Goldsource Revises 2016 Production Guidance
VANCOUVER, BC – August 25, 2016 – Goldsource Mines Inc. (“Goldsource” or the “Company”) today announced that throughput and production from the Eagle Mountain Gold Project (“Eagle Mountain”) in Guyana have been affected in July and August, primarily as a result of weather related issues, a delay in the shipment of a 40-tonne truck to site and the low grade of available material. Processing operations were suspended on July 23, 2016 to reduce consumable costs and focus on developing access to Pit #4 and preparing Pit #4 for open pit mining. Eagle Mountain is expected to begin processing higher-grade material from Pit #4 in early September 2016.
Since July 1, 2016, the Company has processed 13,922 tonnes over 19 days, with average throughput of 732 tonnes per day ("tpd"). During the same period, Goldsource poured 38 ounces of gold and sold 37 ounces of gold at an average price of US$1,336 per ounce. As a result, Eagle Mountain, during July and August, has performed below commercial production levels achieved June 20, 2016 (see news release dated June 21, 2016 and the Preliminary Economic Assessment report titled "Preliminary Economic Assessment of the Eagle Mountain Saprolite Gold Project, Guyana," dated September 12, 2014 with an effective date of June 15, 2014 (the "PEA").
In the first half (“H1”) of 2016, Management elected to shift focus from development of Pit #6 (with material designed to be transported by a gravity fed chute) to the higher grade and closer proximity Pit #4, which is at a lower elevation relative to the process plant, requiring the use of a truck to haul material. Management was originally expecting the delivery of a 40-tonne truck to site in late July to deliver higher-grade material from Pit #4 to the processing plant. A lack of tire availability and an error by the ground transportation freight forwarder resulted in a delay in the ground shipment, which significantly delayed the sea freight departure. The arrival of the truck in Guyana on August 23, 2016 has been confirmed, with an expected arrival on site in early September 2016.
During the commissioning phase of Eagle Mountain, the focus was on processing low-grade material during the optimization process. The plan was to continue to process lower-grade mineralization until higher-grade material could be exploited through the arrival of the 40-tonne truck to site. However, with the grade processed averaging just 0.43 grams per tonne (“g/t”) gold (below the 0.5 g/t cutoff grade for the Eagle Mountain resource) Management elected to stop processing material on July 23 to reduce the cost of onsite consumables and shift focus to developing access and mine preparation for the higher-grade material at Pit #4.
Unexpectedly heavier rainfall due to “La Nina” at Eagle Mountain has made road access challenging, which contributed to additional downtime in July and August. Fewer weather related issues are expected as we move into the drier months of September through March.
While Eagle Mountain has underperformed in July and August, the Company expects to return to commercial production levels in early September based on the following:
- Purchase and operation of a 15-tonne truck: With the start of the dry season in Guyana, the Company was able to procure and operate a 15-tonne truck to begin stockpiling the higher-grade material from the higher grade Pit #4. During dry weather this vehicle is capable of stockpiling 350-750 tpd. To date, the Company has stockpiled 5,913 tonnes of material from Pit #4. Once a sufficient higher-grade stockpile is built up, Management expects to resume processing operations prior to the arrival of the 40-tonne truck on site.
- With the 40-tonne truck onsite in early September 2016, a throughput of 1,250-1,500 tpd from Pit #4 to the processing plant should be achieved.
Weather and a delay in the delivery of the 40-tonne truck procured in Q2, 2016 have impacted operations in Q3, 2016. In addition, Management has also applied for a permit from the Government of Guyana to operate a low impact intensive cyanide leaching circuit (“SLR unit”) at Eagle Mountain, which is expected to substantially improve gold recovery and production from the mine. While the permit was originally expected in July 2016, to allow the SLR unit to be operational by October 2016, the permit has not yet been granted and there is no firm date for its issuance. As a result, the Company has revised its targets and assumptions previously announced in its news release dated June 21, 2016 as follows:
- The Company anticipates a total production of approximately 1,400-2,100 ounces of gold for 2016, down from the previous guidance of 3,600 ounces of gold in 2016. The revised production forecast is based on the following:
- Average throughput of 1,000 tpd in September, ramping up to 1,500 tpd from October to December 2016, down from the previous guidance of 1,800 tpd.
- Average gravity gold recovery of 50%. With an average table recovery of 50-60%, resulting in a net recovery to dore of 25-30%.
- Mining focused on low strip higher grade material in Pit #4 to increase the average grade and gold production.
While the Company has reduced its 2016 production guidance, the phased expansion approach to Eagle Mountain remains intact. The throughput expansion plan and the contemplation of integrating an SLR unit into the process flow sheet warrants completion of a pre-feasibility study (“PFS”) by H1 2017. Management’s expects the PFS to support the design, purchase and deployment of the Phase II plant, which should increase throughput capacity to approximately 4,000 tpd. The Company expects to achieve this expansion through the implementation of the following:
- Night shift: A second (night) shift is to be phased in during the latter part of Q3, 2016.
- Phase II Plant: A second modified scrubber is to be added to the Phase II Plant and the current falcon concentrators are to be doubled from 2 to 4 units.
