Condor Gold recently announced the results from Whittle Consulting’s Enterprise Optimisation study on La India Project, Nicaragua. The optimisation involves the application of advanced analytical techniques to construct a model of the operation from the orebodies through mining and ore treatment processes to products sold to the market with a view to maximising a project’s economics. The study used the reserves/resources and technical studies used in the NI 43-101 compliant prefeasibility study (PFS) and PEA produced by SRK Consulting in December 2014.
Highlights of optimisation study:
• 22% increase in average gold production for the first five years, ranging from 91,000 to 165,000 oz/y gold across three production scenarios
• The object of the optimisation is to bring forward future cashflows
• 29% increase to 866,000 oz gold from 674,000 oz gold of contained gold of Indicated ounces only in the base case La India open pit, as the pit pushes deeper
• 29% increase to 1,066,000 oz gold from 827,000 oz gold contained gold of Indicated and Inferred ounces within La India open pit + two feeder pits
• 18% increase to 1,544,000 oz gold from 1,313,000 oz gold of contained gold of Indicated and Inferred within all pits and underground
• The model shows payback improves to two to three production years across three production scenarios
• The recovered gold over life of mine ranges from 796,000 oz to 1,437,000 oz gold across the three production scenarios
• AlI in sustaining cash costs remain under $700/oz gold for all production scenarios.
Mark Child CEO of Condor: “The results of the optimisation study are extremely positive. Indicated ounces of gold within the main La India open pit increase by 29% to 866,000 oz gold as the pit pushes deeper. Contained gold within the pit shells increases 29% to 1,066,000 oz gold for the main pit and feeder pits. The annual gold production for the first five years increases on average 22% and ranges from 91,000 oz to 165,000 oz/y gold versus the PFS and PEA studies. All in sustaining cash costs remain under $700/oz gold. The recovered gold over life of mine ranges from 796,000 oz to 1,437,000 oz. The average pay back of upfront capital costs is between two and three production years, highlighting the outstanding economics and versatility of La India Project.
“The optimisation study commenced in May 2015 to maximise the economics for four production scenarios at La India Project by bringing forward future cashflows and increasing production ounces. The main optimisation mechanisms applicable to the La India Project are: variable cutoff grade, stockpile use, grind-throughput-recovery, optimised pit and phasing, and multi-mine scheduling”
Whittle Consulting’s Enterprise Optimisation is an integrated approach to maximising the economics of a mining business by simultaneously optimizing 10 different mechanisms across the mining value chain. Condor commissioned the independent optimisation study in May 2015 to investigate strategic options to improve project economics. The study is a strategic planning tool and is not NI 43-101 compliant. However, Whittle is the recognised world leader in a specialist field of maximising the economics of a mine and has completed work for major mining companies: Rio Tinto, Anglo American, Kinross, AngloGold Ashanti, Barrick, Xstrata, Vale.
Four production scenarios were assessed, based on the study methodology employed by SRK and Condor.
The PFS case includes Measured and Indicated material only from the La India open pit, with a processing capacity of 0.8 Mt/y or 2,200 t/d.
The PEA 1.0 case also includes the La India open pit Inferred material, with a process capacity of 1.0 Mt/y or 2,800 t/d.
The PEA 1.2 case includes all of the La India open pit material, and also includes material from two nearby smaller pits, America and Central Breccia. The processing capacity for this case is 1.2 Mt/y or 3,300 t/d. This is known as scenario A in the SRK reports.
The PEA 1.6 case adds underground mining from La India and America, over and above the material in PEA 1.2. The processing capacity for this case is 1.6 Mt/y or 4,400 t/d. This is known as scenario B in the SRK reports.
Validation runs for each case were produced. Optimised runs were generated using multi-mine scheduling, fully variable cutoff grade and stockpiling. Reduced capacity cases were run, also optimised for schedule, cutoff grade and stockpiling. Grind-throughput-recovery relationships were developed for La India open pit material, and this methodology was used to further optimise the schedule for all cases. Pit and Phase optimisation was completed on La India pit using the Enterprise Optimisation economics.
The optimised cases were developed from work done from May 2015 through to September 2015. The gold price for this work is $1,250/oz, and the silver price is $19.75/oz in order to have a like for like comparison with the PFS and PEAs. Metal recoveries were based on the PFS and PEA work completed in late 2014.
