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Aquila Resources Announces Positive Feasibility Study Results for its Back Forty Project

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Aquila Resources Announces Positive Feasibility Study Results for its Back Forty Project

Canada NewsWire

- After-tax NPV at a 6% discount rate of US$208M, IRR of 28.2% and Capex of US$294M -

Shares Outstanding: 337,568,556

TORONTO, Aug. 1, 2018 /CNW/ - Aquila Resources Inc. (TSX:AQA) ("Aquila" or the "Company") announced today the results of an independent open pit only Feasibility Study ("Feasibility Study") completed on its 100% owned zinc- and gold-rich Back Forty Project in Michigan. The Feasibility Study was compiled by Lycopodium Minerals Canada Ltd ("Lycopodium") with support from globally recognized experts and specialist consulting engineering companies in environmentally critical areas such as waste water treatment, tailings and waste rock management and mine design. All economic values within this news release are in US dollars unless indicated otherwise.

"The completion of the Back Forty Project Feasibility Study is a significant milestone for Aquila and sets the stage for the next steps to develop this deposit," said Barry Hildred, President and Chief Executive Officer of Aquila. "Back Forty is well-positioned as a permitted project in a favourable mining jurisdiction that is close to existing infrastructure. We can now focus the Company's resources on the pre-construction phase at Back Forty while considering funding alternatives to complete the development of the Project."

Highlights

  • Pre-tax NPV at a 6% discount rate of $259M and IRR of 32.0% at base case metal prices of $1,300/oz gold, $1.20/lb zinc, $20/oz silver, $3.00/lb copper and $1.00/lb lead.
  • After-tax NPV at a 6% discount rate of $208M and IRR of 28.2% with a 2.2 year payback.
  • Open pit Proven and Probable Mineral Reserves of 11.65M tonnes.
  • A project life of seven years with total payable gold production of 468,000 oz (or an average of 67,000 oz per year) and 135,000 oz in Year 1. Total payable gold equivalent production of 1.1 million oz.
  • Total payable zinc production of 512M lbs (or an average of 73M lbs per year). Total payable zinc equivalent production of 1.2B lbs.
  • Initial project capital costs estimated at $294M with a 24-month construction period.
  • Sustaining capital costs of $110.6M.
  • Gross C1 cash costs1 of $499/oz gold equivalent or $0.46/lb zinc equivalent and net C1 cash costs of -$590/oz gold or -$1.73/lb zinc.
  • Gross AISC2 of $677/oz gold equivalent or $0.62/lb zinc equivalent and net AISC of -$171/oz gold or -$1.34/lb zinc.
  • The Company has also identified a number of opportunities to further enhance the overall economics of the Project including the future addition of an underground expansion.

Andrew Boushy, P.Eng., Senior Vice President, Projects commented, "I want to thank our entire expanded team of specialists and consultants for all of their efforts in helping us complete the Feasibility Study. The robust results of the study clearly demonstrate that Back Forty is a compelling project based only on an open pit operation and we see several opportunities to further enhance value that will be advanced during the detailed engineering phase. We have set the bar high for environmental protection and plan to engage local contractors who live in the community in which we will operate."

____________________________

1 C1 cash costs, which are intended to measure direct cash costs of producing paid metal, does not have a standardized meaning under IFRS. See "Non-IFRS Measures".

2 All-in sustaining costs ("AISC") does not have a standardized meaning under IFRS. See "Non-IFRS Measures".

 

Back Forty Project Background

The Back Forty Project (the "Project") is a polymetallic (zinc, gold, copper, silver, lead) Volcanogenic Massive Sulphide ("VMS") deposit located in Menominee County, Michigan, USA. The Back Forty deposit was originally discovered in 2002, and is currently wholly-owned by Aquila. The Project is located approximately 55 km south-southeast from Iron Mountain, and approximately 19 km west of Stephenson, Michigan.

Mineralization at the Back Forty deposit consists of discrete zones of: 1) zinc or copper-rich massive sulphide (±lead), which may contain significant amounts of gold and silver, 2) stockwork stringer and peripheral sulphide, which can be gold, zinc, and copper-bearing (±lead/silver), 3) precious metal-only, low-sulphide mineralization, and 4) oxide-rich, precious metal-bearing gossan.

