Trans-Siberian Gold PLC Rodnikova Project Scoping Study (6472P)

TIDMTSG

RNS Number : 6472P

Trans-Siberian Gold PLC

19 February 2021

19 February 2021

Trans-Siberian Gold plc

("TSG", the "Company" or the "Group")

Rodnikova Project Scoping Study

Trans-Siberian Gold plc (TSG.LN), a low cost, high grade gold producer in Russia, is pleased to announce the results of an independent Scoping Study for the 100% owned Rodnikova Project (the "Project") in Kamchatka, Far East Russia prepared by SRK Consulting (Russia) Ltd ("SRK").

Project Highlights

Production Potential

   --      Life of mine ("LOM") 14 years 

-- LOM is based on a Mineral Resource Estimate, reported in accordance with the JORC Code (2012), of 6.3 Mt at an average grade of 5.0 g/t gold

   --      LOM gold production of 517,000 oz. at an average grade of 4.03 g/t 
   --      LOM silver production of 3,062,000 oz. at an average grade of 28.9 g/t 
   --      Sub-level stoping and underground mining methods assessed to be optimal for the Project 
   --      Conventional CIL processing plant with processing capacity of 500 kt per annum 
   --      Gold recovery 94% 
   --      Cut-off grade of 3.5 g/t, calculated based on $1,250/oz gold price assumption 

-- Production schedule does not include any potential future exploration success and Mineral Resource growth

Project Costs & Economics[1]

   --      LOM Revenue of $715m 
   --      LOM Free Cash Flow of $126m 
   --      LOM CAPEX $133m of which $82m is initial/construction CAPEX in year 1 
   --      Economics at LOM gold price of US$1,600/oz (Management sensitivity) 

o Including application of TOR:

-- Post Tax NPV(10%) of $177.6m

-- Post Tax Internal Rate of Return of 59.2%

o Excluding application of TOR[2]

-- Post Tax NPV(10%) of $117.6m

-- Post Tax Internal Rate of Return of 40%

   --      Economics at LOM gold price of US$1,300/oz (SRK base case) 

o Including application of TOR:

-- Post Tax NPV10% of $92.4m

-- Post Tax Internal Rate of Return of 35.3%

o Excluding application of TOR

-- Post Tax NPV(10%) of $45.8m

-- Post Tax Internal Rate of Return of 22%

   --      Discounted Payback period of 4 years applying TOR, or maximum of 6 years excluding TOR 

Socio- economic contribution

-- It is anticipated that, should the project advance, as a major employer in the Kamchatka region the project would create approximately 800 employment opportunities and generate significant tax remittances to regional and federal governments

The Project Scoping Study is based on Indicated & Inferred Mineral Resources, reported in accordance with the JORC Code (2012), of 6.3 Mt at an average grade of 5.0 g/t gold, for a total of 1Moz contained gold[3] . The Scoping Study has identified economically viable development options which justifies the advancement of the Project.

The Company believes that the Project continues to have additional upside potential which it will evaluate through additional exploration and a Pre-Feasibility Study ("PFS"). The Mineral Resource Estimate is expected to increase in size and confidence through further exploration.

At this stage of project evaluation, as is typical and expected, a number of risks have been identified. In particular, geotechnical, hydrogeological, environment and social impact risks will be fully evaluated during the PFS with a robust mitigation plan developed where appropriate.

The use of favourable incentives available under Kamchatka TOR enhances the Project economics substantially and illustrates that the Far East of Russia is highly attractive for foreign direct investment.

Alexander Dorogov, Chief Executive Officer of Trans-Siberian Gold plc commented:

" The Rodnikova Project Scoping Study has delivered viable project economics based on cautious and conservative assumptions. As with all Scoping Studies there is a significant amount of work to be completed before a definitive investment decision can be made. We are committed to progressing with the exploration and development required in order to advance towards a Pre-Feasibility Study. At this stage, we're pleased with the positive economic indications and upside potential to enhance the project which if advanced would bring significant socio-economic benefit to the people of Kamchatka".

 
 Contacts: 
 TSG 
  Stewart Dickson                                  [phone] 
 Canaccord Genuity Limited 
  (Nominated Adviser & Joint Corporate Broker) 
  Henry Fitzgerald-O'Connor / James Asensio       [phone] 
 Panmure Gordon (UK) Limited 
  (Joint Corporate Broker) 
  John Prior / Hugh Rich / Ailsa MacMaster        [phone] 
 Hudson Sandler 
  (Financial Public Relations ) 
  Charlie Jack / Katerina Parker / Elfie Kent     [phone] 
 

About TSG

TSG is focused on low cost, high grade mining operations and stable gold production from its 100% owned Asacha Gold Mine in Far East Russia. The Company also holds the licence for the development and exploration of the Rodnikova deposit, one of the largest gold fields in South Kamchatka.

