Results of the Feasibility Study update on the Ajax project in Canada

Wednesday, 13 January, 2016
2/2016

The Management Board of KGHM Polska Miedź S.A. (“KGHM”, “the Company”) announces the completion of work on the updated Feasibility Study for the Ajax project, owned by the joint venture company KGHM Ajax Mining Inc., in which 80% of the shares are held by the KGHM Group and 20% are held by Abacus Mining & Exploration (”Abacus”). The updated Feasibility Study supersedes the earlier version dated 6 January 2012, the results of which were announced by the Company in regulatory filing no. 45/2011 dated 21 December 2011. This new document describes the specific technical and economic conditions related to the construction and operation of the future copper, gold and silver mine in the vicinity of the town of Kamloops, in British Columbia in Canada. The updated Feasibility Study incorporates changes to the project’s general arrangement whereby the facilities have been moved farther from the Kamloops community, technology improvements have been incorporated and an increase in the processing facility’s throughput, from 60 to 65 thousand tonnes per day, has been made.

Measured and Indicated mineral resources are estimated at 568 million tonnes containing 0.26% of copper, 0.18 g/t of gold and 0.35 g/t of silver, that include proven and probable mineral reserves estimated at 426 million tonnes of ore containing 0.29% of copper, 0.19g/t of gold and 0.39 g/t of silver, as compared to the 503 million tonnes of reserves containing 0.27% of copper and 0.17 g/t of gold reported in the 2012 Feasibility Study. 

Contained metal content in the reserves was calculated at 1.2 million tonnes (2.7 billion pounds) of copper, 2.6 million ounces of gold and 5.3 million ounces of silver. Average annual production of copper and gold in concentrate is expected to amount to, respectively, 58 000 tonnes of copper and 125 000 ounces of gold. Mine life is calculated at 18 years. Silver production is variable throughout the mine life of which only a portion of the recovered metal will meet payable thresholds.

The project's pre-tax investment parameters are as follows: USD 429 million NPV @ 8% discount rate, 13.4% IRR. Under the base case scenario, the investment payback period is approximately six and one half years. 

Initial capital expenditures, estimated at USD 1307 million (the equivalent of PLN 5 237 million, according to the average USD/PLN exchange rate of the National Bank of Poland from 13 January 2016), reflect the introduction into the project of several important technological changes, aimed at increasing metals recovery during processing, decreasing operating costs, and reducing environmental impact (such as changes in preliminary milling and ore transport systems as well as technological solutions at the processing plant, and in the tailing storage system). 

The C1 cash-cost has been calculated at USD 1.37/pound. Mine construction will last two and one half years once it commences. The schedule for construction and first copper concentrate production will be reviewed following receipt of permits.

The economic parameters of the project were calculated assuming the following long term copper, gold and silver prices: USD 3.21/pound for copper, USD 1 200/ounce for gold and USD 16/ounce for silver (with volatile metal prices in the short term).

The Feasibility Study update has been prepared in accordance with Canadian standard NI 43-101 by a consortium of independent consultants under the direction of M3 Engineering and Technology Corp. 

 

Legal basis: art. 56 section 5 of the Act dated 29 July 2005 on public offerings and conditions governing the introduction of financial instruments to organised trading, and on public companies (unified text: Journal of Laws 2013.1382).