Facing the Challenges of Exploring and Developing Projects in Remote Mining Environments - Presentation by Wes Carson, Vice President, Project Development, Sabina Gold & Silver Corp. at the Global Mining Summit March 17-18 2014 in Las Vegas
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Facing the Challenges of Exploring and Developing Projects in Remote Mining Environments-Presentation by Wes Carson, Sabina Gold & Silver Corp.
1. Facing the Challenges of ExploringFacing the Challenges of Exploring
and Developing Projects in Remote
Mining Environments
Sabina Gold & Silver Corp.
A Gold Miner in the Making Wes Carson, P.Eng
Vice President – Project Development
Global Mining Summit – Las Vegas, NV March 17, 2014
2. 2
Forward Looking Statements
Statements relating to future studies and operations at the Back River project and the Hackett River projectStatements relating to future studies and operations at the Back River project and the Hackett River project
and the expected results of this work are forward‐looking information that are not historical facts and are
generally, but not always, identified by the words “expects”, “plans”, “anticipates”, “believes”, “intends”,
“estimates”, “projects” and similar expressions, or that events or conditions “will”, “would”, “may” or “should”
occur. Information inferred from the interpretation of drilling results may also be deemed to be forward‐
looking information, as it constitutes a prediction of what might be found to be present when and if a project is
actually developed. This forward‐looking information is subject to a variety of risks and uncertainties which
could cause actual events or results to differ materially from those reflected in the forward‐looking
information, including, without limitation: risks related to fluctuations in metal prices; uncertainties related to
raising sufficient financing to fund the planned work in a timely manner and on acceptable terms; changes inraising sufficient financing to fund the planned work in a timely manner and on acceptable terms; changes in
planned work resulting from weather, logistical, technical or other factors; the possibility that results of work
will not fulfill expectations and realize the perceived potential of the Company’s properties; risk of accidents,
equipment breakdowns and labour disputes, access to project funding or other unanticipated difficulties or
interruptions; the possibility of cost overruns or unanticipated expenses in the work program; the risk of
l d l f b ’ d h k denvironmental contamination or damage resulting from Sabina’s operations and other risks and uncertainties,
including those described in Sabina’s Annual Report for the year ended December 31, 2012.
Forward‐looking information is based on the beliefs, estimates and opinions of Sabina’s management on the
date the statements are made Sabina undertakes no obligation to update the forward looking informationdate the statements are made. Sabina undertakes no obligation to update the forward‐looking information
should management’s beliefs, estimates or opinions, or other factors, change, except as required by applicable
law.
3. 3
Challenges Facing Remote Projects
What can we do to restore market confidence in our
• Sabina and Back River Project Overview
What can we do to restore market confidence in our
industry’s ability to execute large scale remote projects?
• Transportation and Logistics
– 2013 Season at Back River
2013 PFS Options– 2013 PFS Options
• Recruitment and Retention
– Exploration
– Construction
– Operations
• Cost Management• Cost Management
– Capital Costs
– Operating Costs
• Summary
4. 4
Sabina Investment Highlights
• A growing high grade gold project at Back River• A growing high‐grade gold project at Back River
– Pre‐feasibility Study = significant high grade gold production at good
margins in a mining friendly jurisdiction
• Continued de‐risking of Back River Project
– Funded through engineering and permitting
– Many opportunities identified for mineral reserve additions and newMany opportunities identified for mineral reserve additions and new
discoveries in 2013 program
• Major silver royalty on Xstrata’s Hackett River Project
F ll i d t ti l f t h fl– Fully carried potential future cash flow
– Hackett River infrastructure would benefit Back River
• Low geopolitical riskg p
– Assets located in Canada
• Strong treasury and experienced management
$58 3 illi D b 31 2013 b l– $58.3 million December 31, 2013 balance
5. 5
Sabina Investment Highlights
• Flagship assets located in Nunavut, in northern Canadag p ,
• Bathurst Inlet Port and Road Project (BIPR), a Sabina/Xstrata venture, being
pursued in order to enhance infrastructure
• Arctic resource development a priority for local and federal governments
Back River – 100% Sabina
Hackett River – 100% Glencore
Wishbone – 100% Sabina
6. • Gold hosted in banded iron formation
6
Back River – A World Class Gold Project
• Acquired by Sabina from Dundee Precious
Metals in 2009
• Sabina has made a number of high grade
discoveries adding ~5Moz to the resource
• Significant exploration potential remains
Classification Tonnes (kt)
Au
(g/t) Metal (koz Au)Classification Tonnes (kt) (g/t) Metal (koz Au)
Measured 10,446 5.2 1,714
Indicated 17,907 6.1 3,536
Measured and Indicated 28,354 5.8 5,297
Inferred 8,179 7.3 1,927
Mi l R th t t i l d t h d t t d i i bilit Mi lMineral Resources that are not mineral reserves do not have demonstrated economic viability. Mineral
resource estimates do not account for mineability, selectivity, mining loss and dilution. These mineral
resource estimates include inferred mineral resources that are normally considered too speculative
geologically to have economic considerations applied to them that would enable them to be categorized
as mineral reserves. There is also no certainty that these inferred mineral resources will be converted to
measured and indicated categories through further drilling, or into mineral reserves, once economic
considerations are applied.