Major aspects of the Project include mine open pit, hydrological cut-off wall, oxide and sulphide processing plants, tailings management facility, waste rock storage facilities, contact and non-contact water basins, mine services, access road and a state of the art waste water treatment plant.  The reclamation and closure plan includes the backfilling of the open pit with waste rock and the capping of the tailings and waste rock facility followed by a minimum of 20 years of environmental monitoring as required by Michigan law.

Access to the facility is from the west side of the Project from the existing River Road. Principal access will be via a main security gate near the process plant. Power to the site will be provided via an incoming high voltage line from the east side of the Project.

Mineral Reserve Estimate

The Proven and Probable Mineral Reserve Estimate for the Project is summarised in the table below.  Approximately 70% of the Mineral Reserve Estimate is in the Proven category. Only Measured and Indicated Mineral Resources are included in the open pit Mineral Reserve Estimate. The Mineral Reserve Estimate was prepared by P&E Mining Consultants Inc.

Back Forty Mineral Reserve Estimate as at February 6, 2018


Ore

Mt

NSR

$/t

Gold

g/t

Silver

g/t

Zinc

%

Lead

%

Copper

%

Proven

8.12

$120

1.95

18.4

3.02

0.13

0.35

Probable

3.53

$85

1.63

29.3

1.76

0.41

0.10

Proven + Probable

11.65

$109

1.85

21.7

2.64

0.21

0.28


1.

CIM definitions were followed for the Mineral Reserve Estimate.

2.

The Mineral Reserve Estimate used average long term metal prices of $1,250/oz gold; $20.00/oz silver;  $1.15/lb zinc; $1.00/lb lead; and $3.00/lb copper. 

3.

A Mineral Reserve is defined within a mine plan, with pit phase designs guided by Lerchs–Grossmann (LG) pit shells, after dilution and mining loss adjustments.

4.

The Mineral Reserve Estimate is derived from Measured and Indicated Mineral Resources only.

5.

Metallurgical recovery used was a variable function of the rock type and metal grade.  

6.

The Mineral Reserve Estimate for the Project will be comprised of eight different ore types that will be processed either though a flotation concentrator or cyanide leach plant. NSR cut-off values applied are: Ore 1 - $16.50/t, Ore 2,3,4,7,8 - $16.00/t, Ore 5 - $17.50/t, and Ore 6 - $28.50/t.

7.

The life-of-mine strip ratio is 4.3:1 including the pre-construction period.

 

Mineral Resource Estimate

The Mineral Resource Estimate from which the Mineral Reserve is derived from is set out below and was prepared by P&E Mining Consultants Inc.

Back Forty Mineral Resource Estimate as at February 6, 2018

Area

Metallurgy
Type

Class

NSR

Cut-off

Tonnes

Gold

Gold

Silver

Silver

Zinc

Zinc

Copper

Copper

Lead

Lead

$/tonne

(1,000)

