Mr. Glenn Leroux reports
CANADIAN PREMIUM SAND ANNOUNCES COMPLETION OF A POSITIVE PRELIMINARY FEASIBILITY STUDY TECHNICAL REPORT AT THE WANIPIGOW SAND PROJECT IN MANITOBA
Canadian Premium Sand Inc. has provided the results of an independent preliminary feasibility study (PFS) and mineral resource update on the Wanipigow sand project, located on the company's 100-per-cent-owned Ordovician silica sand deposit in southeastern Manitoba. The PFS was completed jointly by APEX Geoscience Ltd. and John T. Boyd Company, with other technical inputs completed by subconsultants, including Turnkey Processing Solutions (TPS).
Key updates of the PFS:
- New definition of geological units based on Canadian Premium's 2018 drill program, which included 93 sonic core holes (see Jan. 23, 2019, news release) and includes Lower Black Island (LBI); Upper Black Island (UBI); Black Shale (BS); and Pleistocene glaciofluvial (Pgf). The PFS resource and reserve estimations and mine plan were developed in consideration of these geological subunits;
Definition of measured and indicated mineral resources of 49.6 million tonnes reported for LBI and UBI;
Definition of an inferred mineral resource of 97.3 million tonnes reported for Pgf and UBI;
Definition of proven and probable mineral reserves of 30.6 million tonnes;
Initial 25-year mine life;
After-tax net present value of $220-million discounted at an 8-per-cent discount rate;
After-tax internal rate of return of 20.2 per cent;
Initial capital expenditure of $220-million and sustaining capital of $110-million to $115-million.
The mineral resource update benefited from the results of the 93-drill-hole program (1,574 metres), which was managed, logged and sampled by APEX Geoscience. A total of 761 samples were collected, including 237 LBI, 57 UBI, 17 BS and 450 Pgf samples. All 761 samples were analyzed for particle-grain-size distribution analysis using a Camsizer P4 particle analyzer. A subset of 675 grain-size fractions were analyzed for proppant characterization testwork, including Krumbein shape factor and crush resistance. An additional 14 samples underwent complete proppant testwork that included acid solubility and turbidity (in addition to Krumbein shape factors and crush resistance testwork). A split of 58 samples were collected and analyzed for loose-sand bulk density analysis.
Quality assurance/quality control samples were collected and analyzed to test the precision and accuracy of duplicate sample pairs for both gradation measurements and crush resistance tests (and at multiple labs).
The analytical work was completed at Turnkey Processing in Ottawa, Ill., and Stim-Lab in Duncan, Okla. The analytical work was carried out by independent, accredited laboratories. The analytical methods are standard and routine in the field of silica sand, or proppant, testwork pursuant to International Organization for Standardization 13503-2.
The mineral resources within the Wanipigow property have been classified as measured, indicated and inferred resources in accordance with National Instrument 43-101 and have been estimated using the CIM (Canadian Institute of Mining, Metallurgy and Petroleum) Estimation of Mineral Resources and Mineral Reserves Best Practice Guidelines (2003) and the CIM Definition Standards for Mineral Resources and Mineral Reserves (2014). Several factors were considered for the mineral resource classification, including drill hole spacing; nature of the geological contacts; the degree of testing; proppant quality; and lateral and vertical continuity. These factors serve as a proxy for geological confidence and the level of uncertainty of the individual units.
The three-dimensional geological model is defined by 93 vertical drill holes completed by Canadian Premium in 2018. The gradation data form an assay file that was used to calculate the Wanipigow property silica sand resource estimate. The resource is calculated using a block model with a size of 20 metres by 20 metres in the horizontal directions and two metres in the vertical direction. The Wanipigow estimation of the individual sieve-size fractions was completed and reported using a lower cut-off of mesh sizes that are greater than or equal to 20-mesh fraction and less than or equal to 140-mesh fraction. The loose bulk densities were converted to in situ compacted bulk densities using a bulking factor of 30 per cent and include Pgf -- 1.90 grams per square centimetre; UBI -- 1.91 grams per square centimetre; LBI -- 1.88 grams per square centimetre. Bulk densities were utilized to convert volume (cubic metres) to tonnages.
Mineral resources are not mineral reserves and do not have demonstrated economic viability. This Wanipigow property silica sand resource estimate predicts total (for example, global) resources of:
Lower Black Island measured and indicated resources of 45.1 million tonnes;
Upper Black Island indicated resource of 4.4 million tonnes and inferred resource of 1.7 million tonnes;
Pleistocene glaciofluvial inferred resource of 95.6 million tonnes.
The mineral resources were converted to mineral reserves through the application of the appropriate modifying factors to potential mining volumes created during the mine design and planning process. In this PFS, a mineral reserve is defined as the measured and indicated mineral resource that would be extracted by the mine design and which can then be processed and sold at a profit. Inferred resources were not converted to mineral reserves. The measured resources meeting that standard were classified as proven mineral reserves, while the indicated resources meeting that standard were classified as probable mineral reserves.
