Wojtek Wodzicki, President and CEO of NGEx commented, "We are very pleased with the results of the Project Constellation PEA which demonstrates that Project Constellation is one of the best development stage copper-gold projects in the world and one of very few controlled by a junior company. We believe that the long term fundamentals for copper are strong and that the Company is well placed to benefit from a recovery in copper prices. Work completed during this quarter confirmed our belief in the potential for us to grow Filo del Sol into another outstanding asset for our shareholders. We will be working hard over the coming year to add value to both projects."
Q1 2016 HIGHLIGHTS AND SIGNIFICANT EVENTS
- Positive results from the Preliminary Economic Assessment of Project Constellation
A Preliminary Economic Assessment (the "Integrated PEA") of Project Constellation, which contemplates the combined development of the Los Helados and Josemaria deposits, was completed during the three months ended March 31, 2016. The Integrated PEA contemplates a large, long life project, with life of mine average annual metal production of 150,000 tonnes of copper, 180,000 ounces of gold, and 1.18 million ounces of silver over 48 years. The Integrated PEA shows a base case after-tax NPV (8%) of US$2.61 billion and IRR of 16.6%.
- Positive results from surface exploration program at Filo del Sol
Field work including geological mapping, geophysical surveys, and geochemical sampling was successful in extending the Filo system to the north and identified new targets for future drill testing.
- Completed two private placements for total net proceeds of $10.6 million
The Company completed two separate private placements and sold an aggregate of 17,333,333 common shares during the three months ended March 31, 2016 for net proceeds of $10.6 million.
- Appointed new Interim CFO
On February 3, 2016 the Company announced the appointment of Ms. Joyce Ngo as Interim Chief Financial Officer.
The Integrated PEA, initially announced on January 7, 2016, contemplates an integrated project combining the Los Helados and Josemaria projects, whereby materials from both the Los Helados and Josemaria deposits would be processed at a centralized processing plant located in Argentina. Following the removal of an export retention tax that was applicable to copper concentrate exports in Argentina, the results of the Integrated PEA were updated on February 22, 2016 to reflect an increase in Project Constellation's after-tax NPV and after-tax IRR to US$2.61 billion and 16.6% respectively.
A National Instrument 43-101 Technical Report with an effective date of February 12, 2016, an amended signature date of March 31, 2016, and titled "Constellation Project incorporating the Los Helados Deposit, Chile and the Josemaria Deposit, Argentina NI 43-101 Technical Report on Preliminary Economic Assessment" (the "Project Constellation Report") was prepared by Amec Foster Wheeler International Ingeniería y Construcción Limitada ("AMEC") under the direction of Jamie Beck P. Eng, Project Manager (NGEx Resources). The report has been filed on SEDAR and is available for review under the Company's profile on SEDAR (www.sedar.com).
Pursuant to the updated results of the Integrated PEA, Project Constellation is estimated to produce a life-of-mine annual average of approximately 150,000 tonnes of copper, 180,000 ounces of gold and 1,180,000 ounces of silver over a project life of 48 years from two porphyry deposits. Forecast annual metal production over the first five years of production are 185,000 tonnes of copper, 345,000 ounces of gold and 1,310,000 ounces of silver.
Integrated PEA Summary:
| || |
|Pre-Tax NPV (8%) & IRR||$4.43 billion NPV|
|After-Tax NPV (8%) & IRR||$2.61 billion NPV|
|Payback Period (undiscounted, after-tax cash flow)||3.6 Years|
|Metals Prices Assumed||$3.00/lb Cu|
|Initial Capital Expenditures||$3.08 billion|
|LOM Sustaining Capital Expenditures||$4.36 billion|
|LOM C-1 Cash Costs (net of by-product credits)||$1.05/lb Cu payable|
|Nominal Mill Capacity||150,000 t/d|
|Mine Life||48 years|
|Average Annual Metal Production (rounded)||Life of Mine||First 5 years|
|150,000 t Cu|
180,000 oz Au
1,180,000 oz Ag
|185,000 t Cu|
345,000 oz Au
1,310,000 oz Ag
|LOM Average Process Recovery||88.3% Cu|
| || |
|* All figures reported are in 2015 US dollars and on a 100% Project and 100% equity basis valuation.|
Note: The reader is advised that the Integrated PEA results in this Press Release are only intended to provide an initial, high-level summary of the project. The Integrated PEA is preliminary in nature and includes the use of inferred mineral resources, which 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 the Integrated PEA results will be realized. Mineral resources are not mineral reserves and do not have demonstrated economic viability.
