October 27th, 2020

Feasibility Study underpinned by Maiden Mineral Reserve for the Johnny Lee Deposit of 8.8Mt at 2.6% Cu for 226,100t of copper, underpinning an 8-year life for a state-of-the-art project that either meets or exceeds the stringent Mine Operating Permit conditions

White Sulphur Springs, Montana – October 27, 2020 – Sandfire Resources America Inc. (“Sandfire America” or the “Company”) is pleased to announce its maiden Mineral Reserve and the results of the Feasibility Study (the “Feasibility Study”) for the Johnny Lee deposit at its Black Butte Copper Project in White Sulphur Springs, Montana, USA, pursuant to National Instrument 43-101 – Standards of Disclosure for Mineral Projects (“NI 43-101”).

The Feasibility Study relates solely to Mineral Reserves located on the Johnny Lee copper deposit, the cornerstone deposit at the Black Butte Copper Project (the “Johnny Lee Deposit” or the “Project”).

The Company is also pleased to announce an updated Mineral Resource for the Lowry copper deposit (the “Lowry Deposit”), which is located approximately 3km south-east of the Johnny Lee Deposit, pursuant to NI 43-101.

All dollars in this announcement are US dollars unless otherwise stated.

Feasibility Study Highlights:

  • Maiden Mineral Reserve of 8.8 million tonnes at 2.6% copper for 226,100 tonnes of contained copper defined for the Johnny Lee Upper and Lower Copper Zones.
  • The Project has been designed to meet or exceed all of the standards and obligations required under the Project’s stringent Mine Operating Permit conditions.
  • The Johnny Lee Deposit underpins an 8-year mine life and is designed to be mined at 1.2 million tonnes of ore per annum.
  • Forecast production totaling 805,000 dry metric tonnes of copper concentrate containing 189,500 tonnes of copper metal over the life of the mine.
  • Average annual production of ~23,000 tonnes of copper metal at a C1 cash cost of US$1.51/lb.
  • The Project is forecast to generate $1.3 billion in gross sales and $518 million in pre-tax net cashflow during mine operations, based on a copper price of US$3.20/lb.
  • The Project has a pre-tax NPV5% of $124.9 million (IRR=17%) and a post-tax NPV5% of $77.6 million (IRR=13%).
  • Average annual post-tax cashflows of $77.8 million per annum for the first five years of operations.
  • Construction capital cost of $274.7 million.
  • Updated Inferred Mineral Resource of 8.3 million tonnes at 2.4% copper for 199,500 tonnes of contained copper completed for the Lowry Deposit, 3km south-east of Johnny Lee:
    • The updated Mineral Resource is based on updated geological modeling, resource estimation, classification, and mineralogy/recovery assumptions.
    • The Lowry Deposit is not covered by the current environmental permits and will need to undergo a further permitting and approvals process.

Commenting on the Feasibility Study completion and key outcomes, Sandfire America CEO and Project Director Rob Scargill stated: “The positive outcomes of the Feasibility Study show that we can deliver a robust underground mining project at Black Butte that meets the world’s highest environmental standards while at the same time creating jobs, opportunities and significant direct and indirect benefits for the State of Montana.

“This is one of the highest-grade copper deposits in the world and one of the very few fully-permitted and development-ready copper assets globally. The Feasibility Study delineates a clear pathway to unlocking its value for our shareholders in a manner that is consistent with world-best practice in ESG and community engagement.

“The Project will employ 240 full-time, highly paid employees along with 20-30 full-time contractors as well as providing significant economic benefits for all stakeholders in the local community and Montana at large. We have already commenced pre-construction earthworks on the site employing over 30 Montanans through local contractors, in addition to our own dedicated team.

“We are excited about the opportunity to move this high-quality project forward and position it to meet what is increasingly emerging as a new era of demand for copper driven by its growing use as a key input to renewable and clean energy applications, including the electrification of transportation globally.

“Meanwhile, the updated Mineral Resource for the Lowry Deposit demonstrates the significant exploration potential at the Black Butte Copper Project. The deposit is located just 1.8km from the underground access portal for the Johnny Lee Deposit and is a high priority for our next round of exploration.”

Black Butte Copper Project Overview

The Black Butte Copper Project consists of 3,223 hectares of fee simple lands under mineral lease by the Company and 525 unpatented mining claims on U.S. Forest Service Lands (USFS), leased by the Company, totaling 4,037 hectares. The Black Butte Copper Project is located in south-central Montana in Meagher County, 27 km north of White Sulphur Springs.