To derive the estimate of the saleable product tonnes, or mineral reserves, no external dilution was applied; internal dilution comprised the plus-20-size and minus-140-size fractions as interpolated in the mineral resource block model; mining losses of 5 per cent represent mineral resources not extracted due to operational constraints encountered during routine mining operations; and processing losses of 5 per cent due to general inefficiencies in the processing of silica sand.
The mineral reserve complies with CIM definitions and is supported by a detailed mine plan and cash flow model. The mineral reserves estimated for the Wanipigow silica sand project are subject to the types of risks common to most silica sand quarry operations that exist in Canada. These risks include, but are not limited to, site-specific mining and geological conditions, management and staff capabilities, availability of financing to properly operate and capitalize the operation, variations in cost elements and market conditions, developing and operating the mine in an efficient manner, unforeseen changes in legislation, and new industry developments. There is no guarantee that all or any part of the estimated mineral resource or mineral reserve will be recoverable.
The mineral reserves, expressed as saleable product tonnages, estimate proven and probable reserves of 26.8 million tonnes of LBI; and 3.8 million tonnes of UBI.
The Wanipigow silica sand project is projected to include a conventional, open-pit quarry, employing typical truck and excavator mining operations. The quarry and fully enclosed plant are planned to operate 24 hours per day, seven days per week year-round (weather permitting) and are expected to extract approximately 1.8 million tonnes of raw sand per year at full production. At this mining rate, the operation will produce an average of 1.2 million product tonnes per year after processing losses. The mine life is projected to be at least 26 years after which an estimated 43.2 million tonnes of raw sand and 11.6 million bank cubic metres of waste materials will have been mined.
Capital expenditure estimates were provided by TPS and developed by using first principles and applying direct project experience. The estimates were reviewed by the qualified persons and found to be reasonable and appropriate for a PFS. The accuracy of the capital expenditure estimate is plus/minus 10 per cent and includes initial, sustaining and total capital cost estimations. Salvage value was not considered in the PFS.
The capital expenditure estimate for the Canadian Premium wet and dry plant, loadout, and related infrastructure is approximately $220-million, including a contingency of approximately $16-million. Additionally, the company expects to lease mobile equipment to minimize upfront expenditures. Mobile equipment lease payments are estimated to total approximately $90-million over the life of the mine (LOM). A further $20-million to $25-million is contemplated for miscellaneous development and rebuilds for sustaining capital expenditures over the LOM. As a result, the total capital expenditure and lease-related costs are estimated at $330-million to $335-million for LOM plan.
Sustaining capital expenditures are incurred to maintain production and expected to be in the range of 75 cents per tonne, or $20-million to $25-million over LOM. Exclusions from the capital expenditures estimate include, but are not limited to, project financing and interest charges and working capital.
Operating cost estimates were provided by TPS. These were reviewed by the qualified persons and found to be reasonable and appropriate for a PFS.
Qualified person recommended programs
As part of Canadian Premium's plan for the future, financing should be considered to include work necessary to:
Enhance the economics of the deposit by upgrading inferred resource areas or geography units to higher levels of resource/reserve classification by way of additional exploratory work;
Prepare the silica sand resources/reserves to a feasibility level of mine design and costing accuracy and/or open-pit mining and mine production phases at the discretion of Canadian Premium;
Conduct exploratory work to define the extent of the deposit beyond the current resource/reserve area;
Continuing environmental management planning, permitting, and social and local community engagement.
About Canadian Premium Sand Inc.
The PFS is the culmination of a nine-month program initiated by Canadian Premium in 2018, which focused on the completion of a 93-sonic-drill-hole exploration program completed by Boart Longyear of Calgary, with independent oversight by APEX, including 1,574 metres of core within its 42 quarry leases, encompassing 2,289 hectares. Laboratory testing was conducted on 761 samples by Stim-Lab and TPS to estimate the potential product quality of the silica sand reserves and to allow development of a mine plan and conduct the engineering to develop a detailed plant flowsheet. In addition, a market study was completed and the necessary infrastructure improvements were identified to support the entire facility.
Simultaneously with this program, the company began the permitting and licensing process to obtain all necessary approvals from Hollow Water First Nation, the local community of Seymourville, and Manitoba, which have all been granted.
The technical information in this news release with respect to the PFS has been reviewed and approved by Roy Eccles, professional geologist of APEX Geoscience, and Robert Farmer, professional engineer of John T. Boyd, each of whom is independent of Canadian Premium and a qualified person under NI 43-101 (Standards of Disclosure for Mineral Projects).
A technical report in respect of the PFS will be filed on SEDAR within 45 days of this news release, providing details of the Wanipigow sand project, including the quality assurance program and quality control measures applied, along with key assumptions, parameters and methods used to estimate the mineral resources and reserves.
We seek Safe Harbor.
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