RUSORO MINING LTD.
Suite 2164 ? 1055 Dunsmuir Street, Four Bentall Centre
Vancouver, BC V7X 1B1
Tel: 604-632-4044 Fax: 604-632-4045 Toll Free 1 800-668-0091
Website: www.rusoro.com email: info@rusoro.com
May 19, 2009 Trading symbol (TSX-V): RML
Rusoro Receives Preliminary Assessment for Choco 10 Expansion
Production Expansion of Choco 10 shows potential to expand gold
production to Over 500,000 oz/yr, with operating costs estimated to
be in the world?s lowest quartile and robust cash flows.
VANCOUVER, B.C. ? George Salamis, President of Rusoro Mining Ltd ("Rusoro"
the "Company") is pleased to provide an overview of the results of a recently completed
Preliminary Assessment (the "PA" or ?the Study?). The PA, also known in the mining
industry as a Scoping Study, conducted by Micon International Limited (?Micon?) has
examined a number of different gold production expansion scenarios sourcing gold resources
and reserves from the Choco 10 mine (95% owned) and the near-by Increible 6 (100% owned)
gold deposit.
The objective of the study was to evaluate the potential for expansion of the project. In order
to do this, the cash flow of the unexpanded (5,000 t/d) base case and each of three expansion
options has been forecast, enabling a comparison to be made of the NPV of each option versus
the base case. The gold processing parameters studied the construction of a new 10,000 t/d
mill and two alternative 20,000 t/d mill cases: one involving a completely new mill and one
studying the achievement of 20,000 t/d milling capacity using a combination of existing Choco 10
processing capacity run in parallel with newly constructed milling facilities on the same site.
Results in this press release are presented for the optimal case (Case 2) which is comprised of the
existing facility at 5,000 t/d plus an additional 15,000 t/d of new capacity.
The mining scenarios envisaged in the study, examined both owner-operated mine haulage fleets
and contract mining operations, with both aimed at open pit mining on the extensive resources on
both concessions. Open pit shell optimizations used in the mine scheduling of estimated resources to
be mined at both projects used a gold price of $US 700/oz.
In summary, the results of the PA are highly encouraging and Rusoro remains committed to bringing
the project to feasibility by Q2, 2010. The Study shows that over the first three years of production,
an expanded Choco 10 Milling Complex will average 545,500 oz Au/yr from 7,300,000 t/yr treated at
an average head grade of 2.58 g/t Au, with cash costs averaging $US 331/oz over the life-of-mine (LOM).
Highlights and Conclusions
The following highlights are taken from Case 2 of the PA comprised of the existing 5,000t/d processing
facility plus an additional 15,000 t/d of new capacity.
? Potential to increase existing steady-state production at Choco 10 to over 500,000 oz/yr over a 12
year mine life.
? The most robust financial outcome of the PA is derived from combining existing hard-rock milling
capacity at Choco 10 with a new 15,000 t/d mill construction, for a total capacity 20,000 t/d.
? Contract mining generates better financial returns versus owner-operated mine fleet arrangements in the PA.
? Gold production at the expanded mine and mill facility is forecasted to reach a maximum of over
717,300 oz in Year 10, with an average rate of 558,200 oz/yr, post expansion.
? LOM cash cost estimate is $US 331/oz.
? Expansion capital requirements estimated at $US 208.5 million plus contingencies of $US 30.8 million and
sustaining capital of $US 80.3 million over the life of mine (12 years).
? Life-of-mine net revenue of $US 3.57 billion using $US 700 Au. Average annual after-tax cash flow of
$US 77 million at $US 700/oz Au,
? Payback, post commissioning of the expanded plant, is estimated at 2.1 years (discounted at 8%), on a total
mine-life of over 12 years.
? At a gold price of $US 700/oz, the PA estimates the NPV (8%) to be $US 449.7 million and after-tax IRR
of 51.7%. Using a gold price of $US 850/oz, the project generates an NPV (8%) of $US 741.9 million and
an after-tax IRR of 120.7%.