The Johnny Lee copper deposit was discovered by a joint venture between Cominco American Inc. and Utah International in 1985. The Johnny Lee copper deposit is comprised of two zones of mineralization: an upper copper zone (“UCZ”) situated at depths of 40m – 210m below surface and an underlying lower copper zone (“LCZ”) at depths of 340m – 520m below surface.

A mine operating plan (“MOP”) application for the extraction of mineralized rock from both zones of the Johnny Lee Deposit was submitted to the Montana Department of Environmental Quality (“MT DEQ”) in December 2015 and, following revisions, was deemed to be complete and compliant. A draft MOP permit was issued by the MT DEQ on September 18, 2017 and the Environmental Impact Statement (“EIS”) process started soon thereafter and was completed on March 13, 2020. The MOP proposes underground mining of the Johnny Lee Deposit using a drift and fill mining method and production of a copper concentrate by milling and froth flotation. Mill tailings will be used for underground paste-fill support and the surplus deposited in a double-lined cemented tailings storage facility.

A legal challenge to the issuing of the Mine Operating Permit has been filed in the 14th Judicial Court of Montana.The same parties have also objected to the Company’s leasing of mitigation water rights that have preliminary approval from the Montana Department of Natural Resources and Conservation (MT DNRC). The water rights have to be finalized prior to start of production.

To date, the legal challenge has not resulted in any interference with development activities and construction continues. While the Company does not believe that either of these challenges have any merit, they do have the potential to delay the development timeline.

The Lowry Deposit, a similar style copper deposit to the Johnny Lee Deposit, is located approximately 3km to the south-east of the Johnny Lee Deposit.

For further details about the Project, please go to the Sandfire Resources America Inc. website at sandfireamerica.wp2.adnetcms.com.

Johnny Lee Deposit – Mineral Reserve

The Mineral Reserve was prepared in accordance with Canadian Institute of Mining and Metallurgy and Petroleum (“CIM”) Definition Standards and will be supported by a technical report (the “Technical Report”) pursuant to NI 43-101, to be published and filed on the Company’s website and SEDAR profile within 45 days.

A net smelter return (“NSR”) was calculated for each block in a block model based on metallurgical recovery, grade, and payability factors. Mine design shapes were created to reach a cut-off value of $70/t which was used for guidance to create detailed designs. All mining blocks then had dilution and recovery applied to them and were tested for economic viability. The mining stope and level designs with dilution and mining recovery factors applied determined the Mineral Reserve shown in Table 1.

Table 1 – Mineral Reserve Johnny Lee Deposit

Class

Diluted Tonnes

Cu Grade

Contained Cu Metal (t)

Proven

1,998,000

3.0%

60,700

Probable

6,804,000

2.4%

165,400

Total

8,802,000

2.6%

226,100

Notes:

1.The qualified person, as such term is defined, for the Mineral Reserve is Brad Evans MAusIMM CP(Mining).

2.Effective date: October 19, 2020. All Mineral Reserves have been estimated in accordance with CIM definitions, as required under NI 43-101.

3.Mineral reserves were estimated using a $3.10 /lb copper price and a NSR cut-off value of $70/t.

4.Tonnages are rounded to the nearest 1,000 t, metal grades are rounded to one decimal place. All units are metric.

5.Rounding as required by reporting guidelines may result in summation differences.

6.Average metallurgical recovery is 84%

The Mineral Reserves identified in Table 1 comply with CIM definitions and standards for a NI 43-101 Technical Report. Detailed information on mining, processing, metallurgical, and other relevant factors demonstrate, at the time of the Technical Report, that economic extraction is justified. The Feasibility Study did not identify any mining, metallurgical, infrastructure or other relevant factors that may materially affect the estimates of the Mineral Reserves or potential production. Table 2 below shows the Mineral Reserves broken out by zone.

Table 2 – Mineral Reserves for the Johnny Lee Deposit by Zone

Zone

Class

Diluted Tonnes

Cu Grade

Contained Cu Metal (Tonnes)

UCZ

Proven

1,159,000

2.2%

25,900

Probable

5,693,000

2.1%

116,900

Total

6,852,000

2.1%

142,800

LCZ

Proven

839,000

4.1%

34,800

Probable

1,111,000

4.4%

48,500

Total

1,950,000

4.3%

83,300

Grand Total

Total

8,802,000

2.6%

226,100

Economic Analysis

The Feasibility Study economic analysis is based on the Johnny Lee Deposit Mineral Reserves. The Feasibility Study does NOT include the Lowry Deposit.

The copper price assumption adopted for the base case is $3.20/lb from the start of production.

The Project’s pre-tax NPV at a 5% discount rate is estimated to be US$124.9M with an IRR of 17%. Cash Costs (C1) are estimated to be $1.51/lb of copper. The life-of-mine all-in sustaining cost is estimated to be $1.63/lb of copper. Payback of start-up capital is achieved approximately 3 years from commissioning.

