Rainy River Resources Ltd. ("Rainy River" or the "Company") (TSX:RR) is pleased
to announce receipt of an updated and revised positive Preliminary Economic
Assessment ("PEA") for its 100% owned Rainy River Gold Project ("RRGP") in
western Ontario, Canada. The information presented below summarizes the results
of a conceptual mine and processing scenario based on the February 24, 2012
National Instrument 43-101 ("NI 43101") mineral resource estimate, which
includes assay data up to December 31, 2011. All currency amounts in this press
release are expressed in Canadian dollars ($) unless otherwise noted.
HIGHLIGHTS OF THE UPDATED PRELIMINARY ECONOMIC ASSESSMENT
First 10 Years of Production:
-- Average annual production of 308,000 gold ounces and 478,000 silver
ounces.
-- Average mill head grade of 1.45 g/t of gold, an increase of 50% over the
first PEA.
-- Average open pit grade improves by 39% to 1.25 g/t of gold with
stockpiling of low grade material compared to the November 2011 PEA open
pit grade of 0.90 g/t of gold.
-- Average underground grade improves by 19% to 4.20 g/t of gold compared
to the November 2011 PEA underground grade of 3.52 g/t of gold.
-- Average cash costs of US$486 per ounce gold (including royalties and net
of silver credits).
-- Operating strip ratio of 2.5:1 (excluding overburden and capitalized
waste) compared to the November 2011 PEA operating strip ratio of 3.3:1.
-- Processing throughput averaging 20,000 tonnes per day (tpd).
-- Production is anticipated for early 1H/2016 for the open pit and 2H/2018
for the underground.
Economics
Key Metrics
-- Life-of-mine pre-tax net present value ("NPV", at a 5% discount rate) of
$846 million, internal rate of return ("IRR") of 21.0% and a payback of
3.8 years based on US$1250 per ounce gold and US$25 per ounce silver.
-- In the current metal price environment, pre-tax net present value (NPV
5%) of $1.986 billion, IRR of 36.6% and a payback of 2.2 years(1); Metal
price sensitivities are summarized in Table 1.
-- Life-of-mine metal production of 3.8 million ounces of gold and 6.8
million ounces of silver at 91.0% gold recoveries and 67.4% silver
recoveries.
Open Pit
-- Initial pre-production capital costs of $694 million (inclusive of $100
million in contingency).
-- Open pit total sustaining capital costs of $340 million (tailings,
overburden and waste removal, and equipment).
-- Total capital costs in the open pit decline by $245 million from the
November PEA.
Underground
-- Development capital costs of $67 million, commencing in 2016, drawn from
operating cash flows.
-- Underground sustaining capital costs of $148 million (development,
infrastructure and equipment).
Table 1 - Sensitivities to Metal Prices(2)
----------------------------------------------------------------------------
Base Case
Gold, Silver, US$/oz $1250 / $25 $1600 / $30 $1800 / $35 $2000/$40
----------------------------------------------------------------------------
----------------------------------------------------------------------------
NPV $ millions 846 1,806 2.364 2,922
IRR % 21.0 34.3 41.1 47.5
1. Discounted cash flow calculated at a gold price of US$1,667 per ounce
and silver price of US$30.37per ounce, with a CDN$/US$exchange rate of
$1.0109.
2. Sensitivities calculated at a CDN$/US$exchange rate of 1.05.
Raymond Threlkeld, Rainy River's President and CEO, stated: "Over the last five
months, our team has investigated and quantified options ranging from a mill
having a capacity of 20,000 tonnes per day to 40,000 tonnes per day, conceptual
mine plans sized from 4.1 million ounces gold to 5.7 million ounces of gold, and
life spans ranging from 13 to 27 years.
Today, we have chosen the option that represents the lowest risk to our
shareholders and the strongest internal rate of return in a $1,250 per ounce
gold environment. The resulting project plan represents one of the highest grade
open pits, and highest grade mill throughput of any current Canadian open pit
mine development story at 1.26 g/t and 1.45 g/t, respectively.
Our mine plan averages 308,000 ounces of gold annually for the first 10 years
from open pit and underground, a high mill head grade at 1.45 g/t over 10 years,
and a low open pit operating strip ratio at 2.50:1.
The higher grades mined in the open pit and underground enable the cash costs in
the first five and ten years to be US$450 and US$486 per ounce gold,
respectively, placing the Rainy River Gold Project's costs in the second lowest
quartile of cash costs for gold producers worldwide.
The underground portion of the Project, due to be in full production in the
fifth year of the open pit operations, adds over 800,000 ounces of gold at a
diluted grade of 4.20 grams per tonne for gold and 5.30 grams per tonne for
silver, which represents a gold grade increase of 19% from the last PEA.
