Item 2. Properties
Item 2. Properties.
Summary Disclosure
The Company has only one material mining property, the Stibnite Gold Project, a formerly abandoned, brownfield mine site in rural Idaho, USA. We hold the Stibnite Gold Project through our wholly-owned subsidiary Idaho Gold Resources Company, LLC.
The Project consists of mining the Yellow Pine, Hangar Flats and West End deposits using conventional open pit methods, conventional processing methods to extract gold, silver and antimony, and on-site production of gold (“Au”) and silver (“Ag”) doré and an antimony (“Sb”) concentrate. The Project also entails an extensive reclamation and restoration program for historical impacts to the site including the recovery and reprocessing of historical tailings, restoration of fish passage during and after operations, relocation of historical mining wastes to engineered storage facilities, stream restoration, and reforestation of impacted areas. Perpetua Resources’ plans for decommissioning the site include progressive and concurrent remediation, reclamation, and restoration activities, beginning at the start of construction and continuing beyond the operations phase, through Project reclamation and closure. We are currently undertaking an extensive permitting process for redevelopment and restoration of the Project.
Technical Report Summary
The disclosures in this Item 2, Properties regarding Perpetua Resources’ 100% interest in the Stibnite Gold Project have been prepared in accordance with the mining property disclosure rules specified in S-K 1300. Except for subsequent events or as otherwise noted, the disclosure in this Annual Report on Form 10-K of a scientific or technical nature for the Stibnite Gold Project is derived from, and in some instances is an extract from, the Technical Report Summary (“TRS”), dated as of December 31, 2021, which is included as Exhibit 96.1 of this Annual Report. The TRS summarizes, as of December 31, 2021, in accordance with the mining property disclosure rules specified in S-K 1300, the information presented in the technical report titled “Stibnite Gold Project, Feasibility Study Technical Report, Valley County, Idaho” dated effective December 22, 2020 and issued January 27, 2021 (the “2020 Feasibility Study”), which was prepared in accordance with mining property disclosure standards set forth in NI 43-101.
The technical data and economic conclusions of these reports are identical, with minor differences between the reports resulting only from (i) the respective disclosure requirements of S-K 1300 and NI 43-101 and (ii) differences in commodity prices at the respective effective dates. The notable differences are the following:
● The TRS Mineral Resource estimates were developed based on a gold price of $1,500/oz versus the $1,250/oz gold price assumed for the 2020 Feasibility Study. The change in gold price results from higher trailing average gold prices at the date of preparation for the respective reports.
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● The Measured Mineral Resources in the 2020 Feasibility Study were reclassified to Indicated Mineral Resources in the TRS due to differences in S-K 1300 versus NI 43-101 Mineral Resources classification guidelines.
● The Proven Mineral Reserves from the 2020 Feasibility Study were reclassified as Probable Mineral Reserves for the TRS resulting from the reclassification of the Measured Mineral Resources to Indicated Mineral Resources due to differences in S-K 1300 versus NI 43-101 Mineral Resources classification guidelines.
● The TRS is classified as a Preliminary Feasibility level study whereas the 2020 Feasibility Study was classified as a Feasibility level study. This change was driven by the S-K 1300 requirement that a compliant Feasibility level TRS include a capital cost contingency allowance no greater than 10%, whereas the initial capital cost estimate for the 2020 Feasibility Study included a contingency allowance at approximately 15%.
The TRS was compiled by M3 in compliance with S-K 1300 promulgated by the SEC under the direction of Independent Qualified Persons (as defined in S-K 1300) (“QPs”). QPs for the TRS include: Richard Zimmerman, SME-RM (onsite and offsite infrastructure, cost estimating, mineral processing, financial modeling) with M3; Garth Kirkham, P.Geo. (mineral resources) with Kirkham Geosystems Ltd.; Christopher Martin, C.Eng. (metallurgy) with Blue Coast Metallurgy Ltd.; Grenvil Dunn, C.Eng. (hydrometallurgy) with Hydromet WA (Pty) Ltd.; Scott Rosenthal P.E. (mine planning and mineral reserves) with Value Consulting, Inc.; and Peter Kowalewski, P.E. (tailings storage facility and closure) with Tierra Group International, Ltd.
The 2020 Feasibility Study was compiled by M3 Engineering & Technology Corporation (“M3”) in accordance with NI 43-101 under the direction of independent qualified persons (as defined in NI 43-101) (“Independent QPs”).
Independent QPs for the 2020 Feasibility Study include: Richard Zimmerman, SME-RM (onsite and offsite infrastructure, cost estimating and financial modeling) and Art Ibrado, P.E. (mineral processing) with M3; Garth Kirkham, P.Geo. (mineral resources) with Kirkham Geosystems Ltd.; Christopher Martin, C.Eng. (metallurgy) with Blue Coast Metallurgy Ltd.; Grenvil Dunn, C.Eng. (hydrometallurgy) with Hydromet WA (Pty) Ltd.; Chris Roos, P.E. (mineral reserves) and Scott Rosenthal P.E. (mine planning) with Value Consulting, Inc.; and Peter Kowalewski, P.E. (tailings storage facility and closure) with Tierra Group International, Ltd.
The TRS was filed on EDGAR on January 3, 2022 and on SEDAR on January 4, 2022. The 2020 Feasibility Study was filed on SEDAR on January 28, 2021. See Exhibit 96.1 of this Annual Report and “ Note Regarding Mining Property Disclosures Rules ” .
Certain capitalized terms in this section not otherwise defined have the meanings ascribed to them in the TRS.
Garth Kirkham, P.Geo., an independent Qualified Person, has approved the disclosure concerning mineral reserves and mineral resources in this Annual Report on Form 10-K related to the 2020 Feasibility Study and the TRS.
Assumptions
Portions of the information presented in this Annual Report on Form 10-K and the information contained in the TRS rely on a number of estimates and assumptions, including estimates and assumptions which are inherently subject to significant scientific, business, economic and competitive uncertainties and contingencies that could be material should those assumptions be incorrect. These assumptions include, but are not limited to, certain assumptions as to capital costs, production rates, operating costs, recovery and timing of construction and production; assumptions that the current price and demand for gold and other metals will be sustained or will improve; assumptions that the equipment and personnel required for permitting, construction and operations will be available on a continual basis; there are no significant errors in calculations and information used in mineral resource and reserve estimates, there will be no unforeseen delays, unexpected geological or other effects, equipment failures, or significant permitting delays. For a description of the key assumptions, parameters and methods used to estimate mineral reserves and mineral resources included in this Annual Report on Form 10-K, as well as data verification procedures and a general discussion of the extent to which the estimates may be affected by any known environmental, permitting, legal, title, taxation, sociopolitical, marketing or other relevant factors, please review the TRS, which is included as an exhibit to, and incorporated by reference into, this Form 10-K. See “ Risk Factors ” and “ Cautionary Note Regarding Forward-Looking Statements ” for a discussion of additional industry and business risks and assumptions.
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TRS Highlights
The Stibnite Gold Project economics, as contemplated in the TRS, are summarized in the table below.
Early Production
Life-of-Mine
Component
Years 1-4
Years 1-15
Recovered Gold (2) Total
1,853 koz
4,238 koz
Recovered Antimony Total
74 million lbs
115 million lbs
Recovered Gold (2) Annual Average
463 koz/yr
297 koz/yr
Cash Costs (2,3) (Net of by-product credits)
$328/oz Au
$538/oz Au
All-in Sustaining Costs (2,3) (Net of by-product credits)
$438/oz Au
$636/oz Au
Initial Capital – including contingency
$1,263 million
Case B at US$1,600/oz gold (Base Case) (1)
After-Tax Net Present Value 5%
$1,320 million
Annual Average EBITDA (3)
$566 million
$292 million
Annual Average After Tax Free Cash Flow (3)
$500 million
$242 million
Internal Rate of Return (After-tax)
22.3%
Payback Period in Years (After-tax)
2.9 years
Case C at US$1,850/oz gold (1)
After-Tax Net Present Value 5%
$1,864 million
Annual Average EBITDA (3)
$678 million
$360 million
Annual Average After Tax Free Cash Flow (3)
$584 million
$295 million
Internal Rate of Return (After-tax)
27.7%
Payback Period in Years (After-tax)
2.5 years
Notes:
(1) Base case prices US$1,600/oz gold, $20/oz silver and $3.50/lb antimony, Case C price based on metal selling prices of US$1,850/oz gold, $24/oz silver and $3.50/lb antimony, Post-Tax NPV at 5% discount rate.
