the geological control of the mineralization.

The cost of the combined phases of work is expected to cost approx. $1.2 million.

   
- Perform prefeasibility-level geotechnical studies of Halfmile and Stratmat to support the next stage of mine design (estimated $160,000 cost).
   
- Perform prefeasibility-level mine hydrogeological studies of Stratmat and Halfmile to support next stage of mine dewatering system design (estimated $110,000 cost).
   
- Evaluate Halfmile mine primary access options between ramp and shaft for the extraction of Lower Zone and Deep Zone mineralization. A more comprehensive trade-off study is needed.
   
- Undertake prefeasibility-level DMS/optical test work studies, mill metallurgy testing and possible pilot plant testing (estimated $100,000 cost).
   
- Continue discussion with New Brunswick Provincial departments on additional permit requirements.
   
- Engineering and planning studies should commence as early as possible for the environmental infrastructure and design:
       
- Site geotechnical investigation to assess infrastructure foundations and borrow sources.
       
- Hydrogeological studies including water balance, surface and groundwater models.
       
- Environmental impact assessment.

"This PEA study on Halfmile-Stratmat provides a strong, initial foundation for Trevali's future plans in the Bathurst Mining Camp," stated Dr. Mark Cruise, Trevali's President and CEO. "The study contributes significantly to the Company's continued interest in the region and along with the resource expansion potential at Caribou, additional material at the past producing Restigouche mine and the exploration potential at the past producing Heath Steele mine, demonstrates the optionality for future planned production on either a stand-alone basis or by leveraging our current Caribou operational team and infrastructure."

SUMMARY OF KEY INPUTS AND ASSUMPTIONS:

SRK was retained by Trevali to prepare a technical report on its Halfmile-Stratmat massive sulphide integrated project located approximately 60 kilometers southwest of Bathurst, New Brunswick, Canada in accordance with Canadian National Instrument 43-101 ("NI 43-101"). SRK was the lead independent consultant for the PEA with contributions from Stantec Inc. (environmental) and Trevali personnel.

The project has been valued using a discounted cash flow (DCF) approach. This method of valuation requires projecting yearly cash inflows, or revenues, and subtracting yearly cash outflows such as operating costs, capital costs, royalties, and provincial and federal taxes. Cash flows are taken to occur at the middle of each period. The resulting net annual cash flows are discounted back to the date of valuation, mid-2019, and totaled to determine net present values (NPVs) at the selected 8 percent discount rates. The internal rate of return (IRR) is calculated as the discount rate that yields a zero NPV. The payback period is calculated as the time needed to recover the initial capital spent.

The PEA includes two options: a new concentrator complex at the Stratmat site to treat product from both mining operations; and development of the mining complexes to support feed to the Caribou Mining complex at the exhaustion of the Caribou underground resource. Both options consider Dense Media Separation, based on preliminary test work conducted on Halfmile mineral in 2012. The majority of costs are supported by Caribou actual cost data and supplier contractor quotations.

The Halfmile property Mineral Resource Estimate was updated as part of the PEA study, and the Stratmat property Mineral Resource Estimate that supports the PEA was previously updated by SRK in 2015 in the prior technical report titled "Independent Technical Report for the Stratmat Lead-Zinc Project, Bathurst, New Brunswick Canada", dated July 6, 2015. The Mineral Resource Estimates conform to the CIM Definition Standards for Mineral Resources and Mineral Reserves.

SRK cautions that the PEA is preliminary in nature and are partly based on Inferred Mineral Resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as Mineral Reserves, and there is no certainty that the preliminary economic assessment based on these Mineral Resources will be realized. Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability. The results of the economic analyses represent forward-looking information, as defined under Canadian securities law, that is subject to a number of known and unknown risks, uncertainties and other factors that may cause actual results to differ materially from those presented in the PEA. The results depend on inputs that are subject to a number of known and unknown risks, uncertainties and other factors that may cause actual results to differ materially from those presented here. SRK is of the opinion that the accuracy of the results is in the range of industry wide commonly accepted scoping study level of accuracy.

Underground Mining Study

Key findings of the underground mining study are as follows:

Halfmile:

- Mineralized material available for mine planning at $100/t NSR for post pillar cut and fill mining and $85/t NSR for longhole mining target mineralization CoV of 9.38 million tonnes (Mt) at $124/t NSR value.
   
- Life of mine with DMS mill feed of 7.38 Mt at $155/t NSR value.

Stratmat:

- Mineralized material available for mine planning at $85/t NSR for longhole mining target mineralization CoV of 3.63 million tonnes (Mt) at $122/t NSR value.
   
- Life of mine with DMS mill feed of 2.84 Mt at $152/t NSR value.

Key features of the planned underground mines are as follows:

Halfmile:

- Takes advantage of extensive existing historical underground development and surface and underground infrastructure.
   
- Centralized ramp-trucking system as main access for the Halfmile underground mine.
   
- The deepest mine level planned is approximately 1,150 metres below the main portal, manageable to a ramp-trucking system for materials handlings.
   
- Post pillar cut and fill and longhole open stope with (cemented) waste rock backfill are the major mining methods.
   
- 13 years of underground mine production life.
   
- A steady production profile of above 910 kt per year (2,600 tonnes per day) for 8 years, in addition of approximately 3.5 years ramp up period and 1.5 years ramp down period.
   
- North Zone is excluded from the mine plan as guided by Trevali. This zone can be treated as opportunity for future mine plan.

Stratmat:


- Main Zone and S1 Zones are approximately 750 metres apart on surface.
   
- Double ramp-trucking systems as main accesses for the Stratmat underground mine.
   
- The deepest mine level planned is approximately 700 metres below the main portal, amenable to a ramp-trucking system for materials handlings.
   
- Longhole open stope with (cemented) waste rock backfill is the major mining method.
   
- New Zone is excluded from the mine plan. This zone can be treated as opportunity for future mine plan.
   
- 10 years of underground project life.
   
- A steady production profile of 490 kt per year (1,400 tonnes per day) for 6 years, in addition of approximately 2.5 years ramp up period and 1.5 years ramp down period

Metallurgy and Mineral Processing

The basis of generating both the metallurgical performance and the operating costs of a new concentrator, reference has been made to the current operations of Trevali at the nearby Caribou Mine. The design of the Stratmat-Halfmile flow sheet is based on metallurgical test work which was completed initially by Noranda and includes test milling of the Halfmile deposit in 2012 at the Brunswick-12 mill. In 2015 and 2016 through to 2017, bench scale metallurgical work was completed on a combined sample of Stratmat and Halfmile to establish the main processing parameters of the mineralization. Preliminary test work was also carried out on a mining sample of Halfmile to investigate the potential benefits of applying dense media separation on the RoM materials to reject barren materials before the concentrator.

For more information, please visit: https://www.trevali.com

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