? Upside: The table below shows the project sensitivities and upside of the expansion to higher gold prices.
Economic Sensitivity to Gold Price*
Au Price ($US/oz) | NPV8 (000s $US) | IRR (%) |
450 | (58,555) | 3.7 |
500 | 50,624 | 12.0 |
550 | 154,075 | 20.8 |
600 | 254,075 | 20.8 |
650 | 352,208 | 40.1 |
700 | 449,768 | 51.7 |
750 | 547,318 | 66.3 |
800 | 644,646 | 86.3 |
850 | 741,975 | 120.7 |
900 | 839,304 | N/A |
950 | 936,633 | N/A |
*- In the PA the forecast gold price is quoted net of applicable taxes
Preliminary Assessment ? Summary
In May 2008, Rusoro commissioned Micon to provide an independently generated Preliminary Assessment,
also commonly referred to as a Scoping Study, for the Choco 10 (95% owned) and Increible 6 (100% owned)
gold deposits, situated in the El Callao District of Bolivar State, Venezuela. Rusoro purchased the Choco 10
mine from Gold Fields Ltd in November 2007, on the basis that production at the active gold mine could be
substantially expanded due to the size and distribution of the gold resources underlying the concession. Also
at the time of purchase, the Company?s view of the production expansion potential of the Choco 10 mining
and milling complex was further enhanced by the synergies borne from the proximal location of its 100% owned
Increible 6 gold project, situated only 8 km from the Choco 10 mill.
In the PA, the Choco 10 and Increible 6 deposits were designed as open-pit operations with a construction
phase of approximately 2 years. With the current resource base of the two projects, the anticipated life of the
expanded mine is 12 years with an optimal mill throughput shown to be 20,000 tonnes per day. Gold production
averages 558,200 oz/yr, post expansion with an average total cash cost of $US 331/oz.
Power and water services are readily available on site, as are roads and mine site infrastructure.
Capital expenditures are estimated at $US 208.5 million including EPCM costs, plus $US 80.3 million of sustaining
capital injected over the life of the mine, plus contingencies of $US 30.8 million, giving the project a capital
expenditure per recoverable ounce of gold of $US 55.65.
Mineral resources that are not mineral reserves do not have demonstrated economic viability. The preliminary
assessment is preliminary in nature, and includes 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, and there is no certainty that the preliminary assessment will be realized.
Mining and Mineral Processing
Feedstock for the expanded mill will be provided by mined output from the existing Choco 10 operation (comprising
the presently operating Rosika, Coacia and Pisolita open pits) and planned mine production from the Villa Balazo-Karolina
(VBK) pit at Choco 10 and from the Increible 6 concession which is located 4 km northeast of Choco 10 and from the
small Capia and Cerro Azul deposits.
The stripping ratio is estimated at 5.73 to 1 over the life of mine, with pit designs modeled at 40 degrees in saprolite and
47 degrees in hard-rock.
Mining costs for waste rock and mill feed have been estimated at an average of $2.48/t mined, under the contract
mining scenario.
The study envisages that the Choco 10-Increible 6 ores will be processed by conventional means, consisting of primary
crushing, two-stage milling, cyanide leaching, carbon adsorption and elution, electro-winning and gold smelting. The
plant design is a conventional cyanidation and carbon in pulp plant with a nominal throughput capacity of 20,000 t/d
(7.3 Mt/yr) based on a 90 to 92% plant availability, depending on ore type. Total gold recovery is expected to average
90% based on an average head grade of 2.72 g/t Au over the life of the mine for design criteria. It should be noted
that the study envisages the using the same processing methodology, on an expanded basis, as is currently conducted at
the Choco 10 site.
The mineral processing costs for the 20,000 t/d case, including tailings operations and power, are estimated at $US 4.34/t milled.
General and Administrative Operating costs are estimated to be $US 2.67/t, for the Case 2 20,000 t/d case.