g/t

K oz

g/t

K oz

%

M lb

%

M lb

%

M lb

Pit

Constr-
ained

Floatable

Meas

21

6,797

1.75

381

18.4

4,027

3.45

516.5

0.38

56.4

0.16

23.4

Ind

21

3,768

1.58

191

25.2

3,056

3.15

261.7

0.24

19.9

0.39

32.8

M & I

21

10,565

1.68

572

20.9

7,083

3.34

778.2

0.33

76.3

0.24

56.2

Inf

21

71

1.01

2

30.7

70

2.98

4.7

0.14

0.2

0.37

0.6

Leachable

Meas

22

553

5.61

100

34.8

618

0.19

2.4

0.05

0.6

0.13

1.5

Ind

22

1,777

2.15

123

39.6

2,263

0.41

16.1

0.03

1.3

0.29

11.5

M & I

22

2,330

2.97

223

38.5

2,881

0.36

18.5

0.04

1.9

0.25

13.0

Inf

22

378

3.62

44

40.1

487

0.38

3.2

0.06

0.5

0.52

4.3

Total

Meas

21+22

7,350

2.04

481

19.7

4,645

3.20

518.8

0.35

57.0

0.15

24.9

Ind

21+22

5,545

1.76

314

29.8

5,319

2.27

277.8

0.17

21.2

0.36

44.3

M & I

21+22

12,895

1.92

795

24.0

9,964

2.80

796.6

0.28

78.2

0.24

69.2

Inf

21+22

448

3.21

46

38.6

557

0.79

7.9

0.07

0.7

0.49

4.9

Out of Pit

Floatable

Meas

70

556

1.79

32

26.8

480

5.32

65.2

0.33

4.0

0.41

5.0

Ind

70

3,059

1.84

180

26.2

2,577

4.23

285.4

0.51

34.3

0.30

20.3

M & I

70

3,615

1.83

213

26.3

3,057

4.40

350.7

0.48

38.4

0.32

25.3

Inf

70

544

2.96

52

37.5

656

1.38

16.6

0.62

7.5

0.39

4.6

Leachable

Meas

70

37

7.38

9

74.3

89

0.31

0.3

0.12

0.1

0.11

0.1

Ind

70

77

3.85

9

47.3

117

0.32

0.5

0.15

0.2

0.13

0.2

M & I

70

114

5.01

18

56.1

206

0.32

0.8

0.14

0.3

0.13

0.3

Inf

70

137

5.93

26

81.0

356

0.42

1.3

0.16

0.5

0.49

1.5

Total

Meas

70

593

2.14

41

29.8

569

5.01

65.5

0.32

4.1

0.39

5.1

Ind

70

3,135

1.88

190

26.7

2,694

4.14

286.0

0.50

34.6

0.30

20.5

M & I

70

3,729

1.93

231

27.2

3,262

4.28

351.5

0.47

38.7

0.31

25.7

Inf

70

680

3.56

78

46.2

1,011

1.19

17.8

0.53

8.0

0.41

6.1

Total

Floatable

Meas

21+70

7,353

1.75

414

19.1

4,507

3.59

581.7

0.37

60.5

0.18

28.4

Ind

21+70

6,827

1.69

371

25.7

5,633

3.64

547.1

0.36

54.2

0.35

53.1

M & I

21+70

14,180

1.72

785

22.2

10,140

3.61

1,128.8

0.37

114.7

0.26

81.5

Inf

21+70

615

2.74

54

36.7

726

1.57

21.2

0.57

7.7

0.38

5.2

Leachable

Meas

22+70

590

5.72

109

37.3

707

0.20

2.6

0.05

0.7

0.12

1.6

Ind

22+70

1,854

2.22

132

39.9

2,380

0.41

16.7

0.04

1.6

0.29

11.7

M & I

22+70

2,444

3.07

241

39.3

3,087

0.36

19.3

0.04

2.2

0.25

13.4

Inf

22+70

514

4.24

70

51.0

842

0.39

4.5

0.09

1.0

0.51

5.8

Total

Meas

21+22+70

7,943

2.04

522

20.4

5,214

3.34

584.3

0.35

61.2

0.17

30.0

Ind

21+22+70

8,680

1.80

504

28.7

8,013

2.95

563.8

0.29

55.8

0.34

64.9

M & I

21+22+70

16,623

1.92

1,026

24.7

13,227

3.13

1,148.1

0.32

116.9

0.26

94.9

Inf

21+22+70

1,129

3.42

124

43.2

1,568

1.03

25.7

0.35

8.7

0.44

11.0



1.

Mineral Resources which are not Mineral Reserves do not have demonstrated economic viability. 

2.

The Inferred Mineral Resource in this estimate has a lower level of confidence that that applied to an Indicated Mineral Resource and must not be converted to a Mineral Reserve. It is reasonably expected that the majority of the Inferred Mineral Resource could be upgraded to an Indicated Mineral Resource with continued exploration.

3.

The Mineral Resource was estimated using CIM guidelines and include the Mineral Reserve.

4.

Metallurgical type Oxide (all gold domains and leachable Gossans) is leachable, while all other metallurgical types are flotable.

