Theta (Open cut) Project

A High Margin / Low CapEx Project

The Theta (Open Cut) Project sits across two mining rights MR83 and MR341 (see “Map1”) owned and operated by Theta Gold’s South African 74%-owned subsidiary Transvaal Gold Mining Estates Ltd (“TGME”). The existing CIL plant site and tailings-storage facilities is closely positioned between the two tenements.

Current JORC Resources (Open Cut only, see “Map2”, “Figure1”) of the Theta Project totals 879,600 ounces average 2.7g/t Au. (see “Appendix 1”)

As the mining rights and permits are mapped against the surface farm land boundaries, the Company made a decision to begin an underground-to-openpit mining approval amendment process starting only on MR83 as Stage-One development.

On 16 May 2019, the Company announced its very first Feasibility Study for the Theta Open Cut Project Starter Pits within Mining Right 83 (MR83) only (see “Map1”, “Map2”, “Figure1”). On 20 April 2020, a final Optimised Feasibility Study was released to the market.

A detailed summary of the Optimised Feasibility Study (April 20, 2020) may be viewed via the ASX Announcement.

Compared to the May 2019 original Feasibility Study, the new optimised plan has a new mining schedule with a reduced environmental footprint, reflects an increase in the production rate from 500 Ktpa to 600 Ktpa, includes the mining of several old mine waste rock dumps and increases the overall mine operational flexibility.

During the development/construction of the Stage-one Theta Starter-pits within MR83, the Company will prepare for Reserve drilling into MR341 targeting a combined Ore Reserve in excess of 500,000 ounces.

HIGHLIGHTS (MR83-only)

(All numbers in USD and financials based on USD 1,500/oz gold price and 16.00 ZAR/USD)

  • Pay-back period reduced to 8 months (May ’19 FS: 14 month payback period)
  • 260 Koz delivered to plant over Life of Mine (“LoM”) (May ’19 FS: 219 Koz Au)
  • First year production of 49.5 Koz (May ’19 FS: 46.3 Koz)
  • Life of Mine (LoM) 6.5 years (May ’19 FS: 5 years)
  • US$150.2 million EBITDA over LoM (May ’19 FS: $99.6 million LoM)
  • Internal Rate of Return (IRR) 123% (May’ 19 FS: 65.1%)
  • US$85 million Net Present Value (May ’19 FS: $50 million NPV)
  • US$855 oz all-in sustaining cost (AISC) LoM, bottom quartile for South Africa producers (May ’19 FS: $760/oz cost (“AISC”) over the 5-year LoM)
  • Total Capital Cost $31.4 million includes 20% plant throughput increase and at 16.00 ZAR/USD (May ’19 FS: $34.3 million at 14.01 ZAR/USD)
  • There remains significant resource development upside from the contiguous southerly extension of the Theta Hill mineralisation into Mining Right 341 and other open cut resources nearby – this is no change from the May ’19 FS and, for clarity, these additional resources have not been included in the May ’19 FS or this Optimised Study.

 

The Theta Open-pit Starter Project includes the Columbia Hill deposit and part of the Theta Hill deposit within Mining Right 83 (“MR83”) (see “Map2”, “Figure 1”) in the Pilgrims Rest area of South Africa. Waste Rock dumps of various sizes and from four main areas which were sampled by Rand Mines in the 1990’s are now included in the new mine schedule and add easy gold ounces for the planned mine operations. The bulk of the waste rock dumps (75%) have been scheduled to be processed in the last year of Mine Schedule and as such have limited effect on the payback period. The payback period has been reduced from 14 months in the May ’19 FS to 8 months.

The optimised mine schedule has reduced initial overburden removal by mining smaller pits and also has improved revenue streams as a result of increased ZAR gold prices.

The optimised study reflects strong project economics and commercial viability across a range of gold prices. The new mine schedule significantly enhances all the project economics despite a reduction in the LoM grade.

Table 1 below sets out the comparison of the initial May ’19 FS to the Optimised Study at various gold price scenarios. Salient details between the Optimised Study run at $1,500/oz vs the May’19 FS base case at $1,257/oz include:

  1. The IRR nearly doubling from 65% to 123%;
  2. Mine life increases from 5 years to over 6.5 years;
  3. EBITDA increases by $50 million over the LoM to $150 million; and
  4. NPV increases by $35 million to $85 million.

OPTIMISED STUDY MINE SCHEDULE SUMMARY (MR83-only)

The optimized schedule allows for a life of mine (“LOM”) of 6.5 years and design takes into consideration the company’s commitment to be an environmentally responsible miner.

The Ore Reserves estimated for the Theta Project represent the Iota section of Columbia Hill, and approximately 35% of the Theta Hill and Browns Hill deposits within the MR83 boundary. The Theta Hill and Browns Hill deposits extend to the south and into Mining Right 341 (“MR341”) (see “Figure1”). MR83 is fully permitted for underground mining and an amendment to include open-pit mining is in progress. There is an inclusion of a portion of historical waste rock dumps (inferred resources) in the schedule, albeit that 75% of this material is processed at the end of the mining schedule. The dumps are within a short trucking distance of the gold plant (average ~4 km). Further expansion opportunity exists to extend the project to the south into MR341 and this will be considered in future development work.