Study Parameters
The objective of the study was to evaluate the potential for expansion of the project. In order to do this, the cash flow
of the unexpanded (5,000 t/d) base case and each of three expansion options has been forecast, enabling a comparison to be
made of the NPV of each option versus the base case.
The expansion options considered have total plant throughputs of 10,000 t/d and 20,000 t/d, as follows:
- Case 1: A new plant operating at 10,000 t/d
- Case 2: The existing plant (5,000 t/d) plus a new plant at 15,000 t/d, for a total of 20,000 t/d
- Case 3: A new plant with two new lines at 10,000 t/d each, for a total of 20,000 t/d.
The analysis has been undertaken in United States constant dollars of January 2009 value, i.e., without provision for inflation.
The PA base case valuation assumes a constant gold price of $US 700/oz over the full project life. Capital and operating
costs have been estimated at an overall accuracy of +30%, which is considered appropriate for preliminary assessment of a
mining project of this nature. As part of its sensitivity analysis, Micon tested a range of prices and costs 30% above and below
the base case values.
The table below show a summary of the life-of-mine (LOM) cash flow projections and economic results for each of the
production rate scenarios considered in the study.
LOM Cash Flow Projections ($ millions) ? Using $US 700/oz gold
Item | Base Case 5,000 t/d | Case 1 10,000 t/d | Case 2 5,000+15,000 t/d | Case 3 2x10,000 t/d |
Net Sales Revenue | 2,930.6 | 3,564.9 | 3,564.7 | 3,564.7 |
Total Cash Operating Costs | 1,763.9 | 1,990.5 | 1,829.0 | 1,829.0 |
EBITDA | 1,166.7 | 1,574.4 | 1,735.7 | 1,735.7 |
Total Capital Expenditure Initial Contingency Sustaining Working Cap. Movement | 93.8 42.5 2.9 60.5 (12.0) | 305.3 184.9 27.5 105.0 (12.0) | 307.5 208.4 30.8 80.3 (12.0) | 362.4 251.3 39.5 83.7 (12.0) |
Taxation Payable | 361.2 | 431.5 | 485.7 | 467.1 |
Net Cash Flow after Tax | 711.7 | 837.6 | 942.5 | 906.2 |
NPV | 215.1 | 264.8 | 449.8 | 417.1 |
IRR | N/A | 34% | 52% | 41% |
LOM (years) | 27.0 | 21.0 | 12.0 | 12.0 |
Payback Period (years, undisc.) | N/A | 1.8 | 1.7 | 2.4 |
Payback period (years, disc at 8%) | N/A | 2.2 | 2.1 | 2.9 |
Operating Cost ($/t) | 37.7 | 28.3 | 26.0 | 26.0 |
Operating Cost ($/oz) | 388.5 | 360.2 | 331.0 | 331.0 |
Profitability Index | 4.7 | 1.2 | 1.9 | 1.4 |
For Case 2, LOM average cash operating costs are estimated at $US 26.00/t milled or $US 331/oz of gold produced.
For Case 2, at a discount rate of 8%/yr, the NPV (NPV8) of project cash flows is $US 450 million over a mine life of
12 years. The undiscounted payback period for invested capital is 1.7 years. Case 2 was selected as the case for
presentation in this press release.
The following Figure shows the main elements of the LOM cash flow for the expansion to 20,000 t/d under Case 2.
LOM Cash Flow Projection ? Case 2
(5,000 + 15,000 t/d)
Study Sensitivity and Upside to Gold Price Above $US 700/oz
The results of sensitivity analysis at a discount rate of 8% per year are summarized in the table below. Sensitivity
to gold price is also presented in the following Figure, showing the NPV8 and IRR for Case 2 over a range of
$US 250/oz above and below the base case forecast of $US 700/oz. Generally speaking, the project shows the most
sensitivity to gold price, with lower sensitivities shown to operating costs and CAPEX.