Additional information is available from the Company's website: www.trans-siberiangold.com

Market Abuse Regulations

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 ('MAR'). Upon the publication of this announcement via Regulatory Information Service ('RIS'), this inside information is now considered to be in the public domain.

Scoping Study Overview

Geology

The Rodnikova deposit includes two sites, Rodnikovoye and Vilyuchinsky, located 5 km apart. The mineralization is classified as epithermal low-sulphidation type.

The technical and economic evaluation of the Project is based on the Mineral Resources Estimate for the Rodnikova deposit in accordance with the JORC Code as of 20 January 2020.

The Mineral Resource Estimate for the Project is shown in the table below.

 
  Classification     Tonnes       Au     Au          Au       Ag      Ag       Ag 
                       (Mt)    (g/t)    (t)    ('000oz)    (g/t)     (t)    (Moz) 
-----------------   -------  -------  -----  ----------  -------  ------  ------- 
 Rodnikovy 
 Indicated              3.1      5.3   16.1         519     43.9   134.9      4.3 
 Inferred               1.7      4.3    7.4         238     32.3    55.7      1.8 
 Vilyuchinsky 
 Inferred               1.5      5.3    7.9         253     27.1    39.9      1.3 
------------------  -------  -------  -----  ----------  -------  ------  ------- 
 Total Indicated        3.1      5.3   16.1         519     43.9   134.9      4.3 
 Total Inferred         3.2      4.8   15.3         491     29.9    95.7      3.1 
------------------  -------  -------  -----  ----------  -------  ------  ------- 
 

Notes:

1. Mineral Resources are reported in accordance with the definitions and standards of the JORC Code and were originally published by the Company on 10 February 2020

2. Mineral Resources were estimated at a cut-off grade of 3.0 g/t within underground mining outlines.

3. The Competent Person for the report of Mineral Resources is Mr Robin Simpson, an employee of SRK Consulting (Russia) Ltd. Mr. Simpson is a Member of the Australian Institute of Geoscientists (AIG), and is deemed to have sufficient experience relevant to the style of mineralisation and type of deposit under consideration and to the activity undertaken to qualify as a Competent Person.

4. The report to support the Mineral Resource Estimate, including JORC Code Table 1 reporting criteria, is available from TSG's website.

SRK notes the deposit has the potential to increase Mineral Resources as:

   --      Mineralisation is open at depth; 

-- Mineralised zones on the flanks are open along strike and there is potential to add resources in the north.

Mining

To assess potential mineable reserves, pit optimisation was performed, and potential mining limits were defined. Potential reserves for underground mining were also estimated based on the Indicated and Inferred Resources.

Optimised resources of Rodnikovoye site (including losses and dilution) amount to 2.96 Mt; total metal (Au) is 16,400 kg; the average grade is 5.53 g/t. Optimised resources of the Vilyuchinsky site amount to 0.9Mt; total metal (Au) is 4,500 kg; the average grade is 4.82 g/t.

Six mining methods have been considered:

 
 Option              Rodnikovoye site                  Vilyuchinsky site 
-------  ----------------------------------------  ------------------------- 
   1                 Sublevel Stoping                  Underground Mining 
   2                  Sublevel Caving                       Open Pit 
   3           Sublevel Caving, Backfilling            Underground Mining 
   4           Sublevel Caving, Backfilling          Open Pit & Underground 
                                                             Mining 
   5      Open Pit & Underground Mining (Sublevel      Underground Mining 
                          Caving) 
   6      Open Pit & Underground Mining (Sublevel   Open Pit and Underground 
                          Caving)                            Mining 
-------  ----------------------------------------  ------------------------- 
 

All resources are proposed to be mined using an underground method as the base case scenario for Rodnikovoye and Vilyuchinsky sites.

Based on the CAPEX and OPEX estimates, the optimum mining method is represented by Option 1 (Rodnikovoye - sublevel stoping, Vilyuchinsky - underground mining) and has been adopted as the base case for the Project.