A whole new CIL Plant has been planned and recently redesigned to treat ore at a rate of 600 ktpa and increased by 20% from the May ’19 FS (see ASX release 28 Jan 2020 “Results of the Independent Plant Design Optimisation Study”). Annual plant throughput and total deposition volume are constrained by the current approved Tailings Storage Facility (“TSF”) at 600 ktpa and 2.5 Mt respectively. Future tailings dam expansions have also been considered in the study and will require design and approvals before implementation.

All processing layouts were configured in and around the existing CIL Plant infrastructure to allow for potential future plant expansions. The plant capital has allowed for all new equipment, except for the mill (see ASX release 2 Oct 2019: “Theta Agrees to Purchase Mill Operated by Glencore”).

An opportunity therefore exists to make use of further high-quality refurbished equipment which may lead to further capital cost savings. 

NEW PRODUCTION TARGET (MR83-only)

The Optimised Study mine schedule for the Theta Open Pit Starter Project considers the following Mineral Resources (“Table 2”) in the LoM plan. Appropriate modifying factors were applied to various Mineral Resource categories as with a Reserve Calculation. Where Inferred Mineral Resources were included, more conservative modifying factors were applied to reflect the added risk of including Inferred Mineral Resources in the financial analysis.

The production target includes 25% of Inferred ounces

  1. Theta Project (Theta Hill, Browns Hill and Iota) cut-off is 0.35 g/t;
  2. The gold price used for the cut-off calculations is USD 1 500/oz;
  3. Geological losses applied are 10% for inferred and 5% for Indicated;
  4. Theta Hill and Browns Hill – Upper Theta Reef, Lower Theta Reef and Beta Reef are diluted grades over 100 cm;
  5. Historical mine voids have been depleted from the Mineral Resource;
  6. The inferred Mineral Resources have a high degree of uncertainty and it should not be assumed that all or a portion thereof will be converted to Ore Reserves;
  7. Mineral Resource fall within the mining right 83MR and 341MR.
  8. The inferred Mineral Resources have a high degree of uncertainty and it should not be assumed that all or a portion thereof will be converted to Ore Reserves;

ORE RESERVE (MR83-only)

The Ore Reserve statement from the May ‘19 FS is presented below. The Ore Reserve calculation considered Mineral Resources in the Indicated category as the Theta Project does not contain any Measured Mineral Resources (see “Table 2”). The graph below (see “Figure 3”) illustrates the effect of the modifying factors on the diluted scheduled tonnes for the Theta Project. Pit designs are provided in Appendix A.

Table3: Ore Reserve – Theta Project (MR83)

Notes:

  1. The Ore Reserve cut-off grade is 0.4 g/t.
  2. Totals in the Ore Reserve may not add-up due to rounding.
  3. Mineral Resources are for MR83 only and excludes MR341.
  4. No Inferred Mineral Resources are included in the Ore Reserve.

The Mineral Resource to Ore Reserve conversion requires application of appropriate factors that would account for any changes to the Mineral Resources (Figure 6) in the life of mine plan as a result of mining the ore. As part of the technical studies the potential ore loss and dilution to the Mineral Resources was determined and applied to the resources available for conversion to Ore Reserves. The ore loss reduces the tonnage and content, while the dilution would add additional tonnage with no gold content. Note ore reserve included previously undiscovered reefs (Bevetts and Shale Reef).

 

STUDY INPUTS AND DERIVATION

The Theta Project Optimised Study is based on the following key input parameters:-

  • The Mineral Resources were estimated and compiled by Minxcon (Johannesburg);
  • The Project mine plan and detailed monthly mining and processing schedule, derived from primarily Indicated Mineral Resources and a portion of Inferred Mineral Resources (25% of content) were produced by Minxcon after the application of mining parameters, mining and processing costs from in-country contractors, processing inputs and geotechnical pit design considerations.
  • Maiden Probable Reserve has been stated by Minxcon after excluding the Inferred Mineral Resources and confirming the economic viability thereof and follows on from the FS completed in May 2019.
  • Geotechnical inputs and parameters for pit designs from Open House Management Solutions (Pty) Ltd (“OHMS”) (Rustenburg);
  • Process engineering design, capital and operating costs by METS South Africa (Pty) Ltd (“METS”) (Pretoria);
  • Metallurgical recovery inputs based on test work by SGS South Africa and interpreted by ENC Minerals (Pty) Ltd (“ENC”).
  • Tailings storage facility design, capital and operating costs by Tailex Management Services (Pty) Ltd (“Tailex”)
  • Waste, residue and water storage designs by Minxcon;
  • Rehabilitation provision by Globesight (Pty) Ltd;
  • Other cost inputs, i.e. labour, overheads, outsource services and environmental and socio-economic costs by owner’s team; and
  • Financial Model compiled by Minxcon.

 

Appendix 1 – Total Theta Open Pit Resource

Notes:

  1. Theta Project (Theta Hill, Browns Hill and Iota) cut-off is 0.35 g/t;
  2. The gold price used for the cut-off calculations is USD 1 500/oz;
  3. Geological losses applied are 10% for inferred and 5% for Indicated;
  4. Theta Hill and Browns Hill – Upper Theta Reef, Lower Theta Reef and Beta Reef are diluted grades over 100 cm;
  5. Historical mine voids have been depleted from the Mineral Resource;
  6. The inferred Mineral Resources have a high degree of uncertainty and it should not be assumed that all or a portion thereof will be converted to Ore Reserves;
  7. Mineral Resource fall within the mining right 83MR and 341MR.