7. 7
Key PFS ResultsPFS – Base Case Assumptions
2013 PFS Key Deliverables
Key PFS Results Base Case
Pre‐Tax NPV5% & IRR C$471M / 21.8%
Post‐Tax NPV5% & IRR C$290M / 16.5%
PFS – Base Case Assumptions
• $1,350/oz Gold Price, 0.95 $US:$CN
• Conventional open pit mine supported by
underground operations
Payback 3.3 Years
Mill Throughput 5,000 tpd
Mined Grade 5.69 g/t
• 5,000 tpd whole ore leach process plant
Area Classification
Tonnes
(kt)
Au
( /t)
Metal
(k A )
Mineral Reserves
Gold Recovery 88.0%
Mine Life 8.4 years
Avg. Gold Production 287,000 oz/a
(kt) (g/t) (koz Au)
Total Open Pit Proven 1,890 4.56 277
Probable 10,935 5.40 1,900
Total Underground Proven ‐ ‐ ‐
Probable 2 165 8 11 564 g
On‐Site Op Costs C$101/t milled
Avg. Total Cash Costs US$651/oz
Pre‐Production Capital C$605M
Probable 2,165 8.11 564
Total Property Proven 1,890 4.56 277
Probable 13,100 5.85 2,464
PFS – Other Key Results Pre Production Capital C$605M
Sustaining Capital C$226M
For the open pit Mineral Reserve estimate, a 1.52 g/t COG was used for the Goose deposits and a 2.00 g/t COG was used for the George deposits. A COG of 6.00 g/t was used
for the underground Mineral Reserve estimate, based on an operating cost estimate of $231.30/t. A gold price of US$1,250/troy ounce is assumed. Mineral reserves are based on
Measured and Indicated Mineral Resources only An exchange rate of Cdn$1 00 to US$1 00 was assumed Mineral reserve numbers have been adjusted for dilution and mining
• 2.5 year construction starting Q3 2015
• Planned first gold production Q4 2017
Measured and Indicated Mineral Resources only. An exchange rate of Cdn$1.00 to US$1.00 was assumed. Mineral reserve numbers have been adjusted for dilution and mining
recovery. The mineral reserve estimate for the Back River deposits was estimated by Herbert Smith, P. Eng of AMC, a Qualified Person under NI 43-101.
The PFS was prepared under the direction of Tetra Tech by leading independent industry consultants, all Qualified Persons (QP) under National Instrument 43-101. The following
consultants and QPs participated in the PFS: John Huang, Ph.d., P. Eng, Hassan Gharffari, P. Eng, Sabry Abdel Hafez, Ph.D.,P. Eng, Harvey Wayne Stoyko, P.Eng, all of Tetra
Tech, John Morton Shannon, P. Geo, Andrew Fowler, Ph.D.MAusIMM, CP (Geo), Dinara Nussipakynova, P. Geo, Herbert Smith, P.Eng, all of AMC Mining Consultants (Canada)
Ltd, Les Galbraith, P. Eng, Knight Piesold and Alistair Kent, P. Eng, Merit Consultants. The Qualified Person under NI 43-101 for Sabina Gold & Silver Corp. is Wes Carson, P.Eng
Vice-President, Project Development, who has reviewed the content of this presentation and approved its dissemination.