(2) In this release, “M” = million, “k” = thousand, all amounts in US$, gold and silver reported in troy ounces (“oz”).
(3) Cash costs, All-in Sustaining Costs, EBITDA and After Tax Free Cash Flow are non-GAAP measures; see section Item 2, Non-GAAP Measures .
(4) All numbers have been rounded in above table and may not sum correctly.
(5) The TRS assumes 100% equity financing of the Project.
Property Description and Location
The Project location is in central Idaho, USA approximately one hundred (100) miles (“mi”) northeast of Boise, Idaho, thirty-eight (38) mi east of McCall, Idaho, and approximately ten (10) mi east of Yellow Pine, Idaho. Mineral rights controlled by Perpetua Resources include patented lode claims, patented mill sites, unpatented federal lode mining claims, and unpatented federal mill sites and encompass approximately 28,480 acres (forty-five (45) square miles). The claims are 100% owned, except for twenty-seven (27) patented lode claims that are held under an option to purchase. The Project is subject to a 1.7% net smelter return royalty on gold only; there is no royalty on silver or antimony.
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Stibnite Gold Project Location
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Land Status Map
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Patented Lands
On June 11, 2009, a predecessor to SGC acquired and exercised an option to purchase (“OTP”) the Meadow Creek group of nine patented lode claims totaling approximately 184 acres from Bradley Mining Co. (“Bradley”).
A predecessor to IGRCLLC secured an OTP agreement from the J.J. Oberbillig Estate on June 2, 2009, to acquire 30 patented mill site claims totaling approximately 149 acres and six patented lode claims totaling approximately 124 acres. The Oberbillig OTP agreement was exercised and title to property rights were acquired on June 2, 2015. An associated transaction included the purchase and extinguishment of a 5% Net Smelter Return (“NSR”) royalty to the Oberbillig estate covering certain lands within the Project area. Most of the mineralization constituting the West End Deposit is located within portions of these patented lode claims. Hecla Mining Company (Hecla) retains some surface rights on portions of six of the patented mill sites, but no mineral rights and IGRCLLC has a right to use the surface for the purposes of mining.
An OTP for patented lode mining claims covering portions of the Yellow Pine Deposit was conveyed to Perpetua Resources in 2011 by way of a company merger between a predecessor to IGRCLLC and a subsidiary of Vista Gold Corp. that was agreed to February 22, 2011. The OTP for the subject patented claims was exercised on November 28, 2012. As a result of the merger, the predecessor to IGRCLLC became a wholly owned subsidiary of Perpetua Resources. The Yellow Pine claim group includes 17 patented lode mining claims totaling approximately 301 acres and eight unpatented lode mining claims (included in the unpatented total below).
On April 28, 2011, a predecessor to SGC purchased 6 patented lode claims east of the Project area. This group of claims is referred to as the Fern claim group, totaling approximately 100 acres.
PATENTED CLAIMS
Valley County
Number of Claims
Assessed
Assessed
Parcel ID
Owner 5
Lode
Millsite
Acres 4
Hectares 4
RP18N09E155300
IGRCLLC
—
16
80.00
32.37
RP18N09E020026
IGRCLLC
6
—
129.82
52.54
RP18N09E115495
IGRCLLC
—
14
53.57
21.68
RP14N05E074475 1
IGRCLLC 1
—
—
25.06
10.14
RP18N09E038995
IGRCLLC
4
—
81.63
33.03
RP18N09E108995
IGRCLLC
5
—
102.8
41.60
RP18N09E127345
IGRCLLC
6
—
99.87
40.42
RP18N09E030005
IGRCLLC
11
—
218.90
85.59
RP18N09E030020
IGRCLLC
6
—
81.17
32.85
RP18N09E12255
IGRCLLC 2
2
—
89.40
36.18
RP18N10E071525
IGRCLLC 2
6
—
38.95
15.76
RP18N09E18150
IGRCLLC 2
7
—
139.19
56.33
RP18N09E018435
IGRCLLC 2
4
—
80.23
32.47
RP18N09E013840
IGRCLLC 2
8
—
136.01
55.04
Totals
65
30
1,357
549.00
UNPATENTED CLAIMS
Number of Claims
Owner
Claim Type
Lode
Millsite
Acres
Hectares
IGRCLLC
Unpatented lode and millsite claims
1,472
46
28,483
11,527
Notes:
1. The Scott Valley parcel for the Stibnite Gold Logistics Facility is a 100% owned fee-simple parcel, that is approximately 25 acres, with no mineral rights.
2. IGRCLLC has an option to purchase (OTP), but no ownership of these parcels. The owner pays property taxes for these parcels until the OTP is exercised.
3. Does not include taxes paid on OTP properties, which are paid by the owner.
4. Not all values may sum due to rounding. Assessed acreage may not correspond exactly to surveyed acreage reported in text.
5. This table summarizes the mineral rights held by Perpetua Resources’ wholly owned subsidiary, IGRCLLC.
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Unpatented Federal Lode Mining Claims and Unpatented Mill Site Claims
A subsidiary of a predecessor to IGRCLLC acquired 229 federal unpatented claims by purchase from previous owners in 2009 and 2011. These included 46 federal mill site claims and 183 federal unpatented lode mining claims. In addition to the purchased claims, IGRCLLC predecessors or subsidiaries acquired by staking an additional 36 federal unpatented lode mining claims in 2009, 217 lode claims in 2010 and 901 federal unpatented lode-mining claims in 2011, and one federal unpatented lode mining claim in 2012. An additional 126 unpatented lode claims were staked in 2015. Minor modifications and amended claim locations have occurred since original staking and/or acquisition.
In 2021, SGC merged with IGRCLLC becoming the sole surviving entity and landowner of patented and unpatented mining claims and mill sites and various optioned properties. Currently, IGRCLLC owns 1,472 unpatented lode mining and 46 mill sites totaling approximately 28,483 acres (11,527 hectares).
Maintenance of unpatented federal claims requires that IGRCLLC provide a list of claims and serial numbers to the Bureau of Land Management (“BLM”) along with annual maintenance fees, currently $165 for each lode-mining claim or mill site on or before September 1st each year. This was completed for the most recent filing year. There is no underlying royalty on these federal lode-mining claims and mill sites other than the Franco-Nevada Corporation (“Franco-Nevada”) royalty. None of the claims are subject to back-in rights; however, Franco-Nevada holds a right of first refusal should mining claims, mill sites or other mineral properties be relinquished.
Stibnite Gold Logistics Facility
On September 9, 2016, IGRCLLC agreed to purchase an undeveloped 25-acre property in fee simple from private interests. The property is situated in Section 7, Township 14N, Range 5E, Boise Meridian. The sale was closed on October 26, 2016. The property’s metallic and non-metallic mineral rights, apart from aggregate materials needed for construction purposes on the property, were retained by the previous owners.
The property, in an area known locally as Scott Valley, has frontage on the Cascade-Warm Lake Highway and was purchased to serve as a project logistics facility. The agreement provides for maintenance of certain pre-existing rights-of-way, easements and rights, none of which would be expected to inhibit use of the property for the intended purposes. IGRCLLC applied for a Conditional Use Permit from the Valley County Planning and Zoning Commission that was granted on October 5, 2020.
