Advanced Exploration Projects in Colombia with Social & Environmental Commitments

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Projects

Preliminary Economic Assessment and Mineral Resource

In February 2018, Antioquia Gold published a NI 43-101 compliant Preliminary Economic Assessment and updated mineral resource estimate for Cisneros prepared by Fernando Linares, MAusIMM of Lima, Peru.

The Report has an effective date of September 24, 2017 and the Corporation has filed the complete report on SEDAR.

PEA Highlights

  • Updated Mineral Resources for the Cisneros Properties, above cut off grade, for all mineralized structures consists of 728,603 tonnes of Measured + Indicated Mineral Resources with an average grade of 5.389 g/t Au and 536,211 tonnes of Inferred Mineral Resources with an average grade of 6.345 g/t Au.
  • Mine production is projected to start in 2Q, 2018. The Guaico and Guayabito vein areas are planned to be mined by the cut and fill method and the Nus structures by Long Open Stoping method. The mining rate is projected to produce an average of 15,000 t/month of mineralized material. The process plant has been designed to operate 347 days per year overall and treat 500 tonnes of mineral daily.
  • Gold design average ore head grade is estimated to be 6.43 g/t Au
  • An overall recovery of 90% has been anticipated.
  • Life-of-mine (LoM) of 5.0 years.
  • LoM gold production of 150,900 ounces gold recovered.
  • The project has a pre-tax net present value (NPV) of US$23.71M and post-tax NPV of US$16.75 M using a 5% discount rate.
  • The project has a pre-tax internal rate of return (IRR) of 24.0% and post-tax IRR of 18.7% using a 5% discount rate.
  • The total preproduction and sustaining capital cost estimated for the Cisneros project is US$75.5 M and includes expenses from 2014 to March 2018. The Capital cost consists of pre-production capital cost of US$61.5 M, sustaining capital cost of US$14.1 M and a contingency of 15% (US$7.8 M)
  • Project payback is 2.6 years on a pre-tax basis.
  • A mineralized stockpile of 19,402 tons will be maintained for the commissioning of the plant, as a result of the preparation of the stopes in the Guayabito and Guaico-Nus areas of the Cisneros Project.
  • Mined ounces (in-situ) will increase from 28 koz in 2018 to 39 koz in 2019, and then decrease gradually for the remaining mine life.
  • The Cisneros Project mine potential mill feed estimate was based on the updated mineral resources. A total of 516,351 tonnes at a grade of 5.44 g/t Au of measured and indicated resources and 268,412 tonnes at a grade of 6.812 g/t Au of inferred mineral resources were considered for the financial evaluation. The following assumptions were used as the criteria to estimate these economic mineral resources:
    • The potential mill feed economic Mineral Resources are inclusive in reported mineral resources.
    • Specific cut off was calculated for Guaico, Nus and Guayabito structures. A cut-off of 2.95 g/t Au for Guaico, 2.62 g/t Au for Guayabito and 1.66 g/t Au for Nus was estimated.
    • Metal price, production, selling cost and recovery were considered as the major factors in the calculation of cut off grade.
    • Gold price assumptions are no more than the average value for the last six months as indicated by the price fixes of the London Metal Exchange.
    • General and administration cost and sustaining cost were not considered in the cut off grade estimation.
    • Guayabito Sur structures and Papi veins were not included. These require more development that is economically not viable in comparison with current tonnage.
    • Mineral resources within 30 m of surface are not considered. A pillar of 9 m width along each level will be left behind. Both of these reduce the initial resources.
    • The potential economic mineral resource includes a historical mineral stockpile reported to contain 7,500 tonnes grading 5.1 g/t Au. The mineralized material was sourced from mine development up to September 30, 2017 on the Guaico and Nus mines.

Mineral Resource Estimate

The updated resource estimate incorporates results from 110 drill holes, including results of 14 new drill holes drilled in 2016-2017 and 1130 channels sampled during 2016 and 2017. The mineralized structures, updated with new data are: Nus, Guaico, Footwall-03, Footwall-05, Vega and La Manuela-01. Resources for Guayabito North and Papi, remain unaltered from the 2013 mineral resource estimate.

Updated mineral resources for the Cisneros Properties, above cut-off grade, for all mineralized structures consist of 760,731 tonnes of measured and indicated resources with an average grade of 5.233 g/t Au and 536,211 t of Inferred Mineral Resources with an average grade of 6.345 g/t Au.