5.

The Mineral Resource Estimate was based on metal prices of $1,375/oz gold, $22.27/oz silver, $1.10/lb zinc, $3.19/lb copper and $1.15/lb lead. 

 

Mining

The Project area consists of subdued terrain and topography. The area, topography and climate are amenable to the conventional open pit mining operations proposed for the Project.  No underground mining is planned at this stage although the potential for underground mining will be evaluated in the near future.

The mining operations will encompass a single large open pit that will be mined with conventional mining equipment in three pushback phases. The mining fleet will consist of major equipment used directly in the rock-moving operation including blast hole drills, hydraulic excavators, and 91 t haul trucks. Various support equipment will be required, such as dozers, graders, water trucks, and light vehicles for maintenance, personnel transport and mine supervision.

For scheduling purposes, the Back Forty open pit was subdivided into three phases. Mining commences in a small higher-grade starter pit and subsequently expands outwards by pushing back the pit walls.  This enables annual waste stripping quantities to be distributed over time to avoid highly variable annual total material mined tonnages.

A summary of the phase tonnages is shown in the table below. 

Pit Phase Tonnages



Phase 1

Phase 2

Phase 3

Total

Waste Stripping






Over Burden

Mt

1.23

1.65

0.90

3.78

Waste

Mt

4.63

19.43

22.39

46.45

Total Waste

Mt

5.86

21.08

23.29

50.23

Strip ratio

w:o

2.6

4.1

5.4

4.3

Ore Production






Flotation Ore

Mt

1.95

4.33

3.66

9.94

Leach Ore

Mt

0.28

0.78

0.65

1.71

Total Ore

Mt

2.23

5.11

4.30

11.65

Avg NSR

$/t

$135

$98

$109

$109

 

Ore may be delivered either to the primary crusher or placed into one of the nearby stockpiles.  Waste is either taken to a waste storage facility or used in tailings dam construction. 

In order to improve mining selectivity and reduce ore dilution, two different bench heights will be used.  The Oxide and Pinwheel Ore Zones can be narrow and closely spaced, hence they will be mined using a 2.5 m high bench height. In the Main and Tuff Ore Zones and in large waste areas away from the ore zones, bench heights of 5.0 m will be used to minimize unit mining costs. In waste areas near the ore zones, waste must be mined on the 2.5 m bench as part of the ore/waste mining separation. Approximately 10% of the waste rock tonnage will be mined on 2.5 m high benches.

Mineral Processing and Metallurgy

The process plant design for the Project is based on a flexible metallurgical flowsheet designed for treatment of a variety of different ore types.  The flowsheet is based on well proven unit operations in the industry.

The key project design criteria for the process plant are:

  • Nominal throughput of 4,000 tpd sulphide ore and 800 tpd oxide ore.
  • Crushing circuit availability of 75% supported by the use of surge bins and dedicated feeders for choke feeding cone crushers for optimum crushing performance and wear minimization. 
  • Oxide and sulphide process plant availability of 91.3% through the use of standby equipment in critical areas and reliable grid power supply.
  • Sufficient automated plant control to minimize the need for continuous operator interface and allow manual override and control if and when required.

Sulphide Mineral Reserve that will be processed through the flotation concentrator have been classified into five ore types from three zones:

  • Main Zone - Representing over half of sulphide mineralization, will produce separate zinc and copper concentrates, each containing payable levels of gold and silver.
  • Tuff Zone - Representing approximately one third of sulphide mineralization, will produce separate zinc and lead concentrates, each containing payable levels of gold and silver.
  • Pinwheel Zone - Represents the remaining 12% of mineralization and has been sub-classified into 3 ore types. All Pinwheel ore types will produce copper mineralization that contains payable levels of gold and silver. However, only one of the ore types (Type 8) will produce zinc concentrate and this will not contain any payable by-products.

Project value will be maximized by campaigning the different sulphide ore types through the process plant separately, with the minimum duration of any campaign approximately one month. A total of seven different ore stockpiles will be used to facilitate campaigning and also ensure that both the sulphide and oxide process plants are fed with the highest value ore available.

