To maximise cash-flow, high-grade ore will be placed on the leach pad during the initial 13 years of production with low-grade ore stockpiled for leaching in the subsequent three years to give a total mine life of 16 years. Average annual gold production will be 93,000 ounces and falling to 50,000oz during the final three years when the stockpiled ore is leached.
Fenix has an after-tax net present value (NPV) of $121 million at a 5% discount rate and a 27.4% internal rate of return (IRR) at an all-in sustaining cost of $997/oz following an initial capital cost of $111 million with life of mine sustaining capital costs of $95 million. At a $1,400/oz gold price, the NPV of Fenix increases to $181 million and its IRR to 36.1%.
"We have completely re-imagined and re-engineered the project with a focus on shortening the timeline to construction/production, simplifying the approval process and permitting of the project, lowering initial capex, concentrating on higher grades during early years of production and optimally minimising the initial strip ratio," said president and CEO Alex Black.
"We also thought outside of the box to arrive at an innovative solution of trucking water to the project with the sole purpose of fast-tracking and simplifying the approvals process and permitting of the project.
"We are confident we can expand the mine quickly and optimally after achieving initial production."
The PFS focuses on a low-cost heap leach gold mine with 1.83 million ounces of gold reserves grading 0.49 grams per tonne to produce 1.37Moz with a recovery rate of 75%. Fenix has an updated mineral resource estimate of 5Moz in the measured and indicated categories and 1.4Moz in the inferred category. The PFS uses a $1,300 per oz gold price.
The PFS contemplates mining at 20,000 tonnes per day significantly less than the 80,000tpd mining rate in the 2014 study undertaken by the previous project operator. Some 81.9Mt grading 0.57g/t will go onto the leach pad with 33.1Mt grading 0.30g/t to be stockpiled.
This production rate will allow for the trucking of water from Copiapo which will expedite and simplify the mine approval and permitting process, reducing the timeline to construction from five years to two years. At 20,000tpd, Fenix will require up to 24 litres per second of water which will be trucked 158km to site by 30-tonne capacity tankers.
Water will be purchased from Copiapo water utility Aguas Chañar with whom the company has an agreement for the supply of up to 80lps of treated town wastewater from its Piedra Colgada treatment facility.
The 2014 PFS outlined the construction of a pipeline with associated power line from Aguas Chañar to Fenix along the existing main road which passes within 20km of the project. This is under consideration for future expansion of Fenix with discussions ongoing with infrastructure companies interested in and able to finance and build the pipeline, and other mining companies who may wish to share in the benefit of the pipeline project.
Following the initial ramp-up to 20,000tpd of high-grade ore mining will continue for an additional 12 years at an average annual rate of 20,000tpd of high-grade ore and 7,000tpd of low-grade ore with the low-grade material to be stockpiled for crushing and leaching in later years.
High-grade ore will be crushed to a P80 size of 4 inches via a single stage gyratory crusher with lime dosing before crushed ore is fed to a stockpile. Crushed ore will be trucked to the leach pad without agglomeration. The pregnant leach solution will be processed in an ADR (adsorption, desorption and refining) plant to produce doré bars. The plant is designed to be upgradeable to 40,000tpd and 80,000tpd.
Power for the project will be generated via diesel generators with a connection to grid power some 25km from the site to be considered as Fenix is expanded.
Rio2 believes its mineralised resource has potential to expand through additional drilling and offers an opportunity to increase annual production and extend the mine life. Increasing production will depend on transporting a greater volume of water via a pipeline, using alternative water solutions closer to the project and changes to the gold price during the initial years of production.
Rio2 filed an environmental impact declaration in April with the Environmental Assessment Service (EAS) and is expected to be approved before year end. An environmental impact assessment (EIA) is expected to be completed and filed with the Environmental Impact Assessment System (SEIA) in early 2020 with environmental approval expected a year later.
Rio2 now plans to complete engineering works and studies for inclusion in the EIA submission, conduct further pit geotechnical investigation and analysis to safely optimise pit wall angles, undertake a cost benefit analysis of crushing versus run of mine (ROM) leaching and a trade-off study of trucking versus conveying for moving ore from the crusher to the pad to reduce operating costs.
Shares in Rio2 (TSXV:RIO) are trading at C58¢, valuing the company at $105 million.