Preliminary Economic Assessment on Marathon PGM-Cu Project Indicates Production of +176,000 Oz of PGM +Au per year
July 4, 2006- Toronto, Ontario: Marathon PGM Corporation ("the Company") (TSXV - MAR) is pleased to report that a Preliminary Economic Assessment ("PEA") has been completed on the Company's Marathon PGM-Cu property by P & E Mining Consulting Inc. of Brampton, Ontario ("P&E"). The complete report will be filed on Sedar and the Company's web site, www.marathonpgm.com, within 48 hours of the issue of this press release.
Project Cash Flow
On an initial capital cost of C$248 million and assuming 100% financing of the project through equity and the use of 18-month trailing average metal prices, the project has a pre-tax payback of 4 years and generates a net pre-tax cash flow of C$330 million over an estimated mine life of 9.2 years, resulting in an IRR of 21.0% and an NPV of C$156 million at a discount rate of 7%. The sensitivity of these outcomes to changes in key assumptions is summarized in the table below.
|
Parameter |
18-Month Average |
12-Month Average |
3-Month Average |
10-Year Average |
|
Pd US$/oz. |
$234 |
$255 |
$344 |
$328 |
|
Pt US$/oz. |
$949 |
$993 |
$1136 |
$587 |
|
Au US$/oz. |
$485 |
$513 |
$615 |
$345 |
|
Cu US$/lb. |
$1.93 |
$2.15 |
$2.97 |
$1.02 |
|
CAD/USD |
0.840 |
0.854 |
0.884 |
0.713 |
|
IRR (%) |
21.0% |
27.1% |
49.7% |
10.2% |
|
NPV@ 7% $C |
$156 million |
$231million |
$528 million |
$33 million |
|
Undiscounted cumulative cash flow $C |
$330 million |
$440 million |
$877 million |
$148 million |
Utilizing an 18-month trailing average metal price scenario, the cash operating cost for palladium (Pd,) platinum (Pt) and gold (Au) is US$88/oz for the first four years of production and US$91/oz for the life of mine average. Cash operating costs includes all on site costs plus smelter charges, concentrate freight and refining charges, less copper revenue, which is treated as a reduction in costs. The cash operating cost does not include capital costs. During the first 4 years of production the project is estimated to produce an annual average of 195,000 ounces of payable Pd, Pt and Au and 37.8 million pounds of payable copper (Cu), while over the anticipated life of mine the project is estimated to produce an annual average of 176,000 ounces of payable Pd, Pt and Au and 32.6 million pounds of payable copper (Cu).
The following table recaps the estimated payable metal (after mill and smelter loss) by year:
|
Payable Metal in Concentrate | |||||||||||
|
Year 1 |
Year 2 |
Year 3 |
Year 4 |
Year 5 |
Year 6 |
Year 7 |
Year 8 |
Year 9 |
Year 10 | ||
|
Gold |
(000) oz |
10 |
10 |
10 |
11 |
9 |
9 |
9 |
10 |
11 |
3 |
|
Platinum |
(000) oz |
36 |
35 |
36 |
37 |
32 |
27 |
30 |
33 |
39 |
11 |
|
Palladium |
(000) oz |
150 |
144 |
150 |
150 |
123 |
112 |
122 |
114 |
121 |
31 |
|
Total precious metals |
(000) oz |
196 |
189 |
196 |
198 |
164 |
148 |
161 |
157 |
171 |
45 |
|
Copper |
Million lb |
35 |
38 |
39 |
39 |
36 |
40 |
38 |
32 |
29 |
3 |
Mineral Deposit
P&E has estimated the potentially mineable portion of the resource estimate based on drilling from 239 drill holes and sampling from 206 surface channels. An inverse distance squared (1/d2) interpolation method was employed to develop grade models for Cu, Au, Pt and Pd. The potentially mineable tonnage was determined by applying a C$7.56/tonne NSR cut-off value to blocks within an optimized and designed pit. The NSR calculation was derived from metal prices of US$1.93/lb for Cu, US$485/oz for Au, US$949/oz for Pt and US$234 for Pd at a $C/$US exchange rate of $0.84. Recoveries to concentrate averaged 86.6% for Cu, 60.0% for Au, 75.5% for Pt and 79.9% for Pd at concentration ratio of 85.7:1. Concentrate shipping was estimated at C$18/tonne and smelter treatment charges at C$135/tonne. Smelter payables were 95% for Cu, 90% for Au, 90% for Pt and 90% for Pd. Refining charges were $US0.10/lb for Cu and US$15/oz for Au, Pt and Pd. Pit optimization was carried out with 50 degree slopes, C$1.35/tonne ore mining cost, C$1.14/tonne waste mining cost, C$6.10/tonne processing and $0.48/tonne G & A cost.