For the initial 18 months of operation, only Main and Pinwheel type ores will be campaigned through the process plant. After 26 months of operation, Pinwheel ore will be depleted and for the remaining life, only Main and Tuff ores will be campaigned through the process plant.

The overall sulphide process plant flowsheet includes the following steps:

  • Primary crushing.
  • Grinding and classification
  • Bulk rougher flotation.
  • Zinc rougher flotation.
  • Bulk concentrate re-grind.
  • Zinc concentrate re-grind.
  • Bulk cleaner flotation, using three stages of cleaning.
  • Zinc cleaner flotation, using two or three stages of cleaning depending on head grade.
  • Bulk concentrate thickening and filtration.
  • Zinc concentrate thickening and filtration.
  • Tailings thickening and disposal in the common Tailings Management Facility (TMF).

The overall oxide process plant flowsheet includes the following steps:

Three stage crushing using an open circuit jaw crusher, open circuit secondary cone crusher and tertiary cone crusher in closed circuit. 

  • Grinding and classification.
  • Pre-leach thickening.
  • Cyanide leach.
  • CCD washing and clarification of pregnant solution.
  • De-aeration and zinc precipitation (Merrill Crowe).
  • Mercury removal using a retort.
  • Smelting to produce doré.
  • Cyanide destruction of tailings.
  • Tailings thickening and disposal in a common TMF.

Metal Production

Metal production figures are summarized in the table below.

Metal

Life of Project Production

Average Annual Production

Gold (K oz)

468

67

Zinc (K lbs)

512,198

73,171

Copper (K lbs)

51,109

7,301

Silver (K oz)

4,458

637

Lead (K lbs)

24,183

3,455

 

A summary of the life of project revenue by metal, revenue by product, and recovery by metal are included in the tables below.






Revenue by Metal


Revenue by Product


Metal Recovery by Product

Metal

% of Revenue


Product

% of Revenue


Metal

Concentrates

Doré

Gold

41%


Zinc Concentrate

45%


Gold

64.5%

91.6%

Zinc

41%


Copper Concentrate

31%


Zinc

91.7%


Copper

10%


Doré

16%


Copper

80.6%


Silver

6%


Lead Concentrate

8%


Silver

64.1%

68.6%

Lead

2%


Total

100%


Lead

81.5%


Total

100%








 

Concentrate Marketing

In addition to a Doré, the Back Forty Project will produce zinc, copper and lead concentrates. The zinc concentrates will on average grade 52.7%, the copper concentates will on average grade 19.3%, and the lead concentrate will on average grade 35%. Over its seven year life, the Project will on average annually produce 71,160 tonnes of zinc concentrate, 23,120 tonnes of copper concentrate and 5,600 tonnes of lead concentrate. All concentrates are expected to be marketable. Studies are ongoing to evaluate the optimal blends, destinations and transport options for Back Forty concentrates. The Company believes that there are multiple attractive options for each of the concentrates. 

Capital and Operating Costs

The capital estimate is summarized in the following tables by area and by discipline. All costs are based on Q1 2018 pricing. The estimate is deemed to have an accuracy of ±15%.

Capital Estimate Summary by Area

Area

$ M

Indirect Construction

19

Common Plant

20

Oxide Plant

33

Sulphide Plant

59

TMF/WRFs

39

Infrastructure

33

Mining

25

Management Costs

22

Owner costs

13

Subtotal

263

Contingency (12%)

31

Total

294

 

Project Implementation Strategy

The implementation strategy for the Back Forty Project is based on a traditional Engineering, Procurement and Construction Management ("EPCM") implementation approach with horizontal discipline-based contract packaging. Horizontal packages were established for earthworks, building works, concrete works, field erected tankage, structural, mechanical and piping installation, electrical and instrumentation supply and installation. Opportunities for vertical or area packages will be reviewed. An experienced project management firm will be engaged to oversee Engineering and Procurement support ("EP") services for the development of the process plant and the associated infrastructure and directly manage project controls and construction with a focus on project delivery best practices as part of an integrated owner's team with Aquila.