The Company will continue to review the potential for future operations to be
enhanced by increasing throughput or adding mine life, or both. This project
design, with the exploration potential in our district, makes the Rainy River
Gold Project stand out in Canada as a low risk, high return project, while
retaining the option to mine more ounces in the future."
AREAS OF UPSIDE POTENTIAL FOR PROJECT
-- Potential to extend mine life
-- Potential to increase mine/mill throughput
-- Expansion at depth, underground
-- District exploration upside
RAINY RIVER GOLD PROJECT - PRELIMINARY ECONOMIC ASSESSMENT
Contributors
The independent PEA was prepared through the collaboration of a number of
industry-recognized consulting firms, including BBA Inc. ("BBA", Montreal, QC),
Golder Associates ("Golder", Vancouver, BC), AMEC Environmental & Infrastructure
("AMEC", Mississauga, ON), Merit Consultants International Inc. ("Merit",
Vancouver, BC) and SRK Consulting (Canada) Inc. ("SRK", Toronto, ON). These
firms provided resource estimates, design parameters and cost estimates for mine
operations, process facilities, major equipment, waste storage, reclamation,
permitting and operating and capital expenditures. A summary of contributors to
the PEA is included in Table 2 below.
Table 2 - PEA Contributors
----------------------------------------------------------------------------
Responsibility Area Contributor
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Geology Rainy River Resources
Resource Estimate SRK
Mine Planning BBA, Golder
Geotechnical, Tailings, Hydrogeology AMEC
Flow sheet and Plant Design BBA
Tailings Management Facility AMEC
Infrastructure, Power Supply BBA
Construction Management Merit
Environmental Baseline and Permitting AMEC
Financial Modeling BBA
----------------------------------------------------------------------------
Mineral Resources
The study assumes that both open pit and underground mining methods would be
used for resource extraction. Tables 3 (a) and 3 (b) summarize the February 24,
2012 mineral resource estimate, which forms the basis of the PEA.
Table 3 (a). Mineral Resources Statement at February 24, 2012
----------------------------------------------------------------------------
Tonnes Grade Grade Au ounces Ag ounces
Area (millions) Au g/t Ag g/t (millions) (millions)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Open pit (M&I) 135.93 1.12 2.33 4.92 10.16
Open pit (Indicated,
out-of-pit) 11.48 0.81 3.37 0.30 1.24
Underground (M&I) 3.17 4.33 4.93 0.44 0.50
----------------------------------------------------------------------------
TOTAL M&I 150.58 1.17 2.46 5.66 11.91
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Open pit (Inferred,
in-pit) 22.68 0.93 2.18 0.68 1.59
Open pit (Inferred,
out-of-pit) 64.44 0.67 2.35 1.39 4.87
Underground (Inferred) 1.17 4.12 5.82 0.16 0.22
----------------------------------------------------------------------------
TOTAL Inferred 88.29 0.78 2.35 2.22 6.68
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Mineral resources are reported in relation to an elevation determined from
conceptual pit shells, and not all of the inferred resources lie within the
optimized pit shell. 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. All assays have been capped where appropriate.
Open pit mineral resources are reported at a cut-off grade of 0.35 g/t gold;
underground mineral resources are reported at a cut-off grade of 2.5 g/t gold.
Optimized cut-off grades are based on a gold price of US$1,100 per ounce, a
silver price of $22.50 per ounce and a foreign exchange rate of 1.10 Canadian
dollars to 1.0 US dollar. Metallurgical recoveries include gold recovery of 88%
for open pit resources and 90% for underground resources, with silver recovery
at 75%.
The mineral resource statement was prepared by Dorota El-Rassi, P.Eng. (APEO
#100012348) and Glen Cole, P.Geo (APGO #1416), of SRK Consulting (Canada) Inc.,
both "independent qualified persons" as that term is defined in National
Instrument 43-101.
Table 3 (b). Mineral Resources Statement at February 24, 2012, Silver Zone.
----------------------------------------------------------------------------
Au Ag AuEq
Tonnes Grade Grade Grade ounces ounces ounces
Silver Zone ('000 t) Au g/t Ag g/t AuEq g/t ('000) ('000) ('000)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Open pit
(Indicated) 126 0.23 48.07 1.07 3.18 654.79 14.57
(i) Excluded from previous table. Mineral resources are reported in relation
to conceptual pit shells. 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. All composites have been capped where
appropriate.