The Enterprise Optimisation methodology included the Grind-Throughput-recovery (GTR) work being isolated to La India Vein Set only due to limited metallurgical data on the America and Central Breccia. Similar results may be recognised when data is collected and assessed for the America and Central Breccia open pit and underground material. It is important to note that the 1.0 Mt/y case does not have a PFS/PEA study equivalent, nor corresponding pit designs, so there is no comparison data. In these cases, improvements are measured against the initial Enterprise Optimisation calibration runs.
The initial optimised schedule for the PFS 0.8 Mt/y/ 2,200 t/d case, using fully variable cutoff grade and a maximum of 1.5 Mt of stockpiling. The grind-throughput-recovery methodology improves economics over the prior case due to faster/coarser grinding and reduced costs. The Enterprise Optimisation net value economics generate a larger pit and higher early value phases.
Whilst this exercise did generate a larger pit with more ounces, it should be stressed that this is not at a PFS level of study.
The PEA 1.2 A case, includes all Measured, Indicated &Inferred material from all three pits, with a nominal processing capacity of 1.2 Mt/y (3,300 t/d). There are two cutoff grade and stockpile optimised Prober schedules for reduced processing rates. Cutoff grade and stockpiling improves economics over the PEA A case, and GTR adds to the economics. Overall, the Enterprise Optimisation methodology significantly improved cashflows for the PEA A 1.2.
The PEA 1.6 B case includes all of the open pit material available, plus a scoping study view of underground resource from the La India and America deposits, with a nominal processing capacity of 1.6 Mt/y/4,400 t/d. For the PEA 1.6 B case, the cutoff grade and stockpile schedule improves economics over the base, and the GTR case adds ounces. The GTR approach had less impact in this case as only La India material has sufficient information for GTR analysis. With the addition of the Central Breccia (CBZ) material, the America pit material, and the higher grade underground material, there is proportionally less material eligible for this methodology. The Enterprise Optimised economics-base pit and phase optimisation generated significant cashflow.
This Enterprise Optimisation Study developed the optimised schedules through variable cutoff grade, stockpile capacity, grind-throughput-recovery, multi-mine scheduling, and optimised pit and phasing. Significant outcomes of this process include:
1. An optimised schedule using fully variable cutoff grade with stockpiling adds significantly to greater production ounces and enhanced cashflow in all cases
2. The permitted maximum stockpile capacity of 1.5 Mt should be utilised, and additional stockpile capacity may increase cashflows and production ounces
3. The grind size-throughput-recovery (GTR) methodology adds significant improved cashflow and production ounces to the project in all cases where it can be utilised
4. Modification of the ultimate pit and phase selection based on the methodology presented here increases cashflows significantly in all cases, partially due to incorporating additional tonnes and ounces
5. The theory of constraints indicates using US$/kWh as the limiting factor in the business system will improve value. The Enterprise Optimised pit and phase optimisation based on this, combined with cut-off and GTR optimisation adds significantly to enhanced economics of the project
6. When additional mining material is added, processing capacity may not necessarily need to be increased.
The Enterprise Optimisation methodology as applied in this study was able to pull cashflow forward.
Overall, the independent optimisation analysis conducted by Whittle clearly demonstrates the potential to unlock substantial additional production ounces and cashflows from La India. Across three production scenarios, the model shows production ounces and cashflows could be increased substantially. The payback on upfront capital costs reduces to between two to three production years, and gold production increases on average 22% for the first five years. Whittle’s study is a strategic planning tool, which is used to maximise the economics, ahead of a “build decision” and can often form part of a more detailed definitive/bankable feasibility study. It should be noted that Whittle’s study is not NI 43-101 compliant and would require re-generation of the PFS and PEAs to confirm the improvements.
Since then, Condor has formally submitted an application for an Environmental Permit for the construction and operation of an open pit mine, a CIL processing plant and associated infrastructure at La India.
The EIA describes a processing plant that will have a capacity of between 2,200 t/d (0.8 Mt/y) and 2,800 t/d (1.0 Mt/y). During the first five years of production, using the 2,200 t/d processing plant the PFS detailed 76,000 oz/y gold and the Whittle Optimisation 91,000 oz/y gold based on Indicated Ounces only. The Whittle Optimisation estimates 101,000 oz/y gold production once the Inferred Material is included using a 2,800 t/d processing plant. The Whittle Optimisation increased contained gold within La India Open pit shell by 30% to 955,000 oz gold by pushing the pit deeper, increasing annual production by 20%, while keeping all in sustaining cash costs under $700/oz gold. The EIA includes processing of an additional 10,000 oz/y of gold from artisanal miners through the main processing plant.