Nevada has the second largest gold reserves in the world. It has 23 major gold mines, produces five million ounces of gold annually, and has produced more than 152 million gold ounces since 1835. Nevada has a stable tax regime, robust legal framework, streamlined permitting process, nearby infrastructure and unparalleled access to qualified labor. It is ranked by the Fraser Institute as the second most mining friendly jurisdiction in the world.
Relief Canyon Mine and Processing Facility
Pershing Gold is an emerging gold producer whose primary asset is the Relief Canyon Mine in Pershing County, Nevada. Relief Canyon includes three open-pit mines, expanding adjacent open-pit-able gold deposits, and a state-of-the-art, fully permitted and constructed heap-leach processing facility. Pershing Gold is currently permitted to resume mining at Relief Canyon under the existing Plan of Operations.
Pershing Gold's landholdings cover approximately 25,000 acres that include the Relief Canyon Mine asset and lands surrounding the mine in all directions. This land package provides Pershing Gold with the opportunity to expand the Relief Canyon Mine deposit and to explore and make new discoveries on nearby lands.
The plant has the capacity to process gold bearing solutions from the leaching of 8 million tons of ore per year. The leach pad is now permitted to hold 21 million tons and can be readily expanded. The facility is ideally situated to process ore from future discoveries of satellite deposits.
Relief Canyon is situated at the southern edge of the Pershing Gold and Silver trend along the Humbolt Range. It is approximately 95 miles northeast of Reno, Nevada. Electricity is available on the property, and water is available from two wells located east of the processing plant. The City of Lovelock, where Pershing Gold has it’s Nevada offices, is located approximately 19 miles by road west-southwest of Relief Canyon.
Preliminary Economic Assessment
In June of 2015, Mine Development Associates of Reno, Nevada complete a Preliminary Economic Assessment (“PEA”) on the Relief Canyon Mine. The PEA uses approximate three-year average prices of $1,250 per ounce of gold and $17 per ounce of silver. The PEA evaluates the economics of two alternative mining scenarios: first, self mining by Pershing Gold with its own manpower and equipment, and second, mining through mine contractors who supply the manpower and equipment to deliver material to the Company’s processing facilities. Highlights from the PEA are listed below in Table 1 and Table 2.
Table 1: Relief Canyon PEA Highlights
Initial CAPEX principally includes costs to construct leach pad space for initial leaching operations, plant upgrades, optimization and relocation of the crusher facility, mobilization of contract mining equipment or down-payment on equipment purchases for self mining, and start-up equipment and supplies. Sustaining CAPEX includes additional leach pad space for later years of production, normal maintenance, and wells, drains and other de-watering activities.
Table 2: PEA Gold Price Sensitivity Analysis, Before Tax
Self versus Contract Mining
The PEA evaluates both Self and Contract open-pit mining options with heap-leach processing. Over the 5.8 year LOM, 513,000 oz Au are expected to be produced with average production of 88,500 oz Au/year. The NPV calculations listed below use a 5% discount rate and $1,250/oz Au.
The Self Mining option outlined in the PEA at $1,250/oz Au gives the Relief Canyon project a pre-tax NPV of $189 million. It estimates an average cash cost of $677/oz Au and AISC of $709/oz Au. Under this option Initial CAPEX would be approximately $22 million with Sustaining CAPEX of $15.8 million, and would produce a pre-tax IRR of 98% with pre-tax Net Cash Flow of $247.6 million.
The Contract Mining option outlined in the PEA gives the Relief Canyon project a pre-tax NPV of $159 million. It estimates an average cash cost of $772/oz Au and AISC of $804/oz Au. Under this option Initial CAPEX would be approximately $12.2 million with Sustaining CAPEX of $16. 6 million, and would produce a pre-tax IRR of 125% with pre-tax Net Cash Flow of $206 million.
Pershing Gold has secured the permits need for Relief Canyon to resume production. The Phase 1 permit modification was received in the third quarter of 2016. It expands the pit boundary, deepens the pit and expands drilling areas.
The Phase II permit to expand and deepen the pit is planned to be submitted in late 2016. This sequential permitting process allows for mining simultaneous with permitting for the next phase. Similar phased permitting strategies have been used for other successful Nevada projects, including Newmont Mining’s Long Canyon project.
Relief Canyon has no sage grouse habitat issues or other sensitive environmental issues. The processing facility at Relief Canyon is fully permitted and ready to operate.
2016 Mineral Resource Estimate
The 260,000 feet of drilling the Company has performed since 2011, plus the intercepts discovered in the historical drilling have produced a resource of 778,000 Measured and Indicated oz Au and 47,500 Inferred oz Au. The Measured and Indicated Resource has an average grade of 0.020 ounces/ton, 0.68 grams/tonne and the Inferred Resource has an average grade of 0.009 ounces/ton, 0.31 grams/tonne. Future drilling is expected to expand this resource due to untested targets surrounding the proposed PEA pit to the west, east and south.
Table 3: 2016 Relief Canyon Resource
- Canadian Institute of Mining, Metallurgy and Petroleum definitions were used to categorize the Mineral Resource.
- Mine Development Associates Geologist, Paul Tietz, is the qualified person responsible for this resource estimate.
- This updated resource estimate includes the results from the ~160 core hole drilling program (~95,000 feet, ~24,000 meters) completed in 2015.
- Rounding may cause apparent inconsistencies.
Pershing Gold has performed extensive metallurgical test work, most of which has been conducted at McClelland Laboratories, Inc. in Sparks, Nevada. These tests include 70 bottle-roll tests, 19 column-leach tests and 18 load-permeability (hydraulic conductivity) tests. This work demonstrates that the Relief Canyon mineralized material is amenable to heap leach processing. Key findings from these tests include the following:
- The individual column leach testing of the nine mineralization types present, as well as composites with 2016 resource model-weighted contributions from the various types, showed an overall average recovery of 80% for crushed and agglomerated material.