Mine Sustaining Capital

Expenditures incurred after Year -1 are considered sustaining capital and are summarized in the table below. The majority of the sustaining capital consists of capital lease payments for the mining equipment. Given the five year life of the open pit, no equipment replacements are planned.

Mine Sustaining Capital Cost Summary ($ '000)


Year 1

Year 2

Year 3

Year 4

Year 5

Year 6

Year 7

Total

Equip. & Down payments

749

277

-

40

-

100

-

1,165

Equip. Capital Leases

6,420

7,709

8,287

8,287

4,181

84

84

35,052

Mine Development

2,956

163

110

-

-

-

-

3,228

Freight & Spares

358

399

414

416

209

9

4

1,811

Total Mine Sustaining Costs

10,483

8,548

8,811

8,743

4,390

193

88

41,256

 

Project Infrastructure Sustaining Capital

Infrastructure sustaining capital costs include subsequent TMF stage raises over the life of mine, waste rock facility expansion costs, mine closure costs, salvage value and rehabilitation costs. The sustaining capital schedule over the life of mine is estimated as shown in the table below.

Project Sustaining Capital Cost Summary ($ '000)


Year 1

Year 2

Year 3

Year 4

Year 5

Year 6

Year 7

Total

Cut-off Wall

4,658

-

-

-

-

-

-

4,658

Tailings Management Facility

15,734

4,360

5,155

-

1,813

-

-

27,062

South Waste Rock Facility

8,538

-

-

-

-

-

-

8,538

North Waste Rock Facility

9,798

19,263

-

-

-

-

-

29,062

Total Project Sustaining Costs

38,728

23,623

5,155

-

1,813

-

-

69,320

 

Operating Costs

A summary of the life of Project operating costs is outlined in the table below. 

Operating Costs Summary


Life of Project

(NYSE:M)

$/t

ore

Gross Revenue

1,437

123

Realization Charges

180

15

NSR (Base Case)

1,256

108




Mining

160

14

Processing

184

16

G&A

27

2

Total Site Opex

371

32

 

Economic Analysis

A summary of key Back Forty Project metrics is outlined in the table below. The Base Case metal price deck is: $1,300/oz gold, $1.20/lb zinc, $20/oz silver, $3.00/lb copper and $1.00/lb lead.

Summary Economic Analysis – Base Case Metal Prices

Item

Description

Total

Ore

Mt

11.7

Strip Ratio

waste : ore

4.3

Grade

Gold equivalent

4.3 g/t

Grade

Zinc equivalent

6.7%

Total Recovery & Payability

% of con'd ZnEq

69.1%

Payable Zinc

Mlbs 

512

Payable Gold

koz

468

Payable Zinc Equivalent

Mlbs 

1,197

Payable Gold Equivalent

koz

1,105

Tailings

Mt

11.0




Gross Revenue

$/t ore

123

NSR (Base Case)

$/t ore

108

Total Site Opex

$/t total ore

32

Royalties

$/t total ore

1

EBITDA

$/t total ore

75

EBITDA margin

EBITDA / NSR

69.6%

Gross C1 Cash Costs

$/oz AuEq

499

Net C1 Cash Costs

$/oz Gold

(590)

Net C1 Cash Costs

$/lb Zinc

(1.73)




Initial Capital

$M

294

Total Investment (including Closure)

$M

480

Gross AISCs

$/oz AuEq

677

Net AISCs

$/oz Gold

(171)

Net AISCs

$/lb Zinc

(1.34)




Annual After-Tax Operating Cash Flow

$M pa

62

After-Tax NPV at a 0% discount rate

$M

316

After-Tax NPV at a 6% discount rate

$M

208

After-Tax IRR


28.2%

After-Tax Payback

Years

2.2




Pre-Tax NPV at a 6% discount rate

$M

259

Pre-Tax IRR


32.0%



1.

None of EBITDA, C1 cash costs or all-in sustaining costs ("AISC") have a standardized meaning under IFRS. See "Non-IFRS Measures".

2.

Gold and zinc equivalencies were determined using total contained and payable metals and the respective ratio of Base Case metals prices. 

3.