Royalties, Option Agreements and Encumbrances
Option Agreements
On May 3, 2011, a predecessor to SGC entered into an option to purchase (“OTP”) 27 patented lode claims totaling approximately 485 acres from the J.J. Oberbillig Estate (the Cinnabar option claims). This agreement was modified in an Amended and Restated Real Property Purchase Agreement effective December 1, 2016. The amended agreement also includes an option on a Right of First Refusal to purchase the surface rights associated with portions of certain patented mill site claims that J.J. Oberbillig Estate sold to Hecla under a Real Estate Purchase and Sale Agreement dated effective as of December 30, 2002. The agreement also includes granting of a renewable easement for a communications tower. Perpetua Resources is obligated to make payments to maintain the OTP to obtain title to these claims. The agreement includes an option to extend up to 10 years after the original term of the agreement expires, through 2037.
On December 10, 2019, a Perpetua Resources subsidiary entered into an option agreement to purchase 3.74 acres from private interests for an electrical switching station site. The OTP has biannual payments of US$2,500 through 2033.
Royalty Agreement
Effective May 9, 2013, Perpetua Resources and its subsidiaries granted a perpetual 1.7% NSR royalty on future gold production from the Project properties to Franco Nevada, subject to adjustment based on final permitted capacity. The royalty does not apply to production of antimony and silver. The royalty agreement applies to all patented and unpatented mineral claims, except for the Cinnabar option claims where Perpetua Resources holds an OTP. Under the agreement, Franco Nevada has the right, but not the obligation, to extend the property subject to the royalty to the Cinnabar option claims upon notice that the OTP is exercised by Perpetua.
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Geologic Setting and Mineralization
Bedrock in the region can be subdivided into the pre-Cretaceous metasedimentary “basement,” the Cretaceous Idaho Batholith, Tertiary intrusions and volcanics, and Quaternary unconsolidated sediments and glacial materials. The SGP is situated along the eastern edge of the Idaho Batholith, on the western edge of the Thunder Mountain caldera complex and within the Central Idaho Mineral Belt.
Large, north-south striking, steeply dipping structures exhibiting pronounced gouge and multiple stages of brecciation occur in the district and are often associated with east-west and northeast-southwest trending splays and dilatant structures.
The Yellow Pine and Hangar Flats deposits are hosted primarily by intrusive phases of the Idaho Batholith along the Meadow Creek Fault Zone. The West End Deposit is hosted primarily by Neoproterozoic to Paleozoic metasedimentary rocks of the Stibnite roof pendant along the West End Fault Zone.
Mineralization and alteration in the district are associated with multiple hydrothermal alteration events occurring through the Paleocene and early Eocene epochs. Main-stage gold mineralization and associated potassic alteration typically occurs in structurally prepared zones. The gold is associated with very fine grained disseminated arsenical pyrite and arsenopyrite to a lesser extent. The gold almost exclusively exists in solid solution in these minerals. Antimony mineralization occurs primarily as the mineral stibnite. Additional gold mineralization affecting rocks of the Stibnite roof pendant (West End deposit) is associated with epithermal quartz-adularia-carbonate veins.
Deposits of the district are not readily categorized based on a single generic deposit model due to complexities associated with multiple overprinting mineralization events and uncertainties regarding sources of mineralizing hydrothermal fluids.
Permits
The Project is subject to formal review under NEPA, which is still ongoing. Following the release of a Draft Environmental Impact Statement (“DEIS”) on August 14, 2020, followed by a public comment period, the USFS indicated it plans to issue a Supplemental Draft Environmental Impact Statement (“SDEIS”) focused on the refined Project proposed action. On February 22, 2022, Perpetua announced that it expected publication of the SDEIS for public review and comment in the third quarter of 2022. A final EIS and draft Record of Decision will follow in due course. Work on other required ancillary permits and management plans continues.
Exploration
The district has been the subject of exploration and development activities for nearly 100 years, yet much of the area remains poorly explored due to its remote location, poor level of outcrop and extensive glacial cover. Perpetua Resources has completed extensive exploration work over the last decade that has included: geophysics; rock, soil and stream sampling and analysis; geologic mapping; mineralogical and metallurgical studies; and drilling.
This newer data has been integrated with datasets from previous operators and provides a comprehensive toolkit for future exploration. These efforts have led to the identification of over 75 prospects with varying levels of target support. These prospective areas include targets within, under, and adjacent to existing deposits; bulk mineable prospects along known or newly identified mineralized trends; high grade underground targets and early-stage greenfield prospects and conceptual targets based on geophysics or geologic inference.
Exploration targets include conceptual geophysical targets, geochemical targets from soil, rock and trench samples, and results from widely spaced drill holes; as a result, the potential size and tenor of the targets are conceptual in nature. There has been insufficient exploration to define mineral resources on these prospects and this data may not be indicative of the occurrence of a mineral deposit. Such results do not provide assurance that further work will establish sufficient grade, continuity, metallurgical characteristics, and economic potential to be classed as a category of mineral resource. Mineral resources are not mineral reserves and do not have demonstrated economic viability.
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The Project area, including the three main deposits, has been drilled by numerous operators, totaling 793,769 ft in 2,723 drill holes, of which Perpetua Resources drilled 637 holes totaling over 344,465 ft since 2009. Pre-Perpetua Resources drilling was undertaken by a wide variety of methods and operators while Perpetua Resources employed a variety of drilling methods including core, reverse circulation, auger, and sonic throughout the district, but with the primary method being core. Operators who conducted significant exploration and/or mineral extraction during this era included: United Mercury Mines. Yellow Pine Company, Bradley Mining Company, Louisiana Land and Exploration Company, Canadian Superior Mining (U.S.) Ltd., El Paso Oil and Gas, Rancher’s Exploration Company, Twin Rivers Exploration, MinVen Corporation, Pioneer Metals Corporation, Hecla Mining Company, Barrick Gold Corporation (formerly American Barrick Resources), Stibnite Mine Inc., and Dakota Mining Company.
No drilling was completed during the reporting period.
Mineral Resources and Mineral Reserves Estimates
The tables below present the estimated Mineral Resources and Mineral Reserves for the Project at December 31, 2021 presented in accordance with S-K 1300. As described in “ Technical Report Summary ”, the only differences in the Mineral Resources and Mineral Reserves presented as at December 22, 2020 in the 2020 Feasibility Study and as at December 31, 2021 in the TRS are related to (i) the respective disclosure requirements of S-K 1300 and NI 43-101 and (ii) differences in commodity prices at the respective effective dates. See “ Notice Regarding Mining Property Disclosure Rules ” for more information regarding these differences.
Economic Criteria, Assumptions and Pit Optimizations for Mineral Resources
S-K 1300 requires that Mineral Resources have “reasonable prospects for eventual economic extraction” requiring that mineralization meet certain grade and material volume thresholds under reasonable production and recovery scenarios at reasonable cut-off grades and was assessed using an open-pit optimization with assumptions noted as discussed in Section 11.7 of the TRS. The potential for eventual economic extraction was assessed using an open-pit optimization Pseudoflow algorithm in MineSight® Version 15.10 software. Input parameters were developed on the basis of advanced cost estimates, metallurgical recoveries indicated by bench and pilot scale test work and from feasibility level design engineering studies, as shown in table below. Section 8.7 in the TRS contains assumptions regarding the validity of historical sample collection, preparation, analysis for pre-Perpetua Resources exploration programs. Section 11.9 in the TRS describes assumptions made to address areas of uncertainty related to mineral resource estimation, mineral resource classification, and parameters used to estimate reasonable prospects of economic extraction. The Mineral Resource estimates were developed using parameters that describe lithology, in-situ density, estimated metal recoveries from in situ materials and after processing and refining, ore and waste percentage, oxidation, and metal grades, as explained in detail in Section 11. Metallurgical recovery functions and costs were applied to gold, silver, and antimony as presented in Sections 11 and 14 in the TRS.