Underground mining schedule

 
                                                                  Year 
-------  -----  -----  -----------------------------------------------------------------------------------------  ------ 
                  1      2      3      4      5      6      7      8      9      10     11     12     13     14     Sum 
 -------------  -----  -----  -----  -----  -----  -----  -----  -----  -----  -----  -----  -----  -----  -----  ------ 
  Ore 
  Mined    Mt    0.15   0.42   0.42   0.42   0.42   0.42   0.42   0.42   0.39   0.24   0.22   0.13   0.10   0.07    4.2 
   Au     g/t    4.0    3.6    4.6    4.2    3.8    4.3    3.7    3.3    3.5    4.4    4.5    4.7    5.4    5.9     4.0 
   Ag     g/t    44.5   32.8   43.9   34.1   28.5   30.0   27.6   24.4   24.4   17.0   24.1   15.3   15.4   13.8   29.0 
   Au      t     0.6    1.5    1.9    1.8    1.6    1.8    1.6    1.4    1.4    1.0    1.0    0.6    0.5    0.4    17.1 
   Ag      t     6.5    13.8   18.4   14.3   12.0   12.6   11.6   10.3   9.6    4.1    5.4    2.0    1.5    1.0    123.1 
-------  -----  -----  -----  -----  -----  -----  -----  -----  -----  -----  -----  -----  -----  -----  -----  ------ 
 
 

Processing

The proposed flowsheet consists of the following unit processes:

   --      Crushing: single stage, open circuit using a jaw crusher. 

-- Grinding: a SAG mill operating in open circuit followed by a ball mill operating in closed circuit with hydrocyclones. Grinding will take place in the presence of cyanide, and so the grinding circuit product will be thickened ahead of the Carbon-in-Leach ("CIL") circuit.

   --      A 10 tank CIL circuit. 
   --      Cyanide detoxification using hypochlorite followed by pressure filtration of the tailings. 
   --      Metal recovery will use a standard elution and electro winning circuit. 

The capacity of the circuit is 500 ktpa.

Infrastructure

The project is well situated to take advantage of regional infrastructure. The site can be accessed via the main road from Petropavlovsk-Kamchatsky which is also termed the "Mutnovsky Power Station road". The road is mostly paved and is understood to be a reasonable standard access road that does not require upgrading for the mine development. There is a deep-water port at Petropavlovsk-Kamchatsky. The North Mutnovsky Power Station is a Geothermal Power Plant located south of the project. The main 220kV transmission line between the Geothermal Power Plant and the main grid bisects the project area.

Tailings Management

The Scoping Study assessment identified a series of filtered tailings storage options for the Rodnikova Project. This study includes a Dry Storage Facility options assessment, volumetric modelling and preparation of material take offs, in order to provide a +/-50% accuracy cost estimate for inclusion in the Scoping Study financial model. A total of four alternatives were modelled, in proximity to the proposed plant site. These were traded off qualitatively to select a preferred configuration for cost estimation.

Technical - Economic Assessment

Financial results of Technical - Economic assessment

 
            Metric                Units       Option 1     Option 1 
----------------------------- 
                                              Exc. TOR     Inc. TOR 
-----------------------------  ----------   -----------  ----------- 
 Ore - Rodnikovoye                 (t)       3,379,081    3,379,081 
 Grade - Rodnikovoye             (g/t Au)       3.88         3.88 
 Gold - Rodnikovoye               (g Au)     13,115,018   13,115,018 
 Ore - Vilyucha                    (t)        870,403      870,403 
 Grade - Vilyucha                (g/t Au)       4.62         4.62 
 Gold - Vilyucha                  (g Au)     4,023,491    4,023,491 
 Gold production                 (oz Au)      512,775      512,775 
-----------------------------  -----------  -----------  ----------- 
 Revenue                           ($m)         715          715 
 Total Operating Costs             ($m)         418          363 
 Total Capital Costs               ($m)         133          133 
 Net Profit                        ($m)         152          219 
 Free Cash Flow                    ($m)         126          194 
 NPV(10%)                          ($m)          46           92 
 IRR                               (%)           22           35 
 Payback Period (non 
  discounted)                    (years)         5            4 
 Payback Period (discounted)     (years)         6            4 
-----------------------------  -----------  -----------  ----------- 
 

Post Tax NPV(10%) Sensitivity to Gold Price[4]

 
 Gold Price    NPV(10%) Exc. TOR   NPV(10%) Inc. TOR 
------------  ------------------  ------------------ 
 $1,200/oz.         $21.7m              $63.9m 
 $1,300/oz.         $45.8m              $92.4m 
 $1,400/oz.         $69.7m              $120.7m 
 $1,500/oz.         $93.6m              $149.2m 
 $1,600/oz.         $117.6m             $177.6m 
------------  ------------------  ------------------ 
 