Both Los Helados and Josemaria are subject to separate Joint Exploration Agreements with joint exploration partners. The Company acts as the operator of both agreements and, in each case, both parties are required to contribute their pro-rata share of expenditures or dilute their interest in their respective projects.
Los Helados is subject to a Joint Exploration Agreement ("PPC JEA") with Pan Pacific Copper Ltd. ("PPC"), whereby the Company holds approximately a 60% interest and PPC holds approximately a 40% interest in the Los Helados Project. Effective September 1, 2015, PPC has elected not to fund its pro-rata share of expenditures and, as a result, has elected to dilute its interest pursuant to the PPC JEA. Accordingly, the Company has funded 100% of the Los Helados project starting September 1, 2015. As at March 31, 2016, PPC's interest in the Los Helados Project has been diluted by approximately 0.6%.
Josemaria is subject to a Joint Exploration Agreement with Japan Oil, Gas, and Metals National Corporation ("JOGMEC"), whereby the Company owns a 60% interest and JOGMEC holds a 40% interest in the Josemaria project. JOGMEC is funding its pro-rata share of expenditures.
The Mineral Resource Estimate for Josemaria was updated in conjunction with the completion of the Project Constellation Report. For further details on the updated Josemaria Resource estimate please refer to the Project Constellation Report.
During the three months ended March 31, 2016, the Company continued with environmental baseline data collection and studies in support of Project Constellation. Negotiations towards the acquisition of surface rights were also ongoing.
FILO DEL SOL PROPERTY, ARGENTINA
Filo del Sol is a high sulphidation epithermal copper-gold-silver system associated with a porphyry copper-gold system. Filo del Sol is a very large mineralized system, with dimensions based on wide spaced drill holes, of at least 3.7 kilometres in a north-south direction and 1 kilometre in an east-west direction. The mineralized system includes both disseminated and stockwork mineralization and is open in all directions. Filo del Sol is located on the border between Chile and Argentina and is 100% controlled by NGEx.
The total Inferred Resource for the Filo del Sol deposit, at a 0.30% copper equivalent cut-off grade, is:
- 381.0 million tonnes at a grade of 0.39% copper, 0.33 g/t gold and 12 g/t silver for a copper equivalent grade of 0.69% (3.3 billion pounds of copper, 4.0 million ounces of gold, and 149.8 million ounces of silver).
Copper equivalent assumes metallurgical recoveries of 84% for copper, 70% for gold and 77% for silver based on similar deposits, as only limited acid-leach metallurgical testwork has been done on Filo del Sol mineralization, and metal prices of US$3/lb copper, US$1300/oz gold, US$23/oz silver. The CuEq formula is: CuEq=Cu+Ag*0.0102+Au*0.5266.
The Mineral Resource estimate has an effective date of August 26, 2015 and was completed by James N. Gray, P.Geo. of Advantage Geoservices Ltd., an Independent Qualified Person as defined by National Instrument 43-101. Further details of the estimation methods and procedures are described in the Technical Report "Updated Mineral Resource Estimate for the Filo del Sol Property, Region III of Atacama, Chile and San Juan Province, Argentina" dated December 11, 2015 which is available under the Company's profile at www.sedar.com or on the Company's website.
The Company conducted a surface exploration program at Filo del Sol during the three months ended March 31, 2016. Work completed included geological mapping, geochemical sampling and geophysical surveying. This was designed to improve the Company's understanding of the regional and property geology and in particular to expand the surface geophysical and geochemical surveys over the deposit area. As at March 31, 2016, some data was still pending, and compilation and interpretation was underway.
A total of 27.7 line kilometres of Induced Polarization (IP) geophysics was completed during January and February, 2016. This work extended the IP grid to the north of the existing coverage. Initial interpretation of the results indicates an extension of the system to the north, and confirms the presence of key structures mapped on surface during the geological mapping campaign. These structures are interpreted to be important potential controls on mineralization.
Talus fine sampling was also extended 2.5 kilometres to the north of the existing data area, with an additional 418 samples collected. Initial interpretation of the results indicates a new area of anomalous copper and gold values located to the northwest of the Filo del Sol deposit, in a previously un-sampled area. Additional work is required to follow up on these anomalous samples and determine their significance.
On February 19, 2016, the Company completed a private placement of 13,333,333 common shares of the Company for gross proceeds of $8 million. Finder's fees and other related costs totaling $0.2 million were paid in relation to the private placement. The net proceeds received by the Company, upon completion of the private placement, totaled $7.8 million.
