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On February 24, 2016, the Company released results of an independent NI 43-101 Feasibility Study for the Buriticá project. The Feasibility Study contains the Company’s initial Mineral Reserve statement and economic analysis demonstrating project viability, and highlights that the Buriticá project will be host to an economically robust, high-grade underground gold mine, which includes a mineral reserve for the combined Yaraguá and Veta Sur vein systems totaling 3.7 million ounces of gold and 10.7 million ounces of silver (13.7 million tonnes grading 8.4 g/t gold and 24.3 g/t silver).

Feasibility Study Highlights

(all dollar amounts in US dollars)

  • After-tax Internal Rate of Return of 31.2% at $1,200/oz gold and 37.8% at $1,400/oz gold
  • Payback period of 2.3 years at $1,200/oz gold and 1.8 years at $1,400/oz gold
  • Estimated project capital cost, including contingency, of $389.2 million
  • Average annual gold production (first 5 years) of 282,000 oz and 494,000 ounces of silver, at a total average cash cost of $387 per ounce of gold (including silver credits)
  • LOM production will average 253,000 ounces of gold and 466,000 ounces of silver annually, at a total cash cost of $411 per ounce of gold (including silver credits)
  • LOM ore production of 13.7 million tonnes grading 8.4 g/t gold and 24.3 g/t silver
  • 14-year mine life that will produce 3,492,000 ounces of recovered gold and 6,425,000 ounces of recovered silver

 Feasibility Study Summary

 Gold Price  $1,200 per ounce
 Silver Price  $15 per ounce
 Total Resource Tonnes to be Mined  13,717,000
 Processing Rate (tonnes per day)  2,100, increasing to 3,000 by third year
 Mine Life  14 years
 Planned Dilution(1)  36%
 Gold Grade  8.4 g/t
 Silver Grade  24.3 g/t
 Gold Recovery Rate  94.1%
 Silver Recovery Rate 59.9%
Total Gold Ounces Recovered  3,492,000
Total Silver Ounces Recovered  6,425,000
Initial Project CAPEX  $389.2 million
Contingency (included within Initial Project CAPEX)  $35.4 million
LOM Sustaining Capital Costs  $272.5 million
Mining Costs  $57.21/tonne
Processing Costs including Tailing Storage Facility  $26.16/tonne
G&A  $17.13/tonne
Cut-Off Grade  4.0 g/t Au (Veta Sur)
3.8 g/t Au (Yaraguá)
Royalty  3.20%
Effective Tax Rate  33.0%

(1) Dilution calculated as below cut-off grade tonnes divided by total tonnes mined.

Financial Analysis

The Feasibility Study’s base case uses a gold price of $1,200 per ounce of gold and generates an after-tax net present value (NPV5%) of $0.86 billion, an Internal Rate of Return of 31.2%, and an average after-tax cash flow from operations of $133 million per year of operation.

Summary of Buriticá Project Economics by Precious Metal Price

Base Case
Gold Price ($/oz) $1,000 $1,100 $1,200 $1,300 $1,400
Silver Price ($/oz) $12 $13 $15 $16 $17
After-Tax Net Cash Flow $991 million $1.22 billion $1.44 billion $1.67 billion $1.89 billion
After-Tax NPV5(1)  $560 million  $710 million  $860 million  $1.01 billion $1.16 billion
After-Tax IRR  23.6%  27.5%  31.2%  34.6% 37.8%
Payback Period (years)  3.0  2.6  2.3  2.0 1.8
Exchange Rate (US$:COP)  2,850  2,850  2,850  2,850  2,850

(1) NPV is discounted to September 1, 2016.
All dollar amounts are in U.S. dollars.

Mineral Reserves

Mineral Reserves from the Feasibility Study are derived from the Mineral Resource Estimate for the Yaraguá and Veta Sur vein systems set out in the technical report entitled “Buriticá Project NI 43-101 Technical Report Feasibility Study Antioquia, Colombia” dated March 29, 2016 with an effective date of February 24, 2016, led by independent consultants JDS Energy & Mining, Inc. The Mineral Reserves are based on 271,003 metres of drill core sampling and 7,215 metres of underground sampling (as at May 11, 2015).