Post Tax NPV(10%) Sensitivity (Exc. TOR) to Discount Rate

 
 Gold Price              Discount Rates 
------------  --------  ---------------  --------  -------- 
                 6%            8%           10%       12% 
------------  --------  ---------------  --------  -------- 
 $1,200/oz.    $42.5m        $31.4m       $21.8m    $13.4m 
 $1,300/oz.    $71.0m        $57.5m       $45.8m    $35.5m 
 $1,400/oz.    $99.5m        $83.6m       $69.7m    $57.7m 
 $1,500/oz.     $128m       $109.6m       $93.7m    $79.8m 
 $1,600/oz.    $156.5m      $135.7m       $117.7m   $101.9m 
------------  --------  ---------------  --------  -------- 
 

IRR sensitivity to Gold Price (%)

 
 Gold Price    IRR (%) Exc. TOR   IRR (%) Inc. TOR 
------------  -----------------  ----------------- 
 $1,200/oz.          15.8               27.7 
 $1,300/oz.          22.0               35.3 
 $1,400/oz.           28                 43 
 $1,500/oz.           34                 51 
 $1,600/oz.           40                59.2 
------------  -----------------  ----------------- 
 

Capital Costs

For the base case development options, capital costs as derived within the Scoping Study for the Project are set out as follows.

 
       Capital costs            US$m 
--------------------------- 
 
 Underground capital works     25.57 
 Underground equipment         17.78 
 Plant                         18.29 
 Plant equipment               12.30 
 Tailings                      10.13 
 Infrastructure                19.90 
 Closure                        7.00 
 Contingencies                 22.19 
 Total Capital Costs           133.16 
----------------------------  ------- 
 

Future works & recommendations for the Prefeasibility Study

The assessment performed in the Scoping Study was based on the most modern approach to designing and organising mining operations. Within the framework of this approach, all the basic elements of the Project were assessed, such as geology, mining, technology, ecology, economics, and the economic effect of using new solutions.

More detailed study work will be required in order to complete engineering design to a higher confidence level, prior to the Project being ready for a construction decision.

The majority of future work required, from a cost perspective, will comprise drilling and exploration works, ultimately designed to increase the size of the existing mineral resources as well as potentially convert them into proven or probable reserves.

Exploration works

SRK notes that the deposit has the potential to increase Mineral Resources.

In order to expand the mineralisation potential of the Rodnikova area, it was recommended to look at options of exploring the northern extension of the zone with infilling the grid to at least 60-80 meters mineralization intersections. Exploration work in this case should be divided into stages, with each subsequent stage of drilling to be based on assay results from the previous stage.

As for the Vilyuchinsky area, main zones containing Inferred Resources require infill drilling to 40m x 40m between mineralised intersections. Other zones intersected by trenches and individual boreholes require more drilling to infill the grid to at least 80m x 80m between mineralisation intersections.

Further studies and assessment

Various additional technical evaluations and assessments are also required for a Prefeasibility Study to be completed at the Project. These will include, but are not limited to, the following:

   --      Additional metallurgical testwork 
   --      Engineering studies to refine the process flow sheet in more detail 
   --      Infrastructure assessments including water and power supplies; 
   --      Baseline studies of the existing natural-environmental and socio-economic conditions 
   --      Preliminary environmental and socio-economic impact assessment 

The Company plans to proceed with these works and studies in 2021 and will invest in exploration work, including drilling in the course of the year.

Disclaimer

This announcement contains "forward-looking statements" - that is, statements related to future, not past, events. In this context, forward-looking statements often address our expected future business and financial performance, and often contain words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "should" or "will." Forward-looking statements by their nature address matters that are, to different degrees, uncertain. For us, uncertainties arise from the behaviour of financial and metals markets, fluctuations in interest and/or exchange rates and metal prices; and from numerous other matters of national, regional and global scale, including those of a political, economic, business, competitive or regulatory nature. These uncertainties may cause our actual future results to be materially different that those expressed in our forward-looking statements.

Competent Person

The Scoping Study was prepared by SRK Consulting (Russia) Ltd. SRK's team includes specialists sufficiently qualified and experienced to act as Competent Persons for reporting Mineral Resources and Ore Reserves. The Scoping Study was managed by Alexander Batalov. Mr Batalov is an employee of SRK, and a member of the Australasian Institute of Mining and Metallurgy (AusIMM). He has sufficient experience relevant to the style of mineralisation and type of deposit under consideration and to the activity undertaken to qualify as a Competent Person as defined by the AIM Rules for Companies.