- Management is optimistic that the total cost of the Phase II expansion could be achieved for less than the US$18.3 million total capital budget outlined in the PEA (see news release dated August 1, 2014).
The Company continues to evaluate opportunities to improve recoveries and the average head grade at Eagle Mountain to increase production prior to the Phase II expansion. Opportunities include:
- Pit #4: Management expects to start processing material from Pit 4 in early September 2016. The average grade of the material in Pit #4 is estimated to average 1.4 g/t gold. Goldsource has procured a 15-tonne truck, which is currently onsite building a stockpile from Pit #4 with the larger 40-tonne articulating truck expected to arrive onsite in early September 2016.
- SLR unit: Management has been evaluating the potential to install an SLR unit to process the gravity gold concentrate and significantly improve the overall gold recovery. Goldsource began the permitting process in May 2016. If the Company obtains this permit, Goldsource would look to expedite the installation of the system to improve recovery and production and treat and recover gold from the onsite inventory of stockpiled table concentrate.
- Sluice Box: A small sluice box has been installed to capture coarse gold before it flows into tailings. A substantially larger sluice box is under construction and is expected to be installed before the end of Q3, 2016. To date, the small sluice box is adding incremental recovery 0.5-1%. Management believes that the new expanded sluice box should increase the incremental recovery by up to 5%.
With Eagle Mountain expected to begin processing the higher-grade material from Pit #4, a significant improvement in production is expected, with potential for a material improvement in production and operating margins should a permit for an SLR unit be granted.
The Qualified Person under National Instrument 43-101 - Standards of Disclosure for Mineral Projects for this news release is Mark Horan, P.Eng MSc. (Rhodes) BSc. Eng (Witwatersrand) Senior Mining Engineer for Tetra Tech EBA, who has reviewed and approved its contents.
ABOUT GOLDSOURCE MINES INC.
Goldsource Mines Inc. (www.goldsourcemines.com) is a Canadian resource company that has recently achieved commercial production for Phase I at it 100%-owned Eagle Mountain Gold Project, located in Guyana. Goldsource is led by an experienced management team, proven in making exploration discoveries and in project construction.
|Ioannis (Yannis) Tsitos
Goldsource Mines Inc.
|For Further Information:
Goldsource Mines Inc.
Contact: Ioannis (Yannis) Tsitos, President
Fred Cooper, Investor Relations
Telephone: +1 (604) 694-1760
Fax: +1 (604) 694-1761
Toll Free: 1-866-691-1760 (Canada & USA)
570 Granville Street, Suite 501
Vancouver, British Columbia V6C 3P1
CAUTIONARY STATEMENT AND FORWARD-LOOKING DISCLAIMER
Management’s production decision for the Eagle Mountain Gold Project is not based on a feasibility study of mineral reserves demonstrating economic and technical viability. This project has a much higher risk of economic or technical failure and may adversely impact the Company’s projected profits, if any. The risks associated with this decision are set forth in the Company’s latest annual management’s discussion and analysis available on the Company’s website and the under Goldsource’s SEDAR profile on www.sedar.com.
This news release contains “forward-looking statements” within the meaning of Canadian securities legislation. Such forward‑looking statements concern Goldsource’s strategic plans and expectations for the development of the Eagle Mountain Gold Project based on the PEA and variations to mining plans as mining operations progress and decrease gold production is encountered; the amount of future production of gold over any period; cash operating costs per ounce of gold; life of mine; estimated pre-production cost; the amount of expected grades and ounces of metals; gold recoveries mine life and gold production rates of the Eagle Mountain Gold Project; and expectations regarding the Company’s ability to manage capital resources and meet working capital requirements. Such forward‑looking statements or information are based on a number of assumptions, which may prove to be incorrect. Assumptions have been made regarding, among other things: conditions in general economic and financial markets; ability to realize the PEA and develop and finance the project and ability to positively adjust mining operations when assumptions and expectations on which mining operations are based are not fully met; accuracy of the interpretations and assumptions used in calculating inferred mineral resource estimates; availability of mining equipment; availability of skilled labour; timing and amount of capital expenditures; performance of available laboratory and other related services; and future operating costs. The actual results could differ materially from those anticipated in these forward‑looking statements as a result of the risk factors including: the timing and content of work programs; results of exploration activities and development of mineral properties; the interpretation of drilling results and other geological data; the uncertainties of resource estimations; uncertainty as to actual capital costs, operating costs, production and economic returns at the Eagle Mountain Gold Project; reliance on the PEA for initial mining operations and on management decisions to appropriately adjust mining operations and depart from mining plans contemplated in the PEA when considered warranted; and general market and industry conditions. Forward-looking statements are based on the expectations and opinions of the Company’s management on the date the statements are made. The assumptions used in the preparation of such statements, although considered reasonable at the time of preparation, may prove to be imprecise and, as such, readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date the statements were made. The Company undertakes no obligation to update or revise any forward-looking statements included in this news release if these beliefs, estimates and opinions or other circumstances should change, except as otherwise required by applicable law.
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