On March 22, 2016, the Company completed an additional private placement of 4,000,000 common shares of the Company for net proceeds of $2.8 million.
RESULTS OF OPERATIONS
Overall exploration and project investigation costs for the three months ended March 31, 2016 totaled $2.3 million, compared to the $12.4 million for the three months ended March 31, 2015. The $10.1 million decrease in exploration and project investigation costs was primarily due to the Company conducting minimal exploration activities subsequent to the completion of the Integrated PEA for Project Constellation in the first quarter of 2016. As the 2015 exploration program for Project Constellation and Filo del Sol included 7,696 meters of drilling activities during the first quarter of 2015, the exploration and project investigation costs for the three months ended March 31, 2015 were significantly higher than the costs incurred for the three months ended March 31, 2016. General and administration costs totaled $0.9 million for the three months ended March 31, 2016 and were consistent with the costs incurred for the three months ended March 31, 2015.
The Company's net loss for the three months ended March 31, 2016 was $3.4 million or $(0.02) per share as compared to a net loss of $12.6 million or $(0.07) per share for the three months ended March 31, 2015. The decrease in net loss of $9.2 million was primarily due to a reduction in exploration expenditures, as discussed earlier, offset by the recognition of a $0.2 million foreign exchange loss from holding US currencies, which weakened against the Canadian dollar during the three months ended March 31, 2016.
The Company's business is driven by: seasonal trends through increased exploration activity during the summer months in South America, as well as the achievement of project milestones such as the achievement of various technical, environmental, socio-economic and legal objectives, including obtaining the necessary permits, preparation of engineering designs, as well as receipt of financings to fund these activities.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 2016, the Company had cash and working capital of $8.5 million and $8.0 million, respectively, as compared to cash and working capital of $2.1 million and $0.9 million, respectively, at December 31, 2015. The increase in cash and working capital is due to funds received from the two private placement financings during the current quarter. The net cash received from these financings totaled $10.6 million and will be used to fund ongoing exploration activities and corporate working capital purposes.
The operating losses are a reflection of the Company's status as a non-revenue producing mineral exploration company. As the Company has no source of income, losses are expected to continue. The Company finances its exploration activities by raising capital through equity financing, joint ventures or disposition of mineral properties and investments, and additional financings may be required to fund further exploration and corporate expenses.
The Integrated PEA indentified additional opportunities to de-risk and add value to Project Constellation, including:
- Land acquisition to secure surface access rights;
- Continued environmental baseline studies;
- Exploring potential regional synergies and cooperative development plans with other regional operators to utilize spare capacity of processing plants and infrastructure, including desalination plants, water pipeline routes and ports; and
- Defining the exploration potential on the remainder of the land package.
The Company plans to pursue these de-risking opportunities during the 2016 work program and will seek to engage with potential partners to lay the groundwork for an eventual transaction. Efforts will be focused on exploring all potential development scenarios for the Project Constellation assets.
At the Filo del Sol Project, the results gathered from the drilling programs conducted to date have improved the Company's understanding of the deposit and highlighted a number of prospective exploration targets on the land package. The field work completed during this quarter will be used to define drill targets for future testing. Some preliminary metallurgical testwork is also planned to test the potential for low cost heap leaching of the near surface oxide mineralization. The Company is also evaluating the possibility of embarking on a Preliminary Economic Assessment of a potential open pit mine and heap leach operation at Filo del Sol.
ANNUAL GENERAL MEETING
The Annual General Meeting of Shareholders will be held on Thursday, June 16, 2016, at 10:00 a.m. (Vancouver time) at Suite 2000, 885 West Georgia Street, Vancouver, British Columbia, V6C 3E8.
Technical disclosure for the Company's projects included in this press release, with the exception of the technical disclosure related to ongoing engineering studies, has been reviewed and approved by Bob Carmichael, P. Eng. (BC). Mr. Carmichael is NGEx's Vice-President of Exploration and a Qualified Person ("QP") under National Instrument 43-101 Standards of Disclosure for Mineral Projects (NI 43-101). Technical disclosure related to the engineering studies has been reviewed and approved by James Beck, P. Eng. (ON). Mr. Beck is the Company's Project Manager and a QP under National Instrument 43-101 Standards of Disclosure for Mineral Projects (NI 43-101).