Assumptions used to derive the cut-off grades and define the resource-limiting pits were estimated to meet the S-K 1300 requirement for mineral resource estimates to demonstrate “reasonable prospects for eventual economic extraction” and vary from those used to limit the mineral reserves reported herein. Section 13.12.3 in the TRS contains procedures used for validation of cost assumptions applied to estimate the cut-off values in the pit optimization analyses. Based on these parameters, cut-off grades for Hangar Flats, West End and Yellow Pine were calculated based on a $1,500/oz gold selling price and was selected based on the three-year trailing average at the time of resource reporting and is below the current spot and trailing average gold prices. Based on these parameters, cut-off grades for Hangar Flats, West End and Yellow Pine were calculated to be approximately 0.40 g/t Au and an open pit oxide cut-off grade of approximately 0.35 g/t Au. Because of the flat and shallow geometry of the Historical Tailings deposit, and due to potential use of the overlying material in conceptual construction scenarios, economic criteria were not assessed using a pit optimization. Instead, cost estimates for removing the overlying Spent Ore Disposal Area (“SODA”) material were compared to potential revenue from processing the tailings material and were shown to be positive.
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As permitted by S-K 1300, the Company uses different gold prices to prepare its Mineral Resources and Mineral Reserves estimates. The Company selected a conservative gold price of $1,500/oz when estimating Mineral Resources for the TRS. The Mineral Reserves in the TRS were calculated at a gold price of $1,600/oz, which was the three year trailing average gold price used to calculate Mineral Reserves for the 2020 Feasibility Study and which the Company determined was a reasonable and conservative gold price based on market prices at the time that the TRS was prepared.
Yellow Pine
Economic Parameters
Units
& Hangar Flats
West End
Mining Cost - Waste
$/tonne mined
2.00
2.00
Mining Cost - Ore
$/tonne mined
2.00
2.00
Ore Type Classification
—
—
Value Based
Oxide Processing Cost
$/tonne mined
—
7.20
Oxide Au Recovery
%
—
R*92.75 + 1.22
Transition Processing Cost
$/tonne mined
—
12.28
Transition Au Recovery
%
—
92.37 - R*8.93
Sulfide Processing Cost
$/tonne milled
10.69
10.69
Sulfide Au Recovery
%
93
96.42 - R*84.72
Dore Transport Cost
$/oz Au
1.15
1.15
Dore Refining Cost
$/oz Au
1.00
1.00
G&A and Rehabilitation Cost
$/tonne milled
4.00
4.00
Pit Slopes
degrees
36-46
36-46
Au Payability
%
99.5
99.5
Au Selling Price - Base Case
$/oz
1,500
1,500
Mining dilution
%
0
0
Mining recovery
%
100
100
NSR Royalty on Au
%
1.7
1.7
Note:
The term “R” used in the West End metallurgical recovery formulas refers to the fraction of free, or cyanide soluble, gold in each block. The value is estimated by dividing the cyanide soluble gold assay estimate by the fire assay gold estimate (for each block).
The Mineral Resource estimates for the Project were estimated in conformity with Committee for Mineral Reserves International Reporting Standards (“CRIRSCO”) “International Reporting Template for the public reporting of Exploration Targets, Exploration Results, Mineral Resources and Mineral Reserves” as adopted by the International Council on Mining & Metals in November 2019. The mineral resources are reported in accordance with S-K 1300.
The Mineral Resource estimates for each of the Hangar Flats, West End and Yellow Pine deposits, and the Historical Tailings, were prepared using commercial mine-modeling and geostatistical software, consider relevant modifying factors, and have been verified by an Independent QP. The consolidated Mineral Resource statement for the Project in metric tonnes (t) is shown in the table below based on a gold selling price of US$1,500/troy ounce limiting pit shell.
Mineral Resource Estimates
The following table presents the estimated Indicated and Inferred Mineral Resources for the Project at December 31, 2021 based on $1,500/oz gold price and presented in accordance with S-K 1300. While the 2020 Feasibility Study includes both Measured and Indicated Mineral Reserves, all Measured Mineral Reserves presented in the 2020 Feasibility Study were reclassified as Indicated Mineral Reserves in the TRS due to differences in calculation standards under S-K 1300 compared to NI 43-101.
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Consolidated Mineral Resource Statement for the Stibnite Gold Project at December 31, 2021, based on $1,500/oz gold:
Gold
Contained
Silver
Contained
Antimony
Contained
Tonnage
Grade
Gold
Grade
Silver
Grade
Antimony
Classification
(000s)
(g/t)
(000s oz)
(g/t)
(000s oz)
(%)
(000s lbs)
Indicated
Yellow Pine
56,445
1.67
3,025
2.10
3,820
0.09
115,022
Hangar Flats
28,065
1.37
1,239
3.20
2,884
0.15
90,925
West End
60,963
1.00
1,956
1.25
2,449
0.00
—
Historical Tailings
2,687
1.16
100
2.86
247
0.17
9,817
Total Indicated
148,159
1.33
6,320
1.97
9,400
0.07
215,764
Inferred
Yellow Pine
8,021
0.85
219
0.59
153
0.00
62
Hangar Flats
17,021
1.00
548
2.30
1,259
0.09
32,146
West End
26,895
0.97
837
1.06
918
0.00
—
Historical Tailings
191
1.13
7
2.64
16
0.16
662
Total Inferred
52,128
0.96
1,611
1.40
2,345
0.03
32,870
Notes:
(1) Mineral Resources are reported in relation to a conceptual pit shell to demonstrate potential for economic viability; mineralization lying outside of these pit shells is not reported as a Mineral Resource. Mineral Resources are not Mineral Reserves and do not have demonstrated economic viability. These Mineral Resource estimates include Inferred Mineral Resources that are considered too speculative geologically to have economic considerations applied to them that would enable them to be categorized as Mineral Reserves. There is also no certainty that these Inferred Mineral Resources will be converted to the Indicated category through further drilling, or into Mineral Reserves once economic considerations are applied. All figures are rounded to reflect the relative accuracy of the estimate and therefore numbers may not appear to add precisely.
(2) Open pit sulfide Mineral Resources are reported at a cut-off grade of 0.40 g/t Au and open pit oxide Mineral Resources are reported at a cut-off grade of 0.35 g/t Au.
The Yellow Pine and Hangar Flats deposits contain zones with substantially elevated antimony-silver mineralization, defined as containing greater than 0.1% antimony, relative to the overall Mineral Resource. The existing Historical Tailings Mineral Resource also contains elevated concentrations of antimony. Antimony Mineral Resources are reported only if they lie within gold Mineral Resource estimates.
Antimony Sub-Domains Consolidated Mineral Resource Statement at December 31, 2021 based on $1,500/oz gold:
Gold
Contained
Silver
Contained
Antimony
Contained
Tonnage
Grade
Gold
Grade
Silver
Grade
Antimony
Classification
(000s)
(g/t)
(000s oz)
(g/t)
(000s oz)
(%)
(000s lbs)
Indicated
Yellow Pine
9,569
2.27
697
5.33
1,639
0.51
108,306
Hangar Flats
6,771
2.08
453
8.22
1,790
0.57
85,509
Historical Tailings
2,687
1.16
100
2.86
247
0.17
9,817
Total Indicated
19,027
2.04
1,250
6.01
3,677
0.49
203,632
Inferred
Yellow Pine
12
1.16
0
2.52
1
0.20
52
Hangar Flats
1,312
2.32
98
15.59
658
1.08
31,274
Historical Tailings
191
1.13
7
2.64
16
0.16
662
Total Inferred
1,515
2.16
105
13.86
675
0.96
31,988
Notes:
(1) Antimony mineral resources are reported as a subset of the total mineral resource within the conceptual pit shells used to constrain the total mineral resource in order to demonstrate potential for economic viability; mineralization outside of these pit shells is not
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reported as a mineral resource. Mineral Resources are not Mineral Reserves and do not have demonstrated economic viability. All figures are rounded to reflect the relative accuracy of the estimate.