NPV8 Sensitivity Diagram
"Simply put, this is the reason why Rusoro purchased the Choco 10 mine; not for what it produces today - on
average 120,000 oz/yr - but for what we think it can produce in the near future, over half a million ounces
per year. The expansion project benefits from immense synergies resulting from the existing ?brown-fields?
infrastructure at the mine site, given that the Choco 10 mine itself has been in existence for over 4 years. This
study further underscores our view of the immense value to be unlocked from our world-class gold deposits,
Choco 10 and Increible 6?, stated George Salamis, President, adding ?We will continue to strive toward our
goal of making Rusoro the next intermediate gold producer on an international scale?.
Andre Agapov, CEO of Rusoro, commented ?There are surprisingly few gold projects remaining in the world
today showing the qualities highlighted in the PEA: significant annual gold production, lower quartile on
operating costs and a relatively long mine life. The production levels estimated in this study, would place the
expanded Choco 10 - Increible 6 in a category within the top 25 gold producing mines, worldwide. Rusoro,
being the only foreign mining Company who has thus far demonstrated an ability to produce gold in Venezuela,
on a large scale, has the means and management to successfully develop such a mine on a grand scale.?
Future Studies and Development
The Company is working to complete a Definitive Feasibility Study and the Environmental Impact Assessment
by Q2, 2010. Additional infill drilling for the Choco 10 and Increible 6 gold deposits is scheduled to begin in the
next few months. Updated measured and indicated resource estimates for both Choco 10 and Increible 6 are to be
released before the end of Q4, 2009. Subsequently upon final pit design, mineral reserve estimates will be completed
as part of a Definitive Feasibility Study.
George Salamis, President stated: "We have an aggressive plan to move the Choco 10 expansion to production by
the end of 2012. During the next nine months we will be focused on completing the Definitive Feasibility Study,
optimizing the capital program and will be seeking the necessary permits for this four fold production expansion.?
Detailed Report
Within the next 45 days, the entire Preliminary Assessment Study will be available at www.sedar.com and on the
Company's corporate website at www.rusoro.com
Note: This Preliminary Assessment Study is conceptual in nature as it is based partially on inferred resources at both
Choco 10 and Increible 6, which at this stage do not have a high enough level of confidence to provide the economic
basis for a production decision. The Company plans to complete its infill drilling program and additional study, which if
positive, may advance the Project to the Definitive Feasibility level.
Qualified Person
The Preliminary Assessment Study was prepared by Micon International Limited.
Qualified Person: Mr. Gregory Smith, P.Geo, the Vice-President Exploration of the Company, is the Qualified Person
as defined by National Instrument 43-101, and is responsible for the accuracy of the technical information contained within
this news release.
About Rusoro
Rusoro is a gold production, development and exploration company operating in Venezuela and is the only foreign gold
miner in the country. The Company controls a large land position in the prolific Bolivar State region of Venezuela, operating on
its own at the Choco 10 Mine and in a JV with the Venezuelan Government at the Isidora Mine. Ore from both mines is processed
through the Choco 10 mill facility near the town of El Callao. The Company produced approximately 100,000 ounces of gold in
2008 and is working towards advancing two new gold mining operations in Venezuela.
ON BEHALF OF
Rusoro Mining Ltd
"George Salamis"
George Salamis
President
CONTACT INFORMATION
Tel: 604-632-4044 Fax: 604-632-4045
Toll Free: 1-800-668-0091
Symbol: TSX-V:RML Email: info@rusoro.com
Website: www.rusoro.com
Forward-looking statements: This document contains statements about expected or anticipated future events and financial results that are forward-looking in nature and as a result,
are subject to certain risks and uncertainties, such as general economic, market and business conditions, the regulatory process and actions, technical issues, new legislation,
competitive and general economic factors and conditions, the uncertainties resulting from potential delays or changes in plans, the occurrence of unexpected events, and the
Company?s capability to execute and implement its future plans. Actual results may differ materially from those projected by management. For such statements, we claim the safe
harbour for forward-looking statements within the meaning of the Private Securities Legislation Reform Act of 1995.
?The TSX Venture Exchange has not reviewed and does not take responsibility for the adequacy or accuracy of this release.?