(ii) Open pit mineral resources are reported at a cut-off of 0.35 g/t gold-
equivalent. Gold-equivalent grade is based on a gold price of US$1,100 per
ounce, a silver price of $22.50 per ounce and a foreign exchange rate of
1.10 Canadian dollar to 1.0 US dollar. Metallurgical recoveries include gold
recovery of 88% with silver recovery at 75%.
Qualified persons - The mineral resource statement was prepared by Dorota
El-Rassi, P.Eng. (APEO #100012348) and Glen Cole, P.Geo (APGO #1416), of
SRK, both "independent qualified persons" as that term is defined in
National Instrument 43-101. Rainy River's exploration program in Richardson
Township is being supervised by Kerry Sparkes, P.Geo. (APEGBC #25261), Vice-
President Exploration and a Qualified Person as defined by National
Instrument 43-101. The Company continues to implement a rigorous QA/QC
program to ensure best practices in sampling and analysis of drill core.
The above section summarizes mineral resources and excludes the impact of mining
dilution, which is the incidence of waste rock extracted together with
mineralized material.
For the PEA, open pit mining dilution is calculated as 10.23% at 0.17 g/t gold
and 1.00 g/t silver. Underground mining dilution is calculated as 10% at 0.32
g/t gold and 0.81 g/t silver. Open pit resources have been calculated assuming a
material loss of 5%. Underground resources have been calculated assuming a
material loss of 5%. With an open pit cut-off grade of 0.30 g/t gold-equivalent,
and an underground cut-off grade of 2.5 g/t gold-equivalent, the resulting
tonnages and grades for the open pit and underground conceptual mine plans are
shown in Table 4:
Table 4. In-Pit and Underground Mineral Resources in PEA (diluted)
----------------------------------------------------------------------------
Tonnes Grade Grade Au Moz Ag Moz
Area (M) Au g/t Ag g/t Contained Contained
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Open pit (M&I) 101.2 0.94 2.55 3.060 8.287
Underground (M&I) 6.20 4.22 5.06 0.923 1.107
----------------------------------------------------------------------------
TOTAL M&I 107.37 1.13 2.69 3.982 9.394
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Open pit (Inferred) 8.1 0.65 2.21 0.168 0.573
Underground (Inferred) 0.60 3.95 7.92 0.083 0.168
----------------------------------------------------------------------------
----------------------------------------------------------------------------
TOTAL Inferred 8.66 0.88 2.61 0.251 0.741
----------------------------------------------------------------------------
----------------------------------------------------------------------------
In-pit and underground Mineral Resources are exclusive of Mineral Reserves.
Mineral Resources that are not Mineral Reserves do not have demonstrated
economic viability.
In-pit Resources have been estimated using a cut-off grade of 0.30 g/t AuEq
and Underground Resources have been estimated using a cut-off grade of 2.5
g/t AuEq.
In-pit Resources have been estimated using a dilution of 10.23% at 0.17 g/t
Au and 1.00 g/t Ag and Underground Resources have been estimated using a
dilution of 10% at 0.32 g/t Au and0.81 g/t silver.
In-pit Resources have been estimated using a mine recovery of 95% and
Underground Resources have been estimated using a mine recovery of 95%.
Mining
The PEA assumes the processing of an average 20,000 tonnes per day of material
from a combination of open pit, underground and stockpile reclaiming operations.
The open pit mine and stockpiling reclaim plan is a 16-year plan that utilizes a
stockpile strategy to maximize grade to the mill and mines to a depth of 400
metres below surface.
The RRGP open pit is designed as a conventional surface mining operation
producing mill feed at a rate of 18,000 to 20,000 tonnes per day. The primary
equipment fleet would consist mainly of two 26 m(3) hydraulic shovels, two 30
m(3) wheel loaders, 220 tonne-class haul trucks, and a fleet of support
equipment. Production drilling will be carried out by diesel-powered
track-mounted units. Operating bench heights of 10 metres have been assumed for
mining operations.
Over the life of the open pit, a total of 311 million tonnes of waste rock and
72 million tonnes of overburden material would be moved. During the
pre-production period, 19 million tonnes of overburden material and 13 million
tonnes of waste rock would be removed as part of development work, with
overburden stripping completed within the first 4 years of mill operations.
Waste rock-to-mill-feed operating strip ratios average 2.50 during the first ten
years of operations, after capitalizing waste material. Waste material totalling
38 million tonnes ($65.0 million) is to be capitalized during the mine life
where the strip ratio exceeds the average waste rock-to-mill-feed ratio of 2.84
for the pit. Mined waste rock and overburden material would be stored in nearby
stockpiles or used in dyke construction activities associate with the tailings
impoundment.