Table 3 – Economic Sensitivity Analysis for the Johnny Lee Deposit

Black Butte Copper Project – FS Case

Pre-Tax NPV Sensitivity Impacts

Sensitivity Variables

Confidence Ranges

$ Millions , Pre-Tax NPV @ 5%

Worst

Best

Worst

Best

Point

Cu Selling Price

-10%

10%

$30

$216

$125

Cu Grade

-10%

10%

$33

$214

$125

Cu Recovery

-10%

10%

$33

$214

$125

Concentrate Shipping Costs – Land

10%

-10%

$116

$130

$125

Opex – Mining

10%

-10%

$108

$138

$125

Opex – Process

10%

-10%

$107

$140

$125

Capital – Mining

10%

-10%

$113

$133

$125

Capital – Process & Admin

10%

-10%

$105

$142

$125

Johnny Lee Mineral Reserve Estimation Methodology and Parameters

Mining Methods

The Black Butte Copper Project Johnny Lee deposit contains two zones – the UCZ and the LCZ. Both of these zones are characterized as being high-grade, laying at low angles and with relatively narrow widths. All deposits have anomalous silver and cobalt mineralization; however copper is the only economic product considered in the Feasibility Study.

Geotechnical data was gathered from logging of the diamond drill core performed by Sandfire America geologists as well as part of previous work by MDEng (MDEng, 2015). Specific geotechnical holes were drilled along the projected main decline and one of the ventilation raises and logged by Mining Plus. Mining Plus in collaboration with Sandfire America geologists undertook a quality assurance and quality control (QA/QC) audit of the data gathered. Acoustic Televiewer and oriented core data were used to determine structural information. In addition to the data logging, multiple rock property tests were performed on different rock types.

The Johnny Lee Deposit will be accessed by a single main ramp driven from surface. The ramp dimensions will be 5m wide by 5m high and excavated with a flat back to maximize the stability of the flat dipping joint sets that are prevalent throughout the Project. The ramp will be excavated at a maximum gradient of -15% from the surface and pass to the east of the UCZ and then spiraling down to the LCZ. Ventilation and secondary egress will be through 3 main ventilation raises.

All material handling will be by trackless underground equipment with 51-tonne haul trucks hauling ore directly from stope areas to either a surface ore pad or the surface crusher.

The mining method will be a combination of drift and fill and cut and fill depending on the height of the orebody. All openings will be completely backfilled with Paste Backfill to allow for the complete extraction of the orebody. In the UCZ where the orebody is wider a Primary-Secondary-Tertiary method, where the tertiary stopes are extracted through an unsupported slash retreat.

Mineral Processing and Metallurgical Test Work

Previous metallurgical test work programs undertaken by the Company indicated that production of a copper concentrate from the LCZ by froth flotation recovered 93.3% to 96.6% of the copper resulting in a concentrate grading 27.0% to 30.8% copper. Tests on UCZ composites during the same test programs showed a wide range of copper recoveries (61.9% to 91.2%) at concentrate grades of 18.5% to 24.5% copper. Mineralogical investigation of UCZ metallurgical composites indicated that copper sulphide liberation was the primary metric that defined metallurgical performance.

Systematic mineralogical investigation of UCZ drill intercepts was undertaken to define the vertical and lateral variability in copper sulphide liberation throughout the entire UCZ. This study also allowed the geometry of the supergene alteration zone (at the intersection of Fault 1 and the brittle-ductile shear zone) to be resolved. The supergene altered zone comprises 2.2% of the total volume of the UCZ.

Based on the mineralogy derived geometallurgical model, 19 PQ diameter (85 mm) diamond drillholes were targeted to intersect the complete range of UCZ copper liberation types. From these drillholes, 21 metallurgical composites were developed, including two composites from the supergene alteration zone.

Comprehensive batch rougher and cleaner flotation tests were completed on all 21 UCZ metallurgical composites to determine the optimum primary grind size, reagent suite, rougher regrind size and flowsheet configuration for UCZ ore. Tests undertaken with site water showed no significant differences to those completed with laboratory tap water. Two rounds of locked-cycle tests were conducted, using a representative subset (seven to eight composites) of the UCZ composites using slightly different regrind sizes and different grinding media. Based on the test work the optimized flowsheet for the UCZ was developed:

Primary grind to 35 µm P80;

Lime addition to rougher flotation circuit to maintain pH = 9.5;

Rougher flotation using aero 3477, mono-sodium phosphate and dextrin;

Regrind of rougher concentrate to 10 µm P80;

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