Total Measured Resource Estimates for Cisneros Deposits

Deposit Name Code Tonnage Au g/t Au oz
Nus NUS 200,877 3.548 22,916
Guaico GCO 26,464 7.529 6,406
Footwall-05 GCFW5 13,596 9.759 4,266
Footwall-03 GCFW3 11,919 7.561 2,898
La Manuela-01 MNL_1 1,133 5.237 191
Guayabito GBY 46,370 7.700 11,479
Papi PAPI 3,592 6.966 804
Total Measured 303,951 5.010 48,959

Total Indicated Resource Estimates for Cisneros Deposits

Deposit Name Code Tonnage Au g/t Au oz
Nus NUS 152,181 3.057 14,958
Guaico GCO 10,014 8.194 2,638
Footwall-05 GCFW5 9,266 9.819 2,925
Footwall-03 GCFW3 17,745 6.929 3,953
Vega VEGA 2,132 13.755 943
La Manuela-01 MNL_1 1,088 4.766 167
Guayabito GBY 211,887 7.268 49,511
Papi PAPI 20,338 3.345 2,187
Total Indicated 424,652 5.661 77,282

Total Measured + Indicated Resource Estimates for Cisneros Project

Deposit Name Code Tonnage Au g/t Au oz
Nus NUS 353,058 3.337 36,640
Guaico GCO 36,478 7.711 8,749
Footwall-05 GCFW5 22,861 9.783 6,957
Footwall-03 GCFW3 29,665 7.183 6,628
Vega VEGA 2,132 13.755 912
La Manuela-01 LMN1 2,221 5.006 346
Guayabito GYB 258,258 7.345 59,003
Papi PAPI 23,930 3.888 2,894
Total Measured + Indicated 728,603 5.389 122,129

Total Inferred Resource Estimates for Cisneros Deposits

Deposit Name Code Tonnage Au g/t Au oz
Nus NUS 103,445 2.984 9,924
Guaico GCO 6,069 8.059 1,572
Footwall-05 GCFW5 6,213 12.628 2,522
Footwall-03 GCFW3 11,007 9.171 3,245
Vega VEGA 5,533 13.364 2,378
La Manuela-01 MNL_1 1,128 3.140 114
Guayabito Sur GBY-SUR 57,973 7.535 14,044
Guayabito GBY 232,911 8.075 60,468
Papi PAPI 111,932 4.201 15,120
Total Inferred 536,211 6.345 109,388
  1. Mr. Edgard Vilela, is the Qualified Persons and Chartered Professional for the Mineral Resource estimate. The effective date of the estimate is September 24, 2017.
  2. Mineral Resources are reported using a cut-off grade of 2.95 g/t Au for GCO, GCFW3, GCFW5 and MNL_1.
  3. Mineral Resources are reported using a cut-off grade of 1.66 g/t Au for NUS and 1.50 for PAPI.
  4. Mineral Resources are reported using a cut-off grade of 2.62 g/t Au for GYB-SUR and 2.50 for GYB.
  5. Reported Mineral Resources contain no allowances for hanging wall or footwall contact boundary loss and dilution. No mining recovery has been applied.
  6. Rounding as required by reporting guidelines may result in apparent summation differences between tonnes, grade and metal content.

 Underground Mining

The base case scenario for the Project includes mining of measured, indicated, and inferred mineral resources with underground Cut and Fill ( C&F ) and Longhole Open Stoping mining methods.

Preliminary assumptions for Cut and Fill Mining method is that it is a selective mining process. The dilution for veins lower than 0.8 metres in width were not considered as part of the block modelling process for veins on Cisneros projects. Block model are diluted to 0.8 m and no additional dilutions were considered for the mine plan in these preliminary evaluations.

The mining recovery factor is depended on results of rock mechanics studies. For every 100 vertical metres it is suggested to leave a nine metre horizontal pillar which will be dependent on the vertical extent of each vein’s geometry. The following table shows the dilution and mining recovery factor for C&F mining based on specific calculations that were considered for dilution and mining recovery factors during mine plan scheduling.

Mining Recovery Factor for Cut and Fill mining

Assumptions Guaico Veins FW3 Vein FW5 Vein
Dilution on veins < to 0.8 m thickness 0% 0% 0%
Mining Recovery Factor 96.7% 93% 93.3%

A mining recovery of 92% is assumed for longhole open stoping Mining. The mining recovery factor is depended on rock mechanics recommendations. Again it is suggested to leave a nine metre horizontal pillar for every 100 vertical metres.
Process Plant

The objective of the metallurgical process is to obtain gravimetric concentrates and flotation concentrates in a plant with a capacity of 500 tonnes per day (tpd). The plant will be composed of a single production line in two conventional processes namely gravity followed by flotation to obtain sulphide concentrates containing gold.

The process plant has been designed to operate 347 days per year and treat 500 tonnes of material daily. The average head grade is estimated to be 6.43 g/t Au and an overall recovery of 90% is anticipated. Mineable resources have been estimated at 784,763 tonnes with a life-of-mine ( LoM ) of five years. A stockpile of 19,402 tons, resulting from development of stopes in the Guayabito and Guaico-Nus areas will be maintained for the commissioning of the plant.

The general flow sheet of the plant process consists of four sections to produce gold concentrates. These include primary and secondary crushing, grinding and gravity, flotation and concentrate filtration.

Capital and Operating Costs

The total preproduction and sustaining capital cost estimated for the Cisneros project is US$ 75.5 M and includes expenses incurred from 2014 to March 2018. Preproduction capital cost is US$ 61.5 M and sustaining capital cost is US$14.1 M.  Capital costs include a contingency of 15% (US$ 7.8 M).