Evaluation includes financial impacts of the Company's silver stream with Osisko Gold Royalties (OGR) but does not include the financial impact of its gold stream with OGR for which the majority of the upfront payments have yet to be received and for which there is uncertainty regarding the exact timing of these payments. See the Company's Q1 2018 Financial Statements and MD&A available on SEDAR for additional details regarding the gold stream.

 

Figure 1 illustrates life of project production, payable production and cash flow that would result under the Base Case macro-economic scenario.

Figure 1: Base Case Production and Cash Flow (1. Free Cash Flow (

Sensitivity Analysis


Base Case

-15%

Base Case

Base Case
+ 15%

Gold ($/oz)

1,105

1,300

1,495

Zinc ($/lb)

1.02

1.20

1.38

Silver ($/oz)

17.00

20.00

23.00

Copper ($/lb)

2.55

3.00

3.45

Lead ($/lb)

0.85

1.00

1.15

Pre-Tax




NPV (6% discount rate) (M)

102

259

416

IRR

17.9%

32.0%

44.1%

After-Tax




NPV (6% discount rate) (M)

79

208

332

IRR

15.5%

28.2%

38.9%

Payback Period (years)

3.3

2.2

1.5

 

Opportunities

Aquila believes there are a number of opportunities available to the Company to improve the performance of the Project as currently outlined in the Feasibility Study, all of which require additional evaluation. These include:

Underground Expansion

The Feasibility Study Mineral Reserve Estimate does not consider any out of pit Mineral Resource. The Company believes there is an opportunity to develop the out of pit Mineral Resource, which currently stands at 3.7M tonnes (Measured + Indicated), but additional studies will be required to demonstrate the economic viability of an underground expansion. An underground expansion would also defer mine closure costs which currently commence in Year 8 at a nominal cost of $74.7M. The Company's existing permits are for an open pit mine only and amendments and additional environmental studies would be required to allow underground mining. Aquila will soon be commencing an exploration drill program to further define the underground Mineral Resource.

Process Plant

Metallurgical test work and optimization is continuing with the objective of decreasing process plant cyanide consumption, water treatment costs and tailings treatment operability. Studies will also be undertaken to follow up on initial test results that have demonstrated increased copper recoveries particularly in the years of higher copper grades in the process plant feed.

Next Steps

Certain pre-construction activities have already commenced. The Company is finalizing its Project Execution Plan which will further define the Project development strategy including contracting philosophy, plans for basic and detailed engineering and any required permit amendments, as well as plans for building the owner's team in preparation for the construction and operational readiness phases of the Back Forty Project.  

The Company will continue discussions with prospective financial partners to secure the required capital to build the Back Forty Project. Aquila, with the assistance from its advisors, will consider all strategic and financial options available to the Company and the Project.

With its current cash resources and an additional $47.5M in staged payments that remain available to the Company under its gold stream purchase agreement with Osisko Gold Royalties Ltd, Aquila is well-financed to complete its planned pre-construction and exploration activities.

Technical Report

The Company will file the Feasibility Study Technical Report on SEDAR in accordance with NI 43-101 within 45 days of the date of this news release. Readers are cautioned that the conclusions, projections and estimates set out in this news release are subject to important qualifications, assumptions and exclusions, all of which are detailed in the Feasibility Study and Technical Report. To fully understand the summary information set out in this news release, the Technical Report to be filed on SEDAR should be read in its entirety.

Qualified Persons

This news release has been reviewed and approved by the Qualified Persons noted below. The Qualified Persons have reviewed or verified all information for which they are individually responsible.

Qualified Person

Employer

Professional Designation

Neil Lincoln

Lycopodium Minerals Canada Ltd

P.Eng.

Eugene Puritch

P&E Mining Consultants Inc.

P.Eng.

David Penswick

Gibsonian Inc

P.Eng.

Kebreab Habte

Golder Associates

P.Eng.

 

ABOUT AQUILA RESOURCES
Aquila Resources Inc. (TSX:AQA) is a development‐stage company with strategic assets in the Great Lakes Region. The Company's experienced management team is focused on advancing pre-construction and exploration activities for its 100%‐owned zinc‐ and gold‐rich Back Forty Project in Michigan.