The information in this release that relates to the Scoping Study, save for the NPV and IRR sensitivity analyses, is based on, and fairly represents, information which has been compiled by Mr. Batalov. Mr. Batalov has consented to the inclusion of this information in the form and context in which it appears.

Technical Glossary

 
 "Au"                 the chemical symbol of gold 
 "Ag"                 the chemical symbol of silver 
 "CIL"                carbon-in-leach, a process in which carbon 
                       is added to the solution following leaching 
                       in order to extract gold 
 "cut-off grade"      the lowest grade, or quality, of mineralised 
                       material that qualifies as economically mineable 
                       and available in a given deposit. May be 
                       defined on the basis of economic evaluation, 
                       or on physical or chemical attributes that 
                       define an acceptable product specification. 
 "g/t"                grams per tonne 
 "Indicated mineral   a part of a Mineral Resource for which tonnage, 
  resource"            densities, shape, physical characteristics, 
                       grade and mineral content can be estimated 
                       with a reasonable level of confidence. It 
                       is based on exploration, sampling and testing 
                       information gathered through appropriate 
                       techniques from locations such as outcrops, 
                       trenches, pits, workings and drill holes. 
                       The locations are too widely or inappropriately 
                       spaced to confirm geological and/or grade 
                       continuity but are spaced closely enough 
                       for continuity to be assumed 
 "Inferred mineral    a part of a Mineral Resource for which tonnage, 
  resource"            grade and mineral content can be estimated 
                       with a low level of confidence. It is inferred 
                       from geological evidence and assumed but 
                       not verified geological and/or grade continuity. 
                       It is based on information gathered through 
                       appropriate techniques from locations such 
                       as outcrops, trenches, pits, workings and 
                       drill holes which may be limited or of uncertain 
                       quality and reliability. 
 "JORC Code"          the code for reporting of the Australasian 
                       Joint Ore Reserves Committee, which is sponsored 
                       by the Australian mining industry and its 
                       professional organisations. The code is widely 
                       accepted as a standard for professional reporting 
                       purposes for reporting of mineral resources 
                       and ore reserves. 
 "Measured mineral    A part of a Mineral Resource for which quantity, 
  resource"            grade (or quality), densities, shape, and 
                       physical characteristics are estimated with 
                       confidence sufficient to allow the application 
                       of Modifying Factors to support detailed 
                       mine planning and evaluation of the economic 
                       viability of the deposit. 
 "Mineral Resource"   a concentration or occurrence of material 
                       of intrinsic economic interest in or on the 
                       Earth's crust in such form, quality and quantity 
                       that there are reasonable prospects for eventual 
                       economic extraction. The location, quantity, 
                       grade, geological characteristics and continuity 
                       of a Mineral Resource are known, estimated 
                       or interpreted from specific geological evidence 
                       and knowledge. Mineral Resources are sub-divided, 
                       in order of increasing geological confidence, 
                       into Inferred, Indicated and Measured categories. 
 "Mineralisation"     the process or processes by which a mineral 
                       is introduced into a rock, resulting in a 
                       valuable or potentially valuable deposit. 
                       It is a general term, incorporating various 
                       types; e.g., fissure filling, impregnation, 
                       and replacement. 
 

Further technical terms are available on the Company's website at:

http://www.trans-siberiangold.com/media/1207/tsg-glossary-of-technical-terms-21.pdf

ENDS

[1] Scoping study Project economics have been prepared by SRK using an LOM gold price of US$1,300/oz. Sensitivities to gold price have been calculated by management to evaluate different Project economics.

Silver price of $16/oz. applied throughout LOM.

[2] Advanced Special Economic Zones ("ASEZ") have been created in the Far East of Russia under a "Territory of Advanced Development" (also known as "TOR"), a special regime of treatment of foreign investors who inject funds and capabilities to Russia's Far East, whereby those foreign investors are provided with certain incentives and benefits. In particular, there are reductions to corporate profits tax, value added tax, land tax, mineral extraction tax and social insurance payments. On 19 December 2019, the Company confirmed that its operating subsidiary had been confirmed as resident of ASEZ Kamchatka. The Company will apply for the Project to be treated under the TOR regime in due course.

([3]) See RNS announcement dated 10 February 2020

   [4]     NPV and IRR sensitivity analyses have been prepared by TSG. 

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