The capital cost profile for the Cisneros Project includes pre-production and sustaining capital. Sustaining capital includes expenses incurred during the expected production period of April 2018 to 2022. All capital costs were estimated for a 3,000 tonnes per month mill capacity.

Economic Analysis and Cash Flow Results

A pre-tax and post-tax cash flow model was developed for the Cisneros project. The financial evaluation presents results for Net Present Value (“NPV”), Internal Rate of Return (IRR) and payback period. All the evaluations include only CAPEX and Sustaining capex from 2017 to LoM and a contingency of 15%. Capital expenditures prior to 2017 of US$13.2 M are included as indicated in the audited financial statements of Antioquia for 31-Dec-2016. The results show that the project has a pre-tax IRR of 24.0% and pre-tax NPV of $23.7M and post-tax IRR of 18.7% and post-tax NPV of $16.7 M.

Cisneros Gold Project economic model summary

Descriptions Input / Output Units Value
Financial Input   
Price  US$/oz 1250
Exchange Rate COP:USD 2910
Discount Rate % 5.0
Processing Schedule 
Total Ore Milled k-tons 785
Au Grade g/t 6.4
Au Recovery % 0.93
Recovered Au k-oz 150.9
Payable Au k-oz 147.3
Capital Cost
Sustaining Capex US$ M (12.22)
Capex 2017-LoM US$ M (39.80)
Total Capex 2017-LoM US$ M (52.02)
Contingency US$ M (7.80)
Total Capex 2017-Lom US$ M (59.82)
Capex previous to 2017 US$ M (15.71)
Pre-Tax CF
Undiscounted pre-Tax Cash Flow US$ M 33.54
Pre-tax IRR % 24.0%
Pre-tax NPV (5%) US$ M 23.71
Payback year 2.60
Post-Tax CF
Undiscounted post-Tax Cash Flow US$ M 25.58
Post-tax IRR % 18.7%
Post-tax NPV (5%) US$ M 16.75
Payback year 3.20

Cash costs of production are estimated at US$697 /oz with all in costs including closure and capital costs estimated at US$1,146 /oz

Operating Cost Analysis

Expenses US$ (M) Unit Cost US$/oz
On Site Mining Cost 74.61 506.5
On Site Mining G & A Cost 11.30 76.7
Royalties 7.06 47.9
Social and Permit Cost
Smelting, Refining and Transport 9.74 66.1
Cash Cost 102.71 697.3
Closure Cost 1.55 10.6
Sustaining Capital 14.05 95.4
All-in sustaining costs AISC 118.31 803.2
Preproduction Capital expenses 50.56 343.3
All in costs AIC 1146.5

Sensitivity Analysis

The NPV is most sensitive to metallurgical recovery, gold price and gold grade and less sensitive to OPEX and CAPEX.

Cisneros Project Post-Tax @ 5% NPV Sensitivity Analysis

% Variations Price
(US$M)
Opex
(US$M)
Capex
(US$M)
Au Grade
(US$M)
Exchange Rate
(COP$/US$)
Recovery
(US$M)
70% -24.2 32.8 30.7 -25.3 15.6 -25.3
80% -8.3 27.4 26.0 -9.0 16.1 -9.0
90% 5.4 22.1 21.4 5.1 16.5 5.1
100% 16.7 16.7 16.7 16.7 16.7 16.7
110% 28.0 11.4 12.1 28.3 17.0 25.4
120% 39.3 6.0 7.5 39.9 17.2 25.4
130% 50.3 0.4 2.8 51.0 17.3 25.4

Subsequent Drilling after PEA Effective Date

During the preparation of the PEA an exploration campaign was carried out with diamond drilling from surface. A total of 2,912.00 meters were drilled in the areas of Guayabito, Nus and Guaico. 2,344.20 metres of drilling were included and reported in the PEA and 567.80 meters were not reported in the PEA as results were obtained after the effective date of the PEA.  AGD’s management believes the results of these drillholes will not materially impact the PEA results.

Drill Hole Highlights

Drill Hole From (m) To (m) Length (m) True Width (m) Au ppm
GCO17-038 101.00 101.50 0.50 0.29 12.34
GCO17-038 109.80 111.00 1.20 0.69 1.59
GCO17-038 135.50 136.30 0.80 0.44 2.23
NUS17-011 98.20 99.20 1.00 0.48 2.28
NUS17-012 119.00 120.00 1.00 0.54 2.82
NUS17-013B 101.40 102.00 0.60 0.33 1.03

Drill Hole Specifications

HOLE EAST_UTM NORTH_UTM ELEV
(M)
TOTAL
DEPTH
AZIMUTH DIP
NUS17-011 485595.85 721979.64 1456.93 120.00 178.00 -59.00
NUS17-012 485533.97 721979.01 1495.25 122.30 178.00 -59.00
NUS17-013B 485481.97 721979.10 1530.36 170.50 174.00 -60.00
GCO17-038 485910.28 722270.36 1301.74 155.00 129.60 -55.00