Underground mining would be conducted with mechanized cut-and-fill (MCAF)
methods with 5 metre high lifts, designed to deliver 2,000 tonnes per day of
feed to the processing plant. Underground workings would be developed from a
primary 5-by-5 metre ramp access and, over time, from the open pit, as the pit
deepens. A fleet of 5.4 m(3) scooptrams and 22 m(3) trucks would load and haul
the material to surface. Development of the underground mine would start in Year
1 of open pit mine operations, commence small scale production by Year 3, and
begin producing at full rates by Year 5.
Both mine areas would deliver material to a central gyratory crusher for primary
reduction and delivery to the processing plant.
Metallurgy and Processing
Metallurgical testing has been conducted over a period of almost three years at
SGS Canada Inc. in Lakefield, Ontario. Based on the results, BBA has developed a
conventional flow sheet including:
-- primary crushing and grinding;
-- gravity recovery;
-- whole-ore leaching followed by a carbon-in-pulp circuit;
-- electro-winning and smelting to produce gold dore.
Major equipment for the processing facility includes a gyratory crusher sized
for 20,000 tpd, a 34' x 20' semi-autogenous ("SAG") mill and a 24' x 40' ball
mill. Mill feed would be ground to a P80 size of 75 micrometers before entering
a leaching circuit for final metal recovery.
Metallurgical recoveries for gold and silver over the life of the mine are
expected to average 91.0% and 67.4% respectively. One tailings pond is
envisioned.
Infrastructure
The RRGP benefits from world-class infrastructure, services and available labour
in the immediate area. The project site is located only 65 km from the town of
Fort Frances (population 8,000) and is accessible year-round by a network of
sealed provincial highways.
Infrastructure is anticipated to include:
-- Plant site and haul roads, gate house, parking, bus station and weigh
station;
-- Separate administration building;
-- Assay lab;
-- Mine maintenance garage, warehouse;
-- Fuel storage facilities;
-- Fresh water supply and fire protection;
-- Sewage treatment;
-- One tailings pond;
-- Construction camp for the project development phase. A camp is not
anticipated during operations.
-- Power to the project supplied by a new 17 km long 230-kV transmission
line connecting to the provincial grid, with total power draw expected
to be 54.2 MW at peak production.
Operating and Capital Costs
Total operating costs for the RRGP are summarized in Table 5 (a) as follows:
Table 5 (a) - Average Life of Mine Operating Costs (in Canadian dollars)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Cost Structure Unit Costs per Unit
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Open pit mining (mineralized and waste
rock) C$ / t mined $ 1.89
Underground mining (cut & fill) C$ / t mined $ 70.00
----------------------------------------------------------------------------
Open pit mining (mineralized and waste
rock) C$ / t milled $ 6.36
Underground mining (cut & fill) C$ / t milled $ 4.11
Processing C$ / t milled $ 8.73
General & Administrative C$ / t milled $ 1.00
Refining expenses C$ / t milled $ 0.14
Royalties C$ / t milled $ 0.30
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total C$ / t milled $ 20.64
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total cash costs for the RRGP are summarized in Table 5 (b) as follows:
Table 5 (b): Average Gold Cash Costs(1 )
----------------------------------------------------------------------------
Initial 5 Initial 10
Years Years LOM
Area $US/oz Au $US/oz Au $US/oz Au
----------------------------------------------------------------------------
Mining (Open Pit and
Underground)(2) $ 248 $ 295 $ 307
----------------------------------------------------------------------------
Processing 205 194 256
----------------------------------------------------------------------------
General and Administrative 23 22 29
----------------------------------------------------------------------------
Refining Expenses 3 4 4
----------------------------------------------------------------------------
Royalties 3 9 9
----------------------------------------------------------------------------
Silver Credit (32) (39) (45)
----------------------------------------------------------------------------
Total Cash Costs $ 450 $ 486 $ 560
----------------------------------------------------------------------------
Notes: Includes silver credit and royalty payments. During years with high
stripping ratios (greater than 2.84), the operating costs associated with
rock waste material have been capitalized.
The breakdown of open pit and underground pre-production and sustaining capital
costs is supplied in Tables 6 and 7, respectively.
Open pit pre-production capital costs include overburden stripping, which is
necessary to expose the bedrock material to be mined, as well as waste rock
stripping. Open pit sustaining capital costs include the construction of a
tailings dam and certain ongoing overburden stripping to expose mineralized
material as the pit expands.