9. 9
Logistics and Transportation – 2013 Season Summary
Aircraft Type Total
• ~83,000m drilled, combination of exploration,
Hercules 96
737 78
Electra 53
Buffalo 47
83,000m drilled, combination of exploration,
geotechnical, geomechanical, infill and extensional
drilling
• Significant environmental baseline program to support
th DEIS
Buffalo 47
Dash‐7 18
Dash‐8 79
Twin Otter 81
the DEIS
• 2,297 passengers, 5M lbs of freight and 2M L of diesel
fuel flown into site on 517 aircraft
• Mobilized earthworks fleet to site by air
Dornier 50
King Air 15
Total 517
y
• Pioneered quarry and completed all-season air strip
19. 19
Logistics and Transportation – 2013 PFS Options
Transport Optionsp p
Option 1: Ocean Freight to Winter Road via Bathurst Inlet
• Ocean freight from Belledune, NB (80%) and Hay River, NWT (20%) to Sabina built
port site 10km north of the proposed BIPR site on Bathurst Inlet
L d t B th t I l t t it• Laydown at Bathurst Inlet port site
• New 160km winter road from Bathurst Inlet to Goose Site (40% Land, 60% Water)
Option 2: Winter Road via Yellowknife
• 650km winter road access to Goose Site from Yellowknife using the existing Tibbit
to Contwoyto Winter Road (currently built to the Ekati Mine turnoff, 70km from
Pellatt Lake)
• Laydown at Pellatt Lake and transfer to off road tractors for remaining 220km• Laydown at Pellatt Lake and transfer to off‐road tractors for remaining 220km
• New 220km winter road construction from Pellatt Lake to Goose Site (50% land,
50% water)
Option 3: Air Freight via Edmonton
• Would still require Option 1 or Option 2 during construction for some items
• 2,500m hard surface airstrip at Goose Lake
• Regular flights with DC‐10 or 767 sized wide body aircraftRegular flights with DC 10 or 767 sized wide body aircraft
• Opportunities to combine passenger and freight haulage
23. 23
Recruitment and Retention – Exploration (Current)
• Peak at ~200 employees and contractors onPeak at 200 employees and contractors on
site for 2013
• Primarily seasonal contractors
Skill Sets
• Technical: Geology, Survey, Engineering
• Operators: Drillers, Heavy Equipment
• Trades: Mechanics, Electricians, Carpenters,Trades: Mechanics, Electricians, Carpenters,
Welders
• Support: Kitchen, Camp/Site Maintenance,
General Labour
• Supervision: Operations, Logistics, Safety,
Environmental, Geology
Challenges
• Training
• High turnover
• Northern/Local Hires
24. 24
Recruitment and Retention ‐ Construction
• Peak at ~800 employees contractors and consultants• Peak at 800 employees, contractors and consultants.
• Continual change in skill sets required during the 2.5 year construction
period
V i d k h d l• Varied work schedules
• Significant number of specialists required on site, particularly during the
commissioning phase.
Challenges
• Developing and maintaining project culture
– Managing multiple on‐site contractors and their personnel with varying levels
of training, experience, etc.
• Retention of highly mobile (when in demand) construction management
team
• Managing continuous state of transition through the construction phase
• Lack of communications infrastructure during early construction
• Tracking project progress for both internal and external stakeholders.g p j p g
25. 25
Recruitment and Retention ‐ Operations
W kf 500 f ll ti l d i ti h• Workforce average ~500 full time employees during operations phase,
with ~300 on site at any one time
– Mining (~300): Supervision, Open Pit Operators, Underground Operators,
Maintenance Technical (engineering geology survey)Maintenance, Technical (engineering, geology, survey)
– Process Plant (96): Supervision, Operators, Maintenance, Technical
(metallurgy)
– Site Services (22): Camp Maintenance Kitchen Equipment OperatorsSite Services (22): Camp Maintenance, Kitchen, Equipment Operators,
Labourers
– G+A (42): Accounting, Human Resources, Health & Safety, Environmental,
Community Relations
Challenges
• Recruitment of initial operating team
• Initial and ongoing training for all site personnelInitial and ongoing training for all site personnel
• Competing with other FIFO operations
• Recruiting and retaining technical staff
E i i i ( idi l )• Ensuring continuous improvement (avoiding complacency)
• Ability to communicate effectively with stakeholders
26. 26
Recruitment and Retention – Technical Expertise
Ch ll i d i h i i d i i hi h• Challenges associated with recruiting and retaining high
quality technical staff
