Sabina advances gold project in 2014

Sabina Gold & Silver Corp. made considerable progress in 2014 in advancing its Back River Gold Project located in southwestern Nunavut toward production. If the project continues development on its current track, the junior could pour first gold as soon as 2018 and quickly rival Agnico Eagle Mines Ltd.'s Meadowbank Gold Mine in size, producing 300,000 to 400,000 ounces of gold annually for 10-15 years.

The Back River project comprises seven properties covering 48,563 hectares (120,000 acres), located 520 kilometers (322.4 miles) northeast of Yellowknife, NWT and 400 kilometers (248 miles) south of Cambridge Bay, NU.

Sabina purchased the project from Dundee Precious Metals in late 2009 and, following discovery of multiple new deposits in 2010 and 2011, made the decision to develop the project.

In 2012, a preliminary economic assessment estimated at least US$1.1 billion worth of gold on the project's properties.

Development in progress

As regulators completed a technical review of the project in mid-November, Sabina reported incremental progress on the project, where it envisions six open-pit mining areas within the Goose and George properties and one underground mine at Goose.

The Back River proposal also includes several roads: all-weather roads within the two properties, a winter road between the two properties, a winter road linking the properties to a marine laydown area about 75 kilometers (47 miles) to the north at Bathurst Inlet and a short-term winter road to the Tibbett-Contwoyto winter road.

Ore produced at Back River would be processed on the Goose property where gold bars would be poured and then flown out by air.

The proposed mine would operate for 10 to 15 years, following two years of mine construction. Another five years would be required to close the mine. Sabina intends to hire 1,600 workers during the construction phase and 900 employees to operate the mine.

Sabina completed a new mineral resource estimate for Back River in March, compiling about 82,000 meters drilled in 2013 that were not included in a pre-feasibility study released in October 2013.

The current estimate includes a measured mineral resource of 10.4 million metric tons grading 5.2 grams-per-metric-ton gold for 1.761 million contained ounces of gold; an indicated mineral resource of 17.9 million metric tons grading 6.1 g/t gold for 3.536 million contained ozs gold and an inferred mineral resource of 8.2 million metric tons grading 7.3 g/t gold for contained 1.927 million ozs gold.

Although the impact of the increased resource on the project will not be fully known until completion of the feasibility study, Sabina said it believes the increase in measured and indicated mineral resources and increase in confidence in the continuity and grade of the deposits offers the potential for a larger mineral reserve on the project and a potentially longer mine life.

Sabina also began work on a feasibility study for the project in June, engaging a team comprised of JDS Energy & Mining Inc. (lead), Hatch Ltd., SRK Consulting, Knight Piésold Ltd. and AMC Consultants Pty Ltd. The feasibility study is anticipated to be completed during the first half of 2015.

"Our studies for the Back River FS are very much on track," said Sabina President and CEO Rob Pease. "While final results and economics for the FS are not expected to be completed until the first half of next year, we are very encouraged by our progress so far and believe with the volume of additional information we now have, that Back River is going to be a compelling project. We also are very fortunate to have what we believe is the best Arctic team in Canada working on the project. Our consultants all have significant Northern experience in design, construction, operations and permitting, which will bring relevant hands-on credibility to the FS."

For the feasibility study, a comprehensive review of all the mining areas has been undertaken. This review is focusing primarily on underground areas where conversion of inferred resources into the measured and indicated categories has demonstrated increased continuity leading to potentially more efficient development strategies and mining methods. The feasibility study will consider whether this could offer a potential reduction in underground mining costs and increased mining recovery and decreased dilution.

Life of mine gold recoveries in the pre-feasibility study were estimated to average 88.0 percent, and metallurgical testing since the PFS has resulted in increased recoveries to an estimated 93.9 percent over the life of the mine. This indicates roughly 5 percent more metal over the life of mine relative to the PFS, and more significantly, a potentially bigger impact in the early years from the first two pits at Llama and Umwelt, which had the lowest recoveries in the PFS, according to Sabina.

The pre-feasibility study contemplated underground development occurring from the bottom of the open pits and a single tailings storage facility to accommodate tailings waste for the life of mine. Current studies for the feasibility study, however, are evaluating the effects of ramp access to the underground external to the open pits.

Sabina said this change allows for other tailings disposal options to be considered in the feasibility study, including the use of open pits for tailings disposal. This may have a positive impact on sustaining capital as well as on the permitting process.

In the pre-feasibility study, the project envisioned a 5,000-metric-ton-per-day operation, producing a life-of-mine average of about 287,000 ounces of gold per year. Analysis is currently underway for the feasibility study on a scenario which would increase the throughput of the process plant by up to 20 percent for the majority of the life of mine. This could alleviate some of the planned open pit stockpiling and increase the overall production profile.

Regulatory progress

Sabina submitted the draft environmental impact statement and associated water license application for the Back River Project to the Nunavut Impact Review Board and the Nunavut Water Board Jan. 22. The DEIS presents scientific and community-based knowledge that determined key aspects of the natural and socio-economic environments in the region. Project interactions were identified; residual effects assessed and proposed mitigation and monitoring plans developed for the construction, operation and closure of the project.

In February, the company received notice from Review Board that the Back River DEIS conformed to the environmental assessment guidelines. In March the company received information requests from the technical review process, and submitted its responses to the board in July. Meetings for the technical review process too place in mid-November.

At the technical hearings, discussion centered on social and environmental concerns about the project, including the impact of shipping for Sabina's proposed Bathurst Inlet shipping area or marine laydown area, particularly on marine mammals; and the impact of the Back River project on the dwindling Bathurst caribou herd, which is down in numbers to less than 10,000 animals in 2014 from about 60,000 in 2006.

Sabina agreed to reconsider the alignment of its proposed winter road to the marine laydown area because of potential impacts on the nearby ecosystem. The area would be used as a fuel storage tank farm and receiving dock for annual sealifts.

Agencies from both federal and territorial governments, including the Northwest Territories submitted concerns to the Review Board about the potential impact shipping would have on marine mammals and other wildlife along the inlet.

In response, Sabina agreed to provide further details on whether fuel storage includes overwintering of fuel vessels in the sea ice; site-specific water quality objectives and management plans; identification and consideration of migratory bird colonies along the shipping route; studies on polar bear distribution density along the route; and, more information on fuel spill risks as well as identifying best- and worst-case spill scenarios.

Sabina also committed to addressing cumulative impacts from the shipping activities of other Kitikmeot region mining projects - both proposed and approved - including TMAC's Hope Bay, Xstrata's Hackett River and MMG's Izok Corridor.

The final environmental impact statement for the Back River project will be informed by the feasibility statement early next year and is expected to be submitted to the Review Board during the third quarter of 2015.

Looking ahead

Sabina anticipated entering 2015 with about C$31 million in its treasury, a sum the junior said is sufficient to take the project through completion of the feasibility study and the environmental assessment process.

The company forecasts that its cash balance after completion of the feasibility study and the final environmental impact statement will total about C$23 million (at the end of 2015 and not including any field work that may be required to complete the FEIS).

Sabina managers are currently informally exploring project financing alternatives and opportunities. The project is expected to be substantively de-risked by the end of 2015, (subject to the results of the completed feasibility study and environmental assessment).