M3 developed the process flow sheet, capital cost estimate, operating cost estimate and financial model, while Allied Nevada developed the heap leach metrics, taxes, mineral reserves and mine plan.

The feasibility study assumptions are largely the same as in the prefeasibility study issued in May, 2014, and continue to assume a two-phase construction plan for the mill expansion.

A summary of the significant changes from prefeasibility to feasibility are highlighted below. Consistent with the prefeasibility study, the base case metal price assumptions of $1,300 per ounce gold and $21.67 per ounce silver have been utilized in the feasibility study. The feasibility is presented on a January 1, 2015, go-forward basis and the comparative prefeasibility results have been adjusted to reflect the same start time. We intend to file a National Instrument 43-101 Technical Report within the 45-day regulatory timeframe.

Randy Buffington, President & CEO, stated, "this project is one of the only economic, permitted large projects in the gold space today and has the potential to become a significant, low-cost producer with a long reserve life and large open resource behind that."


The feasibility study is based on a nominal 120,000 ton per day ("tpd") mill for oxide, transition and sulfide ore and the associated heap leach for lower grade oxide and transition ore as presented in the prefeasibility study in May 2014. The mill is designed and scheduled to be constructed in two phases of 60,000 tpd each. Throughput varies based on ore hardness. The mill flow sheet components include crushing, grinding, flotation, concentrate regrind, concentrate oxidation and leaching, tails leaching, Merrill-Crowe extraction and refining. Our projections are based on detailed engineering, which we expect to begin in early 2015, and construction of Phase 1 anticipated commencing in the second quarter of 2015, subject to our ability to secure the necessary financing. Phase 1 is scheduled to be completed within 24 months, which would result in commissioning in the second quarter of 2017. The feasibility study projects commissioning of Phase 2 to be at the end of the second quarter of 2018, 12 months following completion of Phase 1.

Capital Estimate

The capital has increased to $1.39 billion (up $66 million) primarily resulting from the following: the change in construction of two 120kV power lines to one 345kV line to ensure reliable power availability; additional conveyors and crushed ore storage for the crushing/pre-crush and pebble crushing circuits; increased site general costs and confirmation of geotechnical analysis on required earthworks; and increased sizing for the thickener tanks. These increases were partially offset by a decrease in contingency reflecting the improved confidence level of the capital estimate with 88% of the estimated equipment capital costs now associated with vendor quotes.

Mining and processing

We completed an optimized mine plan that resulted in an additional 52 million ore tons that will be processed during the LOM and a reduced strip ratio of 1.50 (from 1.56). Mining unit costs have decreased slightly resulting from improved haul profiles and a reduction in mining equipment fleet requirements.

The process flow sheet has not changed and still considers a process plant capable of processing three streams: Mill 1 – whole ore; Mill 2 – Atmospheric Alkaline Oxidation ("AAO"); and Mill 3 – AAO with tails leach. A reevaluation of the economic benefit of processing an additional 440 million tons through the tails leach (Mill 3 scenario) as compared with the Mill 2 scenario resulted in additional overall ounces and improved economics.

Mill process costs did not change materially on a per unit basis. Total ton weighted costs increased $0.31/ton to $9.14/ton resulting from the processing of the additional 440 million tons through the Mill 3 scenario, which are more than offset by the revenue from additional ounces recovered. The 440 million tons were assumed to be processed through Mill 2 without the benefit of the additional recovery from tails leaching in the prefeasibility study.

Recovered ounces differ in the table above as compared to the ounces sold in the life of mine economics. The table above shows the ounces placed and recovered on a going-forward basis only to calculate recovery. The life-of-mine model includes 266,000 recoverable ounces of gold and 2,127,000 ounces of recoverable silver in the heap leach inventory at January 1, 2015, and also accounts for ounce reductions due to melt loss and non-payable ounces from the refinery.

Economic Analysis

As noted above, the results of the revised prefeasibility study indicate an IRR projected to be 28.6% and a NPV projected to be $1.81 billion at a discount rate of 5%, assuming gold and silver prices of $1,300 per ounce and $21.67 per ounce, respectively, and based on the additional assumptions set forth in the table titled "Assumptions used in the feasibility study estimate" at the end of this press release. The initial capital to construct the mill and associated infrastructure is on a go-forward basis and does not include capital spent to date on the mill expansion such as the crushing system, Merrill-Crowe plant, mills, motors and excavation. The cash flow model considers the current heap leach revenue and costs as part of the project, which was developed by Allied Nevada.

The Hycroft mill expansion is projected to generate a significant amount of gold and silver at relatively low adjusted cash costs per ounce(4). The project, however, is extremely sensitive to metal prices. The following table illustrates the sensitivity of changes to calculated IRR and NPV(5) at 0% and 5% discount rates at various gold and silver prices and based on a constant ratio of the silver price to the gold price of 60:1.

The term "adjusted cash costs per ounce" is a non-GAAP financial measure. Non-GAAP financial measures do not have any standardized meaning prescribed by GAAP and, therefore, should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP. See the section at the end of this press release and in the most recently filed Annual Report on Form 10-K titled "Non-GAAP Financial Measures" for further information on adjusted cash costs per ounce.
(2). No assurance or guarantee is provided that the calculated IRR or NPV values will be achieved. Actual results may differ materially.
Financing update

We continue to work with interested parties towards establishing a financing plan for the first phase of construction.