- Most of the mineralization types to be processed will require agglomeration.
- The Relief Canyon material recovery is not very sensitive to crush size. This relative lack of crush size sensitivity supports the proposed plan for single-stage crushing to 80% minus three-inch size. The crushing plant will have an annual throughput capacity of about 5.4 million tons.
- Run-of-mine processing should be possible, but would be limited to low grade, low fines material. Column testing supports the 60% recovery rate assumed for run-of-mine processing.
- The PEA assumes treatment of approximately 78% of the mineralized material tonnage by crush and agglomeration, with the remaining 22% treated as run-of-mine.
- The lower grade of run-of-mine material equates to about 6% of recovered gold with the remaining 94% of recovered gold resulting from processing of crushed and agglomerated material.
Load permeability testing of individual mineralization types with high fines indicated that agglomeration cement additions in excess of 10 pounds per ton processed would be required to maintain adequate solution permeability if placed in the deepest portions (200 feet down) of the heap-leach pad. In contrast, low-fines mineralization types showed that adequate permeability could be maintained at that depth with less than 5 pounds of cement per ton processed.
Load permeability testing of blended material consisting of 30% of high-fines and 70% low- fines material showed adequate permeability would be maintained to depths in excess of the 200 feet planned heap leach pad height with a cement dosage rate of 5 pounds per ton. The PEA assumes a cement addition rate of 8 pounds per ton as a conservative budget number. Ongoing test work will establish cement addition requirements for varying ratios of high-fines to low-fines material.
Scientific and Technical Data
All scientific and technical information related to drill and surface samples, resource estimate, mineral processing, metallurgy and recovery methods, and mining for the Relief Canyon project has been reviewed and approved by either Paul Tietz, Certified Professional Geologist #11720, Neil Prenn, P.E. #7844 or Jack McPartland, M.M.S.A., #01350QP, who are each Qualified Persons under the definitions established by Canadian National Instrument 43-101. Drill core at Relief Canyon is boxed and sealed at the drill rig and moved to the Relief Canyon logging and sample preparation facilities by trained personnel. The core is logged and split down the center using a typical table-fed circular rock saw. One half of the core is sent for assay to Skyline Assayers & Laboratories of Sparks, Nevada, while the other half is returned to the core box and stored at Relief Canyon in a secure, fenced-off, area. Pershing Gold Corporation quality assurance/quality control (QA/QC) procedures include the regular use of blanks, standards, and duplicate samples.
Cash costs is a non-GAAP financial measure calculated by the Company as set forth below, and may not be comparable to similar measures reported by other companies. Cash costs include all direct and indirect costs that would generate gold ounces for sale to customers, including mining of mineralized materials and waste, leaching, processing, refining and transportation costs, on-site administrative costs and royalties, net of by-product credits for silver ounces sold. Cash costs do not include depreciation, depletion, amortization, exploration expenditures, reclamation and remediation costs, sustaining capital, financing costs, income taxes, or corporate general and administrative costs not directly or indirectly related to the Relief Canyon project. Cash costs are divided by the number of gold ounces produced for the period to arrive at cash costs per gold ounce produced.
Cost of sales is the most comparable financial measure, calculated in accordance with GAAP, to cash costs. As compared to cash costs, cost of sales includes adjustments for changes in inventory and excludes net revenue from by-product, refining and transportation costs, which are reported as part of revenue in accordance with GAAP.
AISC is a non-GAAP financial measure calculated by the Company as set forth below, and may not be comparable to similar measures reported by other companies. AISC includes cash costs, as defined above, plus exploration costs at the Relief Canyon project and sustaining capital expenditures (including additional leach pads, permitting and customary improvements to the operations over the life of the project). AISC are divided by the number of gold ounces produced for the period to arrive at all-in sustaining costs per gold ounce produced.
Legal Notice and Safe Harbor Statement
This web page contains "forward-looking statements" within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical fact, including those with respect to the expected project economics for Relief Canyon, including estimates of life of mine, average production, cash costs, AISC, initial CAPEX, sustaining CAPEX, pre-tax IRR, pre-tax NPV, net cash flows and recovery rates, the impact of self-mining versus contract mining, the timing to obtain necessary permits, the submission of the project for final investment approval and the timing of initial gold production after investment approval and full financing, metallurgy and processing expectations, the mineral resource estimate, expectations regarding the ability to expand the mineral resource through future drilling, ongoing work to be conducted at Relief Canyon and the potential results of such efforts, the potential commissioning of a Pre-Feasibility study and the effects on timing of the project, are "forward-looking statements." Although the Company's management believes that such forward-looking statements are reasonable, it cannot guarantee that such expectations are, or will be, correct. These forward-looking statements involve a number of risks and uncertainties, which could cause the Company's future results to differ materially from those anticipated. Potential risks and uncertainties include, among others, interpretations or reinterpretations of geologic information, unfavorable exploration results, inability to obtain permits required for future exploration, development or production, general economic conditions and conditions affecting the industries in which the Company operates; the uncertainty of regulatory requirements and approvals; fluctuating mineral and commodity prices, final investment approval and the ability to obtain necessary financing on acceptable terms or at all. Additional information regarding the factors that may cause actual results to differ materially from these forward-looking statements is available in the Company's filings with the Securities and Exchange Commission, including the Annual Report on Form 10-K for the year ended December 31, 2015. The Company assumes no obligation to update any of the information contained or referenced in this press release.