The FS was led by JDS Energy & Mining and contributed to by Hatch, SRK Consulting (Canada), AMC Mining Consultants (Canada), and Knight Piésold.

The Back River Gold Belt is located in the West Kitikmeot Region of Nunavut, Canada and is situated approximately 75 km from tide water at Bathurst Inlet.

The project is made up of a series of five claim blocks of which only two (Goose and George) have been the primary focus of exploration and resource development to date.

"Back River offers a rare opportunity for significant high grade gold production by both open pit and underground operations in one of the world’s safest mining jurisdictions. We are very pleased to announce what we believe is a very compelling FS," said Bruce McLeod, President & CEO.

"The FS presents a project that has been designed on a fit-for purpose basis, with the potential to produce ~350,000 ounces a year for ~10 years with a rapid payback of 2.2 years. At a US$1,200 gold price and a 0.87 exchange rate, the Study delivers a potential after tax internal rate of return ("IRR") of approximately 22% with an initial CAPEX of $695 million. Comparing the Study against other projects we believe this is a sound FS that demonstrates the potential of Back River to be a significant Canadian gold producer. Additionally, as part of their recommendations in the FS, JDS has identified the potential optionality to start smaller at Back River which could kick off production on the belt. Such an opportunity would require less initial capital which in these markets may enhance shareholder value. "

Feasibility Study Highlights

The FS was initiated in June of 2014 following the encouraging results of the Preliminary Feasibility Study ("PFS") on Back River which was announced in October of 2013.

All currencies are in Canadian dollars unless otherwise specified. Base case economics are based on a gold price of US$1200/oz Au and an exchange rate of 0.87 (US$:C$).

The Study’s highlights include:

  • The Project could generate a post-tax IRR of 21.7% and net present value ("NPV") (at 5% discount rate) of $539 million
  • The Project could generate Life Of Mine ("LOM") post-tax net cash flow of $914 million on gross revenues of $4.5 billion with a payback period of 2.2 years (from start of operations);
  • Processing rate of 6,000 tonnes per day ("tpd") could produce an average of ~346,000 oz Au per year (post commencement of commercial production)
  • Average production of 413,000 oz Au in years 1 through 4;
  • Majority of production from open pit;
  • Initial capital estimate of $695 million and sustaining capital estimate of $529 million (including closure);
  • Total LOM cash cost estimate of US$535/oz Au (including third party royalties, refining and transport). LOM all-in sustaining cash cost estimate of US$671/ oz Au LOM (including sustaining capital);
  • A total of 19.8 million tonnes of ore could be milled over 10 years with a LOM average grade of 5.70 grams per tonne ("g/t") Au and metallurgical recoveries of 93%;
  • Base case assumptions of delivered diesel price of $0.94/L for power generation; and
  • Open Pit strip ratio of 7.2:1 over LOM.

Comparison to the PFS

Compared to the PFS, the FS provides:

  • Improved economics using a lower gold price
  • Longer mine life from increased measured and indicated resources;
  • More ounces could be recovered due to improved gold recoveries, notably from the first years of open pit mining resulting in a positive impact on the economics and payback;
  • Optimized throughput — increased throughput to 6,000 tpd from 5,000 tpd resulting in higher production yield;
  • Improved mine sequencing providing opportunity for smaller initial tailings facility and utilization of open pits for tailings disposal.

BACK RIVER GOLD PROJECT — FS

Economic Analysis and Sensitivities

Economic factors and assumptions include the following:

  • Discount rate of 5%;
  • Costs based on nominal 2015 Canadian dollar values;
  • No application of inflation;
  • Values are presented on a 100% ownership basis and do not include management fees or financing costs;
  • Exclusion of all pre-development and sunk costs (i.e., exploration and resource definition costs, engineering field work and studies costs, environmental baseline study costs, etc.). Note: pre-development and sunk costs are used in tax calculations;
  • Gold price of US$1,200/oz;
  • US$:CD$ exchange rate of 0.87;
  • Includes estimated third-party net smelter royalties which average 3.3% over LOM
  • NWT/Nunavut Mineral Royalties (NTNMR) have been evaluated as part of the after-tax analysis. The Crown royalty is levied on a mine-by-mine basis and is equal to the lesser of 8% of the net value of mine output during a fiscal year, and an escalating rate from 0% to 14% on incremental levels of net value of the mine output during a fiscal year.
  • The Back River Mineral Resources considered in the Study are on grandfathered properties subject to royalties under the NTNMR;
  • Federal tax rate of 15% and a NWT 12% rate were used to calculate income taxes;
  • Canadian Exploration Expense (CEE) and Canadian Development Expense (CDE) tax pools were used with appropriate opening balances to calculate income taxes; and
  • Specific capital cost class Capital Cost Allowance (CCA) rates were applied and used to calculate the appropriate CCA the Company can claim during the entire life of the Project.