(2) Open pit antimony sulfide mineral resources are reported at a cut-off grade 0.1% antimony within the overall 0.40 g/t Au cut-off.
Economic Criteria, Assumptions and Pit Optimizations for Mineral Reserves
The Mineral Reserve Estimates for the Project were estimated in conformity with CRIRSCO “International Reporting Template for the public reporting of Exploration Targets, Exploration Results, Mineral Resources and Mineral Reserves” and are reported in accordance with S-K 1300. The Mineral Reserve estimates for each of the Yellow Pine, Hangar Flats, and West End deposits, and the Historical Tailings, were prepared to industry standards and best practices and take into consideration modifying factors including mining, processing, metallurgical, environmental, location and infrastructure, market factors, legal, economic, social, and governmental factors. The Mineral Reserve estimates are based on a mine plan and pit design developed using modifying parameters including metal price, metal recovery based on performance of the processing plant, and operating cost estimates. Operating cost estimates and other parameters are described in Section 12 of the TRS. Metallurgical data used to estimate the recovery of gold, silver, antimony (where present) and sulfur from expected processing plant feed material were derived from extensive metallurgical test work on representative materials and pilot plant-scale testing and further described in Section 14 of the TRS. Recoveries include assumptions regarding dilution of in situ material, mining losses and reductions for losses during processing and refining.
The Mineral Reserve estimates were developed by allowing only Indicated Mineral Resource blocks to contribute positive economic value and is a subset of the Mineral Resource comprised of the Probable Mineral Reserve that is planned for processing over the life-of-mine plan, with assumptions summarized in Sections 12 and 13 of the TRS. No economic credit has been applied to Inferred mineralization in the development of the Mineral Reserve, even if they lie within the Mineral Reserve pit.
The general mine planning sequence to produce the SGP Mineral Reserve estimates and associated mill feed schedule consisted of an ultimate pit limit analysis, pit shell selection, ultimate pit designs, internal pit phase design, mining sequence schedule, and mill feed optimization. A suite of nested pit shells for each deposit was generated using Geovia Whittle™ and a gold selling price ranging from $100 to $2,000 per troy ounce in $50 increments. The pit limit analysis was performed based on gold recovery only, to ensure the ultimate pit geometries would not be dependent on silver or antimony values. Mining costs used for the pit limit analysis are based on a first principles cost buildup for equipment requirements, labor estimates, and consumables price quotes. Selection of the optimal pit shells for each deposit was based on discounted cash flow analysis. For Yellow Pine and West End, the incremental change in discounted pit value (net present value) and strip ratio between potentially optimal pit shells is gradual, and pit shells representing gold selling prices of $1,250/oz and $1,300/oz respectively were selected. For Hangar Flats, the pit limit analysis suggested selecting the $1,150/oz pit shell but, due to additional technical considerations, the $750/oz pit shell was selected.
The ultimate pit designs were based on the selected pit shells, design parameters for 150-ton haul trucks, geotechnical design criteria, and additional mine sequencing and haulage considerations. Cut-off determination utilized a NSR methodology to account for varying ore types and separate process streams with unique process costs. The cut-off strategy applies elevated cut-off values to ensure the highest-grade ore available in the mine plan is processed preferentially and lower grade ore is stored in ore stockpiles for processing later in the Project life.
Cutoff grades for Mineral Reserves were developed assuming long term metal prices of $1,600/oz gold, $20.00/oz silver, and $3.50/lb antimony for material lying within the pit designs based on the pit shells selected above ($1,250, $750 and $1,300/oz Au for Yellow Pine, Hangar Flats and West End, respectively). This results in a Life-of-Mine (“LOM”) average gold cut-off grade of 0.48 g/t for open-pit mining.
As permitted by S-K 1300, the Company uses different gold prices to prepare its Mineral Resources and Mineral Reserves estimates. The Company selected a conservative gold price of $1,500/oz when estimating Mineral Resources for the TRS. The Mineral Reserves in the TRS were calculated at a gold price of $1,600/oz, which was the three year trailing average gold price used to calculate Mineral Reserves for the 2020 Feasibility Study and which the Company determined was a reasonable and conservative gold price based on market prices at the time that the TRS was prepared.
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Table of Contents
Mineral Reserve Estimates
The following table presents the estimated Mineral Reserves for the Project at December 31, 2021 based on $1,600/oz gold price and presented in accordance with S-K 1300. While the 2020 Feasibility Study includes both Proven and Probable Mineral Reserves, all Proven Mineral Reserves presented in the 2020 Feasibility Study were reclassified as Probable Mineral Reserves in the TRS due to differences in calculation standards under S-K 1300 compared to NI 43-101. Under S-K 1300, a Proven Mineral Reserve is the economically mineable part of an indicated and, in some cases, a measured mineral resource and a Probable Mineral Reserve is the economically mineable part of a measured mineral resource and can only result from conversion of a measured mineral resource.
Mineral Reserves Summary (Metric Units) at December 31, 2021 based on $1,600/oz gold:
Average Grade
Total Contained Metal
Deposit
Tonnage
Gold
Antimony
Silver
Gold
Antimony (3)
Silver
Metric Units
(kt)
(g/t)
(%)
(g/t)
(t)
(t)
(t)
Yellow Pine
Low Sb Sulfide –Probable
37,615
1.69
0.009
1.56
63.7
3,565
58.5
High Sb Sulfide –Probable
10,232
2.04
0.460
4.69
20.9
47,064
48.0
Yellow Pine Probable Mineral Reserves
47,847
1.77
0.106
2.23
84.5
50,629
106.5
Hangar Flats
Low Sb Sulfide – Probable
5,167
1.34
0.018
1.65
6.9
954
8.5
High Sb Sulfide – Probable
3,095
1.92
0.369
4.85
5.9
11,407
15.0
Hangar Flats Probable Mineral Reserves
8,262
1.56
0.150
2.85
12.9
12,361
23.5
West End (1)
Oxide – Probable
4,749
0.54
—
0.87
2.6
—
4.1
Low Sb Sulfide – Probable
15,242
1.33
—
1.30
20.2
—
19.7
Transitional – Probable
25,839
1.03
—
1.49
26.6
—
38.5
West End Probable Mineral Reserves
45,830
1.08
—
1.36
49.3
—
62.3
Historical Tailings (1)
Low Sb Sulfide – Probable
1,832
1.16
0.166
2.86
2.1
3,036
5.2
High Sb Sulfide – Probable
855
1.16
0.166
2.86
1.0
1,417
2.4
Historical Tailings Probable Mineral Reserves
2,687
1.16
0.166
2.86
3.1
4,453
7.7
Probable Mineral Reserves
Oxide – Probable
4,749
0.54
—
0.87
2.6
—
4.1
Low Sb Sulfide –Probable
59,856
1.55
0.013
1.54
92.9
7,555
92.0
High Sb Sulfide –Probable
14,181
1.96
0.422
4.61
27.8
59,888
65.4
Transitional – Probable
25,839
1.03
—
1.49
26.6
—
38.5
Total Probable Mineral Reserves (2)
104,625
1.43
0.064
1.91
149.9
67,443
200.0
Notes:
(1) Historical Tailings ore type classification is proportional to the pit-sourced mill feed during Historical Tailings processing.
(2) Metal prices used for Mineral Reserves: $1,600/oz Au, $20.00/oz Ag, $3.50/lb Sb.
(3) Antimony values are reported only for ore scheduled in the mine plan that is classified as High Sb Sulfide.