The Marathon PGM-Cu deposit has a measured and indicated potentially mineable portion of the open pit resource of 49.3 million tonnes, in addition to which there are 8.7 million tonnes in the inferred classification. The potentially mineable portions of the resource are diluted. The reader is cautioned that inferred mineral resources are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves, and there is no certainty that any value from such resources will be realized either in whole or in part. Mineral resources that are not mineral reserves do not have demonstrated economic viability. The estimate of mineral resources may be materially affected by environmental, permitting, legal, title, taxation, sociopolitical, marketing, or other relevant issues.
The metal grades of the measured and indicated potentially mineable portion of the in-pit resource were estimated to be 0.91 g/t palladium, 0.24 g/t platinum, 0.09 g/t gold, and 0.31% copper which contains 1,440,000 ounces of Pd, 388,000 ounces of Pt, 137,000 ounces of Au and 341 million lbs of Cu. The metal grades of the inferred potentially mineable portion of the in-pit resource were estimated to be 0.92 g/t palladium, 0.28 g/t platinum, 0.11 g/t gold, and 0.29% copper which contains 257,000 ounces of Pd, 78,000 ounces of Pt, 31,000 ounces of Au and 56 million lbs of Cu. Management believes there is considerable potential to expand the extent of the resource, and a 20,000 meter exploration drilling program is underway.
The potentially mineable portion of the mineral resource presented in P&E's report is significantly larger than the Company's resource estimate filed in March 2006 due to the use of 18-month trailing average metal prices and improved definition of operating costs in the PEA Also the proposed milling rate was increased from 12,000 tonnes per day to 18,000 tonnes per day, which allowed lower operating costs to be used in the estimate of the potentially mineable portion of the resource and in turn increased tonnage by lowering the cutoff grade.
Mining and Processing
The development model being pursued by the Company envisions open pit mining and on-site processing utilizing a gyratory crusher, a SAG mill, two ball mills, and flotation. A poly-metallic concentrate will be produced for smelting off-site. All technology anticipated for use in this project is industry proven and in common use. The open pit will be mined at a rate of 18,000 tonnes per day of ore, or 6.3 million tonnes per year. The strip ratio is estimated to be 4.1:1.
Capital Costs
Capital costs associated with infrastructure, construction of the process plant and mining equipment are estimated to be C$248 million, including a 15% contingency of C$32.4 million and based on current exchange rates between the Canadian and US dollars. This estimate is considered accurate to within a range of +/-30%, which is consistent with studies at this level of confidence.
Conclusions and Recommendations
P&E makes several recommendations in the PEA that may improve the economics of the project. These include additional metallurgical test work that may improve recoveries, examining the recoveries of nickel, silver and rhodium in the deposit and expanding the resource. A 20,000 m drilling program is underway that is anticipated to add higher grade material to the resource.
The company is pleased with the report and intends to carry out the recommendations at the appropriate time. P&E feels that this project has a good probability of becoming a viable producer due to a projected future high metal price environment, excellent location (only a few km from the Trans Canada Hwy and the town of Marathon complete with services and available workforce), grid electricity and rail transport.
This press release was prepared by Mr. Phillip C. Walford, P. Geo., the President and Chief Executive Officer of the Company and a Qualified Person as defined by National Instrument 43-101, who has the ability and authority to verify the authenticity and validity of information within this press release.
Mr. Tim Mann, P.Eng., Mr. Eugene Puritch, P.Eng., Mr. David Orava, P.Eng., and Mr. Al Hayden, P.Eng., of P&E Mining Consultants Inc. are independent Qualified Persons responsible for the PEA. Mr. Mann, Mr. Puritch, Mr. Orava and Mr. Hayden have read and approved the contents of this press release.
About the Company
The Company has a 100% interest in the Marathon PGM - Cu project, located about 10km north of Marathon, Ontario. As at July 4, 2006, the Company has 15,722,899 shares issued and outstanding, with 19,335,087 shares on a fully diluted basis.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
Except for statements of historical fact relating to the Company, certain information contained herein constitutes "forward-looking statements". Forward-looking statements are frequently characterized by words such as "plan," "expect," "project," "intend," "believe," "anticipate" and other similar words, or statements that certain events or conditions "may" or "will" occur. Forward-looking statements are based on the opinions and estimates of management at the date the statements are made and are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking statements. These risks and uncertainties include but are not limited to those identified and reported in Management's Discussion and Analysis for the year ended December 31, 2005. Circumstances or management's estimates or opinions could change, and management disclaims any obligation to revise or update forward-looking statements, whether for new information, future events or otherwise. The reader is cautioned not to place undue reliance on forward-looking statements.
The TSX Venture Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.
|
On behalf of the Board of Directors, "Phillip C. Walford" Phillip C. Walford President, Chief Executive Officer & Director 416-987-0711 |
For more information, please contact: Jason Roy: jroy@renmarkfinancial.com Tina Cameron: tcameron@renmarkfinancial.com Media: Eva Jura: ejura@renmarkfinancial.com Tel: (514) 939-3989 Fax: (514) 939-3717 |