• Competing with other FIFO operations, particularly the oilCompeting with other FIFO operations, particularly the oil
sands
• Alternatives
– Consultants
– Supplier Representatives
– Contractors
– Remote Communications Solutions
28. 28
Cost Management ‐ Capital Cost
Capital Cost ($M)
Direct Costs
Overall Site 16
Mining 98
Ore Handling 24
Overall Site
2.6%
Mining
16.2%
Ore Handling
Owner’s
Costs
4.6%
Contingency
13.6%
g
Process 68
TSF and Water Management 30
On‐site Infrastructure 55
Airstrip 3
Port Facility 21
Ore Handling
4.0%
Process
11.2%
Port Facility 21
External Access Roads 24
Sub‐total Direct Costs 339
Indirect Costs
Project Indirects 156
Owner’s Costs 28
TSF and
Water
Management
5.0%
On-site
Infrastructure
Airstrip
0.5%External
Project
Indirects
25.8%
Owner s Costs 28
Contingency 82
Total Capital Cost 605
Infrastructure
9.1%
Port Facility
3.5%
Access Roads
4.0%
Logistics and Transportation Costs ($94M – 16% of total CAPEX):
• Logistics Freight and Brokerage $58M• Logistics, Freight, and Brokerage – $58M
• Freight on Fuel – $12M
• Winter Roads – $24M
Construction Labour Costs ($167M – 28% of total CAPEX):($ )
• Direct Labour – $140M ($110/hour)
• Flights – $12M ($1,600/person/turnaround)
• Camp Operating Costs – $15M
29. 29
Cost Management – Operating Costs
$000/a $/t Milled $/oz
Mining 77,325 43.33 269.26
Milling 42,958 24.08 149.59
G&A 25,970 14.55 90.43
Surface Services* 12,014 6.73 41.83
Tailings Management 1,844 1.03 6.42
Freight Costs (Ocean/Port/Ice Roads)** 15,253 8.55 53.12
Ore Hauling (George to Goose Site)*** 5,387 3.02 18.76
Total 180,751 101.29 629.41Total 180,751 101.29 629.41
* Includes surface services at the Goose, George, and port sites.
** Excludes fuel freight costs, which are included in operating cost estimates for related
areas.
*** Ore haulage from the George site to Goose site is only required in Years 7 to 9.
d ($ / f l )Logistics and Transportation Costs ($27M/year – 15% of total OPEX)
• Logistics, Freight and Brokerage – $7M/year
• Freight on Fuel – $12M/year
• Winter Roads – $8M/year$ /y
Operating Labour Costs ($80M/year – 44% of total OPEX)
• Direct Labour – $65M/year
Fli ht $7M/• Flights – $7M/year
• Camp Operating Costs – $8M/year
30. 30
• Significant costs associated with labour at a remote site both direct
Cost Management – Planning and Execution
• Significant costs associated with labour at a remote site, both direct
salaries and indirect costs require evaluation of off‐site alternatives for as
many aspects of the project as possible (modularization, vendor packages,
factory verification, etc.)factory verification, etc.)
• Logistics and transportation costs at a remote site encourages evaluation
of alternatives that would not be possible elsewhere
• Costs associated with technology implementation need to be carefully• Costs associated with technology implementation need to be carefully
weighed to include “intangible” benefits and risks (employee recruitment
and retention, site culture, corporate communications and integration)
• All possibilities to share costs and/or risk with suppliers contractors localAll possibilities to share costs and/or risk with suppliers, contractors, local
communities and government need to be investigated
• Project controls at a remote site are essential as “minor” slipups in
schedule can have massive impacts on budget and quality due toschedule can have massive impacts on budget and quality due to
transportation costs and seasonality
• Trade‐off studies and creative alternatives need to be evaluated as early
as possible during the project development processas possible during the project development process.
32. 32
Summary – Challenges for Remote Projects
What can we do to restore market confidence in our
• Review existing and “proven” technologies against viable
What can we do to restore market confidence in our
industry’s ability to execute large scale remote projects?
• Review existing and proven technologies against viable
developments for cost and benefits weighed against risk.
• Emphasis on planning and studies (solid engineering)p p g ( g g)
• The need for innovation and creative solutions
• Building technical strength within your own organization
• Early stakeholder engagement
• Manage project scale (right sizing a project) focusing on
profitability over reservesprofitability over reserves.
Develop realistic, achievable plans and execute them!Develop realistic, achievable plans and execute them!