Aquila's flagship Back Forty Project is an open pit volcanogenic massive sulfide deposit with underground potential located along the mineral‐rich Penokean Volcanic Belt in Michigan's Upper Peninsula. The Project contains approximately 1.1B pounds of zinc and 1M ounces of gold in the Measured & Indicated Mineral Resource categories, with additional upside potential. Aquila has received all State and Federal permissions required for the construction and commencement of operations at the Back Forty Project.

The Company has three other exploration projects: Reef Gold Project located in Marathon County, Wisconsin, the Bend Project located in Taylor County, Wisconsin and Aquila Nickel located in the Upper Peninsula, Michigan. Reef is a gold-copper property and Bend is a volcanogenic massive sulfide occurrence containing copper and gold.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
This press release contains certain forward‐looking statements within the meaning of applicable Canadian securities legislation. In certain cases, forward‐looking statements can be identified by the use of words such as "plans", "expects" or "does not anticipate", or "believes", or variations of such words and phrases or statements that certain actions, events or results "may", "could", "would", "might" or "will be taken", "occur" or "be achieved" and similar expressions suggesting future outcomes or statements regarding an outlook.

Forward‐looking statements relate to any matters that are not historical facts and statements of our beliefs, intentions and expectations about developments, results and events which will or may occur in the future, without limitation, statements with respect to additional upside potential of the Project and the potential for underground mining activities at the Project and benefits associated therewith, statements with respect to the expected project economics for the Project, such as estimates of life of mine, total production and average production, metal production and recoveries, C1 cash costs, AISC, capital and operating costs, pre- and post-tax IRR, pre- and post-tax NPV and cash flows, the potential conversion of Inferred Mineral Resources into Indicated Mineral Resources, any projections outlined in the Feasibility Study in respect of the Project, the permitting status of the Project and Aquila's future exploration and development plans.

These and other forward‐looking statements and information are subject to various known and unknown risks and uncertainties, many of which are beyond the ability of Aquila to control or predict, that may cause their actual results, performance or achievements to be materially different from those expressed or implied thereby, and are developed based on assumptions about such risks, uncertainties and other factors set out herein. These risks include those described under the heading "Risk Factors" in Aquila's most recent annual information form and its other public filings, copies of which can be under Aquila's profile at www.sedar.com. Aquila expressly disclaims any obligation to update forward‐looking information except as required by applicable law.  Such forward‐looking information represents Aquila's best judgment based on information currently available. No forward‐looking statement can be guaranteed and actual future results may vary materially. Accordingly, readers are advised not to place undue reliance on forward‐looking statements or information. Furthermore, Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability.

Non-IFRS Measures
C1 cash costs, AISC, EBITDA and free cash flow are non-IFRS financial measures calculated by the Company as set forth below, and may not be comparable to similar measures reported by other companies.

C1 cash costs, which are intended to measure direct cash costs of producing paid metal, include all direct costs that would generate payable recoveries of metals for sale to customers, including mining of mineralized materials and waste, leaching, processing, refining and transportation costs, on-site administrative costs and royalties, net of by-product credits. C1 cash costs do not include depreciation, depletion, amortization, exploration expenditures, reclamation and remediation costs, sustaining capital, financing costs, income taxes, or corporate general and administrative costs not directly or indirectly related to the Project. C1 cash costs are divided by the number of ounces of gold or pounds of zinc, as applicable, estimated to be produced for the period to arrive at cash costs per gold ounce or zinc pound produced.

AISC includes C1 cash costs, as defined above, plus exploration costs at the Project and sustaining capital expenditures (including additional leach pads, permitting and customary improvements to the operations over the life of the project). AISC is divided by the number of ounces of gold or pounds of zinc, as applicable, estimated to be produced for the period to arrive at AISC per gold ounce or zinc pound produced.

EBITDA is earnings before interest, taxes, depreciation, and amortization.

Free cash flow is cash flows from operations less all capital investments including closure costs. 

AQA Logo (CNW Group/Aquila Resources Inc.)

SOURCE Aquila Resources Inc.

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