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Mining Methods
The mine plan developed for the Project incorporates the mining of the three in situ deposits: Yellow Pine, Hangar Flats, and West End and their related development rock; and the re-mining of Historical Tailings along with its cap of spent heap leach ore. The general sequence of open pit mining would be Yellow Pine deposit first, Hangar Flats deposit second, and West End deposit last. This sequence generally progresses from mining highest value ore to lowest value ore and accommodates the sequential backfilling the Yellow Pine and Hangar Flats open pits with material mined from West End open pit. Lower grade ore extracted during mining of the three pits is stockpiled and then processed during the operating life of the mill. The spent ore that overlies the Historical Tailings would be used as tailings storage facility (“TSF”) construction material and is treated as stripping. Most development rock would be sent to one of five destinations: the TSF embankment, the TSF buttress, the Yellow Pine pit as backfill, the Hangar Flats pit as backfill, or the Midnight area within the West End pit as backfill. The Historical Tailings would be hydraulically transferred to the process plant during the first four years of operation, concurrent with mining ore from the Yellow Pine open pit.
Mining at the SGP would be accomplished using conventional open pit hard rock mining methods with a production fleet consisting of two 28-yd3 hydraulic shovels, one 28-yd3 wheel loader, and a fleet of approximately eighteen 150 ton haul trucks. Mining is planned to deliver 7.30 Mt of ore to the crusher per year (nominally 20 kt per day) and approximately 22.1 Mt of development rock per year to DRSFs. Pre-stripping the open pits would begin two years prior to ore processing and open pit mining would continue until year 12 of operation. Once open pit mining is completed, the mining fleet will continue to provide ore to the mill from ore stockpiles until approximately the end of the first quarter in year 15. A total of 102 Mt of ore would be mined from the three open pits and an additional 2.7 Mt of historic tailings would be mined. Approximately 254 Mt of development rock would be mined from the three open pits for a total of 356 Mt mined from the open pits and an average strip ratio (waste:ore) of 2.5.
Long-term lower-grade ore stockpiles have been incorporated into the PFS mine plan located for the most part within the footprint of the TSF buttress, thereby minimizing their incremental disturbance. The primary benefits to adding ore stockpile capacity is increased potential to optimize process ore feed value throughout the mine life, improved utilization of the Mineral Resource, reduced peak water treatment needs, reduced development rock tonnage and associated mining impacted water management. The stockpiling strategy is particularly significant during the first half of the mine life when Yellow Pine high value ore is mined at a rate greater than process plant throughput capacity. If stockpile capacity is not available, either the period-based cut-off value must increase resulting in ore converted to waste, or the mining rate reduced to align with process plant throughput capacity resulting in deferred access to high-value ore deeper in the open pit. The addition of long-term ore stockpiles allows for relatively high value ore mined from Yellow Pine open pit to be stockpiled and made available to process when lower value ore is being mined in West End open pit.
Recovery Methods
The process flowsheet for most of the Yellow Pine, Hangar Flats, and West End material uses bulk sulfide flotation to maximize recovery of gold to a sulfide concentrate amenable to treatment by pressure oxidation for materials assaying less than 0.1% antimony. High antimony materials would be first subject to a selective antimony flotation process, thereby producing a shippable antimony concentrate, with a gold-bearing bulk sulfide rougher concentrate to be floated from the antimony flotation tailings. Some of the oxidized West End ores are more transitional or free milling in nature, and an ore leaching process was developed to treat these materials. Testing was also conducted on samples of the historical (Bradley) tailings. This work showed the historical tailings could be processed using the same flowsheet as, and most likely as a blend with, fresh sulfide ores.
Projected gold flotation recoveries for low-antimony materials to a concentrate assaying 6.5% sulfur are estimated at 93.8% for Yellow Pine and 92.1% for Hangar Flats. Silver recoveries are estimated as 90.1% for Yellow Pine and 89.1% for Hangar Flats. Gold and silver flotation recoveries are independent of gold or sulfur grade. For high-antimony materials from the Yellow Pine deposit, gold misplacement to the antimony concentrate and overall gold recoveries to POx are functions of pyritic sulfur grade and gold recoveries are estimated to range from 83.6% to 95.5%. Constant gold and silver recoveries are projected for Hangar Flats high-antimony material at 89.7% for gold and 43.2% for silver. West End sulfide material is highly refractory while transition material has a significant free milling gold content. Sulfide material will be processed by flotation, concentrate POx and cyanide leaching of the concentrate; transition material will be treated similarly, however the flotation tailings will also be leached; oxide materials will just be leached.
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Pressure oxidation testing results demonstrated that neutralization of acid inside the autoclave, or “in-situ acid neutralization” (“ISAN”) facilitates stabilization of arsenic in the POx residue. Neutralization of acid inside the autoclave was accomplished by adding ground limestone in the POx feed to control free acid and sulfate concentrations and limit the formation of jarosite and basic iron sulfates. Higher ferric concentrations available for scorodite formation and lower sulfate concentrations were found to inhibit pitticite (an unstable arsenic compound) formation. However, subsequent environmental geochemical testing completed on commingled flotation and detoxified cyanide leach tailings from the pilot plant indicated that arsenic destabilized at some point downstream of the POx process. Further ISAN POx tests with a terminal free acid of 8 to 13 mg/L of H2SO4, atmospheric arsenic precipitation, and a two-step neutralization procedure at an elevated temperature (92°C) by progressively adding limestone to achieve a pH of approximately 2 with a retention time of 4 to 5 hours produced a stable scorodite precipitate.
The POx testing confirmed consistent gold recoveries in the 96.5-99.0% range.
The Project’s process plant has been designed to process sulfide, transition and oxide material from the Yellow Pine, Hangar Flats, and West End deposits. The processing facility is designed to treat an average of 20,000 t/d, or 7.3 Mt/y. Additionally, the Historical Tailings would be reprocessed early in the mine life to recover precious metals and antimony, and to provide space for the TSF embankment and buttress.
The process operations include crushing, grinding, antimony and gold flotation, pressure oxidation, POx leaching and carbon-in-pulp (“CIP”) recovery, cyanide detoxification, carbon handling and pressure stripping, precious metal electrowinning, mercury retort removal, and doré bar production. Auxiliary operations include a plant to supply oxygen to the autoclave and mining, crushing, grinding, and calcining to provide limestone and lime for neutralization and pH adjustment for the process. A leaching, CIP recovery, and detoxification process is planned for late in the mine life to process crushed and ground oxide material and recover gold from the tailings of transitional (mixed oxide-sulfide) material. Two finished products from the Stibnite Gold Project ore processing facility will be doré bars and antimony‐silver concentrate.
Infrastructure
The Project will require upgrades to existing offsite infrastructure such as roads and power supply, as well as onsite and offsite infrastructure additions such as worker accommodations, water management systems, and tailings management systems.
Site Access
The site is currently accessed by the Stibnite Road, National Forest (NF-412), from the village of Yellow Pine, with three alternative routes up to that point. Alternative access via the Burntlog Route was developed over several other possible alternatives because it provides safer year round access for mining operations, reducing the proximity of roads to major fish-bearing streams, and this route respects the advice and privacy of community members close to the Project location. The route originates from the intersection of Highway 55 and Warm Lake Road and is approximately 71 miles long. The route consists of 34 miles of existing highway (Warm Lake Road), 23 miles of upgraded road, and 14 miles of new road. The 37 miles of new and upgraded road has a design speed of 20 mph, maximum 10% grade, a 21 foot width, and intermediate-sized tractor trailer loading criteria. A maintenance facility along the route is designed for a location on the southern section.
A through-site public access route will replace the current access through the SGP site during mine operations. A new 12-foot-wide gravel road is planned to provide public access from Stibnite Road to Thunder Mountain Road through the mine site.
