Pine Point PEA shows mine may be feasible

Darnley Bay Resources Ltd. April 18 published results of a preliminary economic assessment for Pine Point that indicates developing a mine at this zinc project about 65 kilometers (40 miles) east of Hay River Northwest Territories would be relatively inexpensive and the payback on the initial capital would be realized in less than two years.

The PEA examined several development scenarios and settled on a mining plan where 10 open-pit deposits are mined in sequence.

The deposits included in the mine plan host 25.8 million metric tons of measured and indicated resources averaging 2.94 percent zinc and 1.12 percent lead, plus 3.7 million metric tons of inferred resources averaging 2.9 percent zinc and 0.77 percent lead.

Roughly 4,000 to 6,800 metric tons of mineralized material would be mined per day and fed into dense media separation plants for pre-concentration prior to being trucked to a centralized 1,800-metric-ton-per-day mill to produce lead and zinc concentrates with a more traditional mining and flotation circuit.

The concentrate will then be trucked to a railway facility at Hay River.

This method is similar to that used by Cominco (now Teck Resources) when it operated a mine at Pine Point from 1964 to 1987.

Under the scenario outlined in the PEA, developing a new mine at Pine Point is expected to produce 1.35 billion pounds of zinc and 536 million pounds of lead over a 13-year mine life.

The capital needed to develop this mine is estimated be C$153.8 million, including a 15 percent contingency, with sustaining capital of C$117.5 million per year over the life of the mine.

It is assumed that sustaining capex will be entirely funded out of cash flow.

With these parameters, the mine is expected to produce an after-tax net present value of C$210.5 million and internal rate of return of 34.5 percent. This would pay back the initial investment in about 1.8 years.

Darnley Bay just bought Pine Point in December for roughly C$3 million in cash and 25 million company shares. This payment was made to KSV Koffman Inc., the court-appointed receiver of Tamerlane and Pine Point Holding Corp., previous owners of the property.

Darnley Bay President and Chief Executive Officer Jamie Levy remarked that,

"This preliminary economic assessment supports that management's confidence in this project was well-placed when it was purchased this past December," said Levy. "What is also very encouraging is that there are multiple opportunities, including underground mining, to enhance the economics and extend the project life."

Notable enhancements include bringing in some higher grade underground resources into the mine plan and upgrading historical surface resources to modern NI 43-101 standards with further drilling.

Additionally, further metallurgical testing planned for 2017 may increase both recoveries and concentrate grades.

Darnley Bay plans to begin this feasibility work in the second half of this year.

"The company plans to initiate a feasibility study in the near future while drilling to add additional resources to the mine plan," Levy said.

If the feasibility study continues to show developing Pine Point to be economically viable, the company said it would take about 18 months to construct the mine after the permits and financing is secured.

-SHANE LASLEY