NGEx is a Canadian mineral exploration company with exploration projects in Chile and Argentina. The Company's shares are listed on the Toronto Stock Exchange and on NASDAQ Stockholm under the symbol "NGQ". The Company's focus is on three advanced exploration stage copper-gold systems located on a contiguous land package that the Company holds in Chile's Region III and adjacent San Juan Province, Argentina. Los Helados is part of a joint venture in which the Company holds approximately a 60% interest and Pan Pacific Copper Co., Ltd. holds approximately a 40% interest. Josemaria is part of a joint venture in which the Company holds 60% and Japan Oil, Gas, and Metals National Corporation (JOGMEC) owns 40%. NGEx holds a 100% interest in the Filo del Sol Project. In addition to these more advanced projects, the Company holds a portfolio of 100% owned early stage exploration projects located in Chile and Argentina.
The information in this release is subject to the disclosure requirements of NGEx Resources under the Swedish Securities Market Act and/or the Swedish Financial Instruments Trading Act. This information was publicly communicated on Friday, May 6, at 8:00pm Eastern Time.
On behalf of the board
Wojtek Wodzicki, President and CEO
Cautionary Note Regarding Forward-Looking Statements
Certain statements made and information contained herein in the press release constitutes "forward-looking information" and forward-looking statements" within the meaning of applicable securities legislation (collectively, "forward-looking information"). The forward-looking information contained in this press release is based on information available to the Company as of the date of this press release. Except as required under applicable securities legislation, the Company does not intend, and does not assume any obligation, to update this forward looking information. Generally, this forward-looking information can frequently, but not always, be identified by use of forward-looking terminology such as "plans", "expects" or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases or statements that certain actions, events, conditions or results "will", "may", "could", "would", "might" or "will be taken", "occur" or "be achieved" or the negative connotations thereof.
All statements other than statements of historical fact may be forward-looking statements. Forward-looking information is necessarily based on estimates and assumptions that are inherently subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of the Company to be materially different from those expressed or implied by such forward-looking information, including but not limited to: risks and uncertainties relating to, among other things, the inherent uncertainties regarding cost estimates, changes in commodity prices, currency fluctuation, financing, unanticipated resource grades, infrastructure, results of exploration activities, cost overruns, availability of materials and equipment, timeliness of government approvals, taxation, political risk and related economic risk and unanticipated environmental impact on operations as well as other risks. uncertainties and other factors, including, without limitation, those referred to in the "Risks and Uncertainties" section of the press release, the Company's Annual Information Form for the year ended December 31, 2015, under the heading "Risks Factors", and elsewhere, which may cause the actual results, level of activity, performance or achievements of the Company to be materially different from those expressed or implied by such forward-looking information.
The Company believes that the expectations reflected in the forward-looking statements and information included in this press release are reasonable but no assurance can be given that these expectations will prove to be correct and such forward-looking statements and information should not be unduly relied upon. This statement and information speaks as of the date of the press release. In particular, this press release contains forward-looking statements or information pertaining to the Company's expectations and estimates with respect to cost estimates and other assumptions used in the Integrated PEA and expectations from the Integrated PEA; assumptions used in the updated mineral resources estimates for the Los Helados, Josemaria, and Filo del Sol projects; exploration and development expenditures; the timing and nature of any potential development scenarios; opportunities to improve project economics; estimation of commodity prices, mineral resources, costs and the success of exploration activities; expectations with regard to adding to mineral resources through exploration; permitting time lines; ability to obtain surface rights and property interests; currency exchange rate fluctuations; requirements for additional capital; government regulation of mining activities; environmental risks; unanticipated reclamation expenses; title disputes or claims; limitations on insurance coverage; and other risks and uncertainties.
Forward-looking information is based on certain assumptions that the Company believes are reasonable, including that the current price of and demand for commodities will be sustained or will improve, the supply of commodities will remain stable, that the general business and economic conditions will not change in a material adverse manner, that financing will be available if and when needed on reasonable terms and that the Company will not experience any material labour dispute, accident, or failure of plant or equipment. These factors are not, and should not be construed as being, exhaustive. Although the Company has attempted to identify important factors that would cause actual results to differ materially from those contained in forward-looking information, there may be other factors that cause results not to be as anticipated, estimated, or intended. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. All of the forward-looking information contained in this document is qualified by these cautionary statements. Readers are cautioned not to place undue reliance on forward-looking information due to the inherent uncertainty thereof.
Statements relating to "mineral resources" are deemed to be forward looking information, as they involve the implied assessment, based on certain estimates and assumptions that the mineral resources described can be profitably produced in the future.
NGEx Resources Inc.