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The mining newspaper for Alaska and Canada's North
New study updates timing, economics of silver-zinc operation North of 60 Mining News – November 6, 2020
Drilling has outlined 15.7 million metric tons of reserves at the Kudz Ze Kayah project rich in silver, zinc, gold, copper, and lead.
Following the Yukon Environmental and Socio-Economic Assessment Board's (YESAB) recommendation that the proposed mine the Kudz Ze Kayah (KZK) project be allowed to proceed to permitting, BMC Minerals Ltd. has updated the feasibility study for the silver-dominant polymetallic project in southeastern Yukon.
While the operating parameters of the proposed mine have not changed, the updated feasibility study does take into consideration concerns raised by YESAB. This updated economic and engineering study also includes updates to the economics and scheduling based on the currently projected timing of permitting and development, as well as increased costs and other financial inputs since the completion of the initial study in mid-2019.
"The updated DFS (definitive feasibility study) confirms the Kudz Ze Kayah project is expected to be an internationally significant, high grade silver project with strong zinc, copper and gold credits. Its low operating costs are anticipated to deliver excellent operating margins and cashflows," said BMC Minerals President and CEO Scott Donaldson.
Just like in the 2019 feasibility study, the updated mine at KZK is expected to produce an average of 235 million pounds of zinc, 32 million lb of copper, 56 million lb of lead, 7.8 million ounces of silver and 56,500 oz of gold annually, over an initial nine-year mine life.
"When in production KZK will sit in elite company being one of only a handful of active mining projects worldwide that are in the global top twenty producers for both silver and zinc production. This is independent of the other metal credits," Donaldson said.
The mine detailed in the feasibility study is based on 15.7 million metric tons of probable reserves averaging 5.8% (915,000 metric tons) zinc, 0.9% (135,800 metric tons) copper, 1.7% (265,700 metric tons) lead, 138 grams per metric ton (69.5 million ounces) silver and 1.3 g/t (666,000 oz) gold.
These reserves are found in ABM, one of several base and precious metal-rich volcanogenic massive sulfide (VMS) deposits identified in the KZK district, on properties either owned or optioned by BMC Minerals.
The feasibility study envisions a 2-million-metric-ton-per-year operation that mines ore both from an open-pit and underground.
Pre-production capital costs are estimated at US$376 million, which is slightly lower than the US$381 million estimated in the 2019 study.
The US$546 million total capital requirement for the KZK mine, which includes underground development and closure costs, is also lower than the previously estimated US$587 million.
Once in operation, this mine is expected to generate US$4.2 billion in overall revenue, or US$3.23 billion in net revenue, based on US$1.07/lb zinc, US91 cents/lb lead, US$3.05/lb copper, US$20.55/oz silver and US$1,561/oz gold and a currency exchange rate of C$1 to US77 cents.
At these prices, silver would account for 31% and zinc would contribute 29% of the net revenue of the mine. Gold (17%), copper (16%), and lead (7%) would also be significant contributors to KZK revenue.
Based on these metrics, the mine is expected to have an after-tax net present value (7% discount) of US$617 million and generate an after-tax internal rate of return of 45.9%.
The payback period for the initial capital investment is estimated to be 1.8 years.
"This is one of the most compelling projects I have been associated with and I look forward to continuing to work with the Kaska First Nations, businesses and the Yukon Government assessors and regulators to deliver it into production," said Donaldson.
BMC is currently anticipating that the KZK Mine will deliver its first concentrates to world markets in 2023.
Over his more than 16 years of covering mining and mineral exploration, Shane has become renowned for his ability to report on the sector in a way that is technically sound enough to inform industry insiders while being easy to understand by a wider audience.
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