Logistics Facility
The offsite administrative offices, transportation hub, warehousing and assay laboratory needed for the Project, referred to as Stibnite Gold Logistics Facility (“SGLF”), will be located on private land in Valley County, with easy access to State Highway 55. The SGLF will include offices for managers, safety and environmental services, human resources, purchasing and accounting personnel. Operating supplies for the mine will be staged and consolidated at the SGLF to reduce traffic to the site.
Power Supply and Transmission
Grid power planned for the Project needs to be upgraded to support the 50- to 60-megawatt load including upgrading approximately 63 miles of existing powerlines to 138 kV and approximately 9 miles of new 138 kV line. The 138-kV line would be routed to the Project’s main electrical substation where transformers would step the voltage down to the distribution voltage of 34.5 kV.
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Table of Contents
Worker Accommodations
A new worker housing facility (camp) is planned approximately 2 miles south of the ore processing plant area to provide accommodations for most of the construction workforce and for the operations workforce. Leased accommodation units are planned during peak construction activity and would be demobilized following construction since the peak construction accommodation requirements (approximately 1,000 workers) are much greater than the operations requirements of approximately 350 workers on the site.
Water Management
Perpetua Resources has planned a water management system that protects or improves water quality in Project-area streams and provides water for ore processing, fire protection, exploration activities, surface mining (dust control), and potable water needs.
The key water management consideration for the Project site is the large amount of snowmelt runoff during the months of April through June, making spring melt the critical time for water management, storage, and treatment. Surface water that has the potential to introduce mining- and process-related contaminants (contact water) is kept separate from surface water that originates from undisturbed, uncontaminated ground (non-contact water). This is accomplished by diverting clean water around mine facilities and collecting and reusing, evaporating, or treating and discharging contact water.
The water needed for ore processing is planned to come from meteoric and tailings consolidation water reclaimed from the TSF, water from pit dewatering, contact water, groundwater wells, and a surface intake near the upstream portal of the East Fork South Fork Salmon River (“EFSFSR”) diversion tunnel. Contact water from the pits, stockpiles, TSF buttress, truck shop, ore processing facilities, and legacy materials exposed during construction would be collected in lined ponds or in-pit sumps for later use in ore processing, dust control, or treatment for discharge. Excess dewatering water not used for ore processing would be treated, if required, and discharged to a surface outfall.
Major water diversions include construction of a tunnel and fishway to divert the EFSFSR and provide fish passage around the Yellow Pine pit, and surface diversions of Meadow Creek at the TSF, TSF Buttress, and Hangar Flats pit.
Tailings Management
The Project is projected to produce approximately 120 million tons of tailings solids. The tailings would contain trace amounts of cyanide and metals (including arsenic and antimony), so a fully lined containment facility utilizing a composite liner is proposed to isolate the tailings and process water.
The TSF would consist of a rockfill embankment, a fully lined impoundment, and appurtenant water management features including a surface diversion of Meadow Creek and its tributaries around the facility. A rockfill buttress abutting the TSF embankment would substantially enhance embankment stability. Historical spent heap leach ore would be reused in TSF construction, in locations isolated from interaction with water, but the majority of the rockfill would be development rock sourced from the open pits. Design criteria were established based on the facility size and risk using applicable dam safety and water quality regulations and industry best practice for the TSF embankment on a standalone basis; the addition of the buttress substantially increases the safety factor for the design to at least double the minimum requirements. The TSF impoundment, embankment, and associated water diversions would occupy approximately 420 acres at final buildout, with an approximately 475-foot ultimate height.
Capital and Operating Costs
Capital expenditures or capital costs (“CAPEX”) and operating expenditures or operating costs (“OPEX”) estimates were developed based on third quarter 2020, un-escalated U.S. dollars. Vendor quotes were obtained for all major equipment and operating consumables. Most costs were developed from first principles, although some were estimated based on factored references and experience with similar projects elsewhere. Reclamation financial assurance costs are not included in the capital costs. Additional assumptions that were used to estimate CAPEX are presented in Section 18.1 of the TRS.
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Table of Contents
Capital Costs
The Project CAPEX estimate includes four components: (1) the initial CAPEX to design, permit, pre-strip, construct, and commission the mine, plant facilities, ancillary facilities, utilities, operations camp, and pre-production on and off site restoration and environmental mitigation; (2) the sustaining CAPEX for facilities expansions, mining equipment replacements, expected replacements of process equipment and ongoing concurrent restoration and environmental mitigation activities during the operating period; (3) working capital to cover delays in the receipts from sales and payments for accounts payable and financial resources tied up in inventory; and (4) closure CAPEX to cover post operations reclamation and restoration and water treatment costs. Initial and working capital are the two main categories that need to be available to construct the Project.
The CAPEX estimate includes direct mining equipment and pre-stripping costs, process plant costs, on-site infrastructure such as the TSF and the operations camp, and off-site infrastructure such as the power transmission line, the mine access road, the SGLF, and reclamation and closure costs. The initial CAPEX also includes indirect costs for detailed design and engineering, land acquisition, some environmental mitigation, and other costs. Initial CAPEX also includes an estimate of contingency based on the accuracy and level of detail of the cost estimate. The purpose of the contingency provision is to make allowance for uncertain cost elements that may occur but are not included in the cost estimate. These cost elements include uncertainties concerning completeness, accuracy and characteristics or nature of material takeoffs, accuracy of labor and material rates, accuracy of labor productivity expectations, and accuracy of equipment pricing. The CAPEX estimates are considered to have an accuracy range of -10% to +15%.
The table below provides a summary of CAPEX estimates for the Project.
Initial
Sustaining
Closure
Total
CAPEX
CAPEX
CAPEX
CAPEX
Area
Detail
($000s)
($000s)
($000s) (1)
($000s)
Direct Costs
Mine Costs
84,019
118,968
—
202,987
Processing Plant
433,464
49,041
—
482,505
On-Site Infrastructure
190,910
83,892
—
274,802
Off-Site Infrastructure
115,940
—
—
115,940
Indirect Costs
232,684
—
—
232,684
Owner’s Costs, First Fills, & Light Vehicles
38,351
—
—
38,351
Offsite Environmental Mitigation Costs
14,397
—
—
14,397
Onsite Mitigation, Monitoring, and Closure Costs
3,474
23,484
98,052
125,010
Total CAPEX without Contingency
1,113,239
275,385
98,052
1,486,677
Contingency
149,708
20,354
1,244
171,306
Total CAPEX with Contingency
1,262,948
295,739
99,296
1,657,982
Notes:
(1) Closure assumes self-performed closure costs, which will differ for those assumed for financial assurance calculations required by regulators.
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Table of Contents
Operating Costs and All-In Costs
The Project OPEX estimate includes mine operating costs, process plant operating costs, and general and administrative (“G&A”) costs. Cash costs, expressed in dollars per short ton ($/st) milled or dollars per troy ounce of gold ($/oz Au) produced, are typically expressed before and after by-product credits (from antimony concentrate sales). Total cash costs include smelting and refining charges, transportation charges, and royalties. The All-In Sustaining Costs (“AISC”) and the All-In Costs (“AIC”) include non-sustaining CAPEX, and closure and reclamation CAPEX, respectively. A summary of these Project costs is presented below. Assumptions that were used to estimate OPEX are presented in Section 18.2 of the TRS.