Combined Yaraguá and Veta Sur Mineral Reserve Estimate

Reserve Grades Contained Metal
Category Tonnes Gold
Proven 677,400 21.1 60.0 459,000 1,307,000
Probable 13,039,400 7.8 22.5 3,251,000 9,412,000
Total P&P 13,716,800 8.4 24.3 3,710,000 10,719,000

Notes: Based on cut-off grades of 3.8 g/t for Yaraguá and 4.0 g/t for Veta Sur, $950 per ounce gold price, and US$:COP exchange rate of 1:2,850. Rounding of some figures may lead to minor discrepancies in totals.

Mining and Processing

The Feasibility Study provides the basis for the Buriticá project execution and operating plan, which includes a multiple ramp access underground mining operation, whole ore cyanide leach processing facility, dry-stacked filtered tailing and related infrastructure. The operating plan includes mining and processing beginning at 2,100 tpd, with ramp-up to 3,000 tpd by year three. The mine is designed to develop two high grade zones initially, in order to minimize pre-production development time and capital as well as maximize early revenues. The mining methods selected for Buriticá were chosen to maintain mining flexibility and selectivity for the various anticipated ground conditions. Most of the Mineral Reserve will be mined by either long-hole open stoping (59% stoping plus 25% stope development) on 15-metre sublevels, or overhand cut-and-fill (15%) with average mining costs of $57.21/tonne over the 13.8 year expected mine life. Some shrinkage stope extraction will be applied to the narrower, more isolated veins. Paste fill made from a mixture of tailing and cement will provide the primary backfill material, with unconsolidated waste rock used in cut-and-fill stopes. An internal raise system will direct ore and waste to the existing Higabra tunnel, which is the main haulage level daylighting adjacent to the planned process plant location. The filtered tailing and waste rock not used for backfill will be placed into a single tailing storage facility; the integrated tailing storage facility design will allow the waste rock to be utilized for stability and erosion protection.

Future Facilities Layout

Capital Costs

Capital costs for the Buriticá project were estimated under the assumption that any acquisition costs or expenditures by the Company prior to this Feasibility Study are deemed “sunk” costs, and are therefore not included in the analysis, other than for their impact on taxes.

 Pre-Production Capital Cost Estimate

 Capital Costs  $ million
 Underground Development, Infrastructure and Mine Equipment  95.3
 Process Plant and Tailings Facility  115.8
 General Site Facilities and Equipment and Site Development  43.7
 Water Treatment Plant  12.6
 Power  5.4
 Access Road  10.9
 Subtotal  283.7
 VAT (including $14.9 million available as income tax credits)  19.5
Owners and Project Indirect Cost and EPCM 86.0
 Total (including Contingency of $35.4 million)  389.2

Sustaining capital costs over the balance of the mine-life total $272.5 million, predominantly attributable to continued underground development, equipment rebuilds and replacement, and the ramp-up from 2,100 tpd to 3,000 tpd in the third year of commercial production.

Operating Costs

LOM Unit Operating Cost Estimate

 Operating Costs  $/tonne
 Mining 57.21
Processing 26.16
G&A (including refining and transportation) 18.22
Royalty 10.00
Total Operating Costs  111.59


Total and LOM All-in Sustaining Cash Cost Estimate

Unit Value
Total Cash Costs(1) $M $1,435
Closure, Reclamation & Remediation(2) $M $10
Sustaining Capital Expenditure $M $272
All-In Sustaining Cash Costs $M $1,717
Gold Sales 000’s payable oz $3,489
 LOM All-In Sustaining Cash Costs per Ounce  $/payable oz $492
 Initial Capex $M $389
 Total All-In Sustaining and Construction Costs per Ounce  $/payable oz $604

(1) Net of silver credits totalling $27.50 per Au ounce.
(2) Net of salvage ($7.4M).

Technical Information

The Feasibility Study was prepared, under the direction of JDS Energy & Mining, Inc., by leading independent industry consultants, all Qualified Persons (QP) under NI 43-101. A complete list of the consultants and QPs contributing to the Feasibility Study is included in the technical report entitled “Buriticá Project NI 43-101 Technical Report Feasibility Study Antioquia, Colombia” dated March 29, 2016 with an effective date of February 24, 2016. A copy of the technical report can be accessed under the Company’s SEDAR profile at or on this website.

The technical information in this section has been approved by Donald Gray, BSc. Mining Engineering and MSc. Civil Engineering, Chief Operating Officer of the Company and a QP under NI 43-101.