Years 1-4
LOM
Total Production Cost Item
($/st milled)
($/oz Au)
($/st milled)
($/oz Au)
Mining
9.71
156
8.22
205
Processing
13.13
211
12.76
318
G&A
3.54
57
3.43
85
Cash Costs Before By-Product Credits (1)
26.38
424
24.41
608
By-Product Credits
(5.99)
(96)
(2.81)
(70)
Cash Costs After By-Product Credits (1)
20.40
328
21.60
538
Royalties
1.69
27
1.09
27
Refining and Transportation
0.46
7
0.24
6
Total Cash Costs (1)
22.54
362
22.94
571
Sustaining CAPEX
4.64
75
2.83
70
Salvage
—
—
(0.26)
(6)
Property Taxes
0.05
1
0.04
1
All-In Sustaining Costs (1)
27.23
438
25.54
636
Reclamation and Closure (2)
—
—
0.95
24
Initial (non-sustaining) CAPEX (3)
—
—
11.65
290
All-In Costs
—
—
38.14
950
Notes:
(1) Cash costs, All-in Sustaining Costs, are non-GAAP measures; see section Item 2, Non-GAAP Measures , below.
(2) Defined as non-sustaining reclamation and closure costs in the post-operations period.
(3) Initial Capital includes capitalized preproduction .
Economic Analysis
The economic model is not a true cash flow model as defined by financial accounting standards but rather a representation of Project economics at a level of detail appropriate for the Company’s level of engineering and design. The first year of analysis starts with the decision point of the Project, the completion of the Environmental Impact Statement, and preliminary permit approval (Year -3 or three years before the start of commercial production). Taxation was taken into account using current federal, state, and county rates but the overall tax calculation is approximate and uses rudimentary depletion and depreciation estimates.
Financial Assumptions used in the Economic Analyses
Item
Unit
Value
Net Present Value Discount Rate
%
5
Federal Income Tax Rate
%
21
Idaho Income Tax Rate
%
6.9
Idaho Mine License Tax
%
1.0
Valley County Rural Property Tax Rate ($/$1,000 market value)
%
0.063
Percentage Depletion Rate for Gold and Silver
%
15
Percentage Depletion Rate for Antimony
%
22
Depreciation Term
Years
7
Equity Finance Assumption
%
100
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Table of Contents
Four cases were run in the economic model to present a range of economic outcomes using varying metal prices. The metal prices used in the economic model are shown in the table below. There is no guarantee that any of the metal prices used in the five cases are representative of future metals prices. Table 1-11 and Section 19.1of the TRS contain assumptions used in the construction of the financial model.
Pre- and After-Tax Economic Results by Case
Parameter
Unit
Pre-tax Results
After-tax Results
Case A ($1,350/oz Au, $16.00/oz Ag, $3.50/lb Sb)
NPV 0%
M$
1,637
1,434
NPV 5%
M$
896
771
Annual Average EBITDA (1)
M$
223
—
Annual Average After-Tax Free Cash Flow (1)
M$
—
189
IRR
%
17.3
16.2
Payback Period
Production Years
3.4
3.4
Case B ($1,600/oz Au, $20.00/oz Ag, $3.50/lb Sb)
NPV 0%
M$
2,667
2,232
NPV 5%
M$
1,599
1,320
Annual Average EBITDA (1)
M$
292
—
Annual Average After-Tax Free Cash Flow (1)
M$
—
242
IRR
%
24.3
22.3
Payback Period
Production Years
2.9
2.9
Case C ($1,850/oz Au, $24.00/oz Ag, $3.50/lb Sb)
NPV 0%
M$
3,697
3,026
NPV 5%
M$
2,301
1,864
Annual Average EBITDA (1)
M$
360
—
Annual Average After-Tax Free Cash Flow (1)
M$
—
295
IRR
%
30.4
27.7
Payback Period
Production Years
2.4
2.5
Case D ($2,100/oz Au, $28.00/oz Ag, $3.50/lb Sb)
NPV 0%
M$
4,726
3,815
NPV 5%
M$
3,002
2,404
Annual Average EBITDA (1)
M$
429
—
Annual Average After-Tax Free Cash Flow (1)
M$
—
348
IRR
%
35.9
32.4
Payback Period
Production Years
2.2
2.2
Case E ($2,350/oz Au, $32.00/oz Ag, $3.50/lb Sb)
NPV 0%
M$
5,755
4,603
NPV 5%
M$
3,704
2,943
Annual Average EBITDA (1)
M$
498
—
Annual Average After-Tax Free Cash Flow (1)
M$
—
400
IRR
%
41.0
36.9
Payback Period
Production Years
1.9
1.9
Notes:
(1) EBITDA and After-Tax Free Cash Flow are non-GAAP measures; see section Item 2, Non-GAAP Measures , below.
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Mineral Resource and Reserve Internal Controls
Perpetua Resources’ field work on the Project from 2009 to 2015, including drilling, was carried out under the supervision of Christopher Dail, CPG and Richard Moses, CPG, who were Perpetua Resources’ senior geologists responsible for certain aspects of the programs during the periods they were employed by Perpetua Resources. Field work, including drilling, completed in 2015-2017 was carried out under supervision of Kent Turner, independent senior geology consultant and SME-Registered Member, and Austin Zinsser, Perpetua Resources’ Senior Resource Geologist and SME-Registered Member. The general mineral resource estimation methodology for all deposits involved the following procedures:
● generation of updated geological models and review of structural controls on mineralization;
● database verification and validation;
● exploration data analysis, compositing and evaluation of outliers;
● construction of estimation domains for gold, antimony and silver;
● spatial statistics and geostatistical analysis;
● block modeling and grade interpolation;
● mineral resource classification and validation;
● assessment of “reasonable prospects for eventual economic extraction;” and
● preparation of the mineral resource statement.
● Quality Assurance/Quality Control program results do not indicate any problems with the analytical programs.
● Independent data audits have been conducted and indicate that the sample collection and database entry procedures are acceptable.
● All core has been catalogued and stored in designated areas.
Mineral resources and mineral reserves are estimates that are imprecise and depend upon geologic interpretation and statistical inferences drawn from drilling and sampling analysis, which may prove to be unreliable. See Risk Factors – “Perpetua Resources’ mineral resource and mineral reserve estimates may not be indicative of the actual gold that can be mined. ”
Non-GAAP financial measures
To provide investors with additional information in connection with our economic analysis as determined in accordance with accounting principles generally accepted in the United States of America (“GAAP”), we disclose certain projected non-GAAP financial measures. The projected non-GAAP financial measures include Cash Costs, EBITDA, All-in Sustaining Costs and After-Tax Free Cash Flow estimates and related calculations.
Cash Cost and All-in Sustaining costs (AISC)
Cash Costs is a non-GAAP metric defined as the sum of cash operating costs (mining, processing, G&A), by-product credits, refining and transportation costs and royalties and is used to evaluate the Company’s future operating performance and provide visibility into the economics of our future mining operations.
All-in Sustaining Costs (AISC) is a non-GAAP metric defined as the sum of cash costs (from above), sustaining capital costs and non-revenue-based taxes (i.e. property tax) and is used to evaluate the Company’s future operating performance and the ability to generate cash flow from operations.
EBITDA
Earnings before interest, taxes and depreciation and amortization (EBITDA) is a non-GAAP metric generated from adding back taxes, interest, depreciation to net income and is used to evaluate the Company’s future operating performance.
After-Tax Free Cash Flow (FCF)
After-Tax Free Cash Flow (FCF) is a non-GAAP metric defined as net cash provided from operating activities less capital expenditures and taxes and is used to evaluate the Company’s future operating performance and ability to generate excess cash flow but it does not entirely represent cash available for discretionary expenditures due to the fact that the measure does not deduct the payments required for debt service and other items.
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We believe the projected non-GAAP financial measures included in this Annual Report on Form 10-K provide additional meaningful comparisons between the Company’s economic analysis and its peer companies. These projected non-GAAP financial measures are not historical measures of financial performance and are not presented in accordance with GAAP. Therefore, these measures should not be considered in isolation or as an alternative or superior to GAAP measures. You should be aware that our presentation of these measures may not be comparable to similarly-titled measures used by other companies. The projected non-GAAP measures included in this presentation cannot be reconciled to comparable GAAP measures without unreasonable effort.