Table 6 - Open Pit Capital Costs
-------------------------------------------
Open Pit Pre-Production Capital C$M
-------------------------------------------
Overburden Stripping 32
-------------------------------------------
Waste Stripping 27
-------------------------------------------
Process Plant 279
-------------------------------------------
Tailings and Water Management 21
-------------------------------------------
Equipment 27
-------------------------------------------
Site and Mine Infrastructure 85
-------------------------------------------
Indirect Costs 123
-------------------------------------------
Contingency 100
-------------------------------------------
Total 694
-------------------------------------------
Open Pit Sustaining Capital C$M
-------------------------------------------
Equipment Lease 136
-------------------------------------------
Waste Stripping Costs 65
-------------------------------------------
Overburden Stripping Costs 61
-------------------------------------------
Tailings Dam Construction 88
-------------------------------------------
Other: Closure and Salvage value, net (10)
-------------------------------------------
Total 340
-------------------------------------------
-------------------------------------------
Table 7 - Underground Capital Costs
-----------------------------------------
Underground Capital C$M
-----------------------------------------
Development 67
-----------------------------------------
Sustaining 148
-----------------------------------------
Total 215
-----------------------------------------
Environment
The environmental baseline assessment was initiated in 2008, and was followed by
extensive annual regional field assessments.
As noted in the November 2011 Preliminary Economic Assessment, AMEC's
environmental study to-date suggests that 'no fatal flaws' are indicated for the
RRGP.
Rainy River recently commenced the project environmental assessment with the
filing of a draft Terms of Reference for the provincial process, and the filing
of the draft Project Description for the federal process.
Community
The Company is an active member of the local community supporting a variety of
community events and initiatives. Regular public information meetings combined
with site tours are some of the ways in which the Company continues to engage
and inform the local population as to the project's progress.
The Company has local offices situated both near the project site in the town of
Emo, and in Thunder Bay.
In support of aboriginal engagement, the Company announced in April 2012 that it
had signed a Participation Agreement ("PA") with the six member nations of the
Fort Frances Chiefs Secretariat First Nations. Additional consultations in
support of Mine permitting are well underway.
The peak construction workforce would total 480 during the 21-month construction
period. Employment levels at the RRGP during operations would vary according to
production requirements, but would peak at 571 employees.
Project Economics
The first five years of mining yields cash costs (including royalties and net of
silver credits) of US$450 per ounce of gold, placing RRGP in the first quartile
of global gold projects, based on published industry cost curves. In Years 1 -
10, cash costs are US$486 per ounce of gold, placing the RRGP within the second
quartile of global gold projects. Life-of-mine cash costs, net of silver
credits, after the processing of low-grade stockpiles in years 11 to 16, are
calculated to be US$560 per ounce of gold. This life-of-mine average places the
project within the second quartile of global gold projects, based on published
industry cost curves.
Production volumes and cash costs are shown in Tables 8(a) and (b) and 9 below.
Table 8(a) - Gold and Silver Production Profile: Open Pit(1)
----------------------------------------------------------------------------
OPEN PIT
----------------------------------------------------------------------------
Gold Silver Gold Silver
Year Tonnage Grade Grade Production Production
----------------------------------------------------------------------------
000's tonnes g/t g/t 000's oz 000's oz
----------------------------------------------------------------------------
1 6,418 1.37 2.45 260 340
----------------------------------------------------------------------------
2 7,218 1.37 1.98 293 309
----------------------------------------------------------------------------
3 7,193 1.46 1.86 311 290
----------------------------------------------------------------------------
4 7,006 1.20 2.57 247 389
----------------------------------------------------------------------------
5 6,575 1.02 3.55 198 506
----------------------------------------------------------------------------
6 6,569 1.11 4.44 215 633
----------------------------------------------------------------------------
7 6,569 1.13 4.50 220 643
----------------------------------------------------------------------------
8 6,576 1.24 3.73 243 531
----------------------------------------------------------------------------
9 6,577 1.22 1.92 239 273
----------------------------------------------------------------------------
10 6,567 1.38 1.68 270 238
----------------------------------------------------------------------------
11(2) 6,570 0.56 1.94 107 276
----------------------------------------------------------------------------
12 6,570 0.35 2.01 65 286
----------------------------------------------------------------------------
13 6,729 0.35 2.01 66 293
----------------------------------------------------------------------------
14 7,300 0.35 2.01 65 317
----------------------------------------------------------------------------
15 7,300 0.35 2.01 65 317
----------------------------------------------------------------------------
16 7,300 0.35 2.01 65 317
----------------------------------------------------------------------------
17 196 0.35 2.01 2 9
----------------------------------------------------------------------------
109,232 0.92 2.52 2,931 5,968
----------------------------------------------------------------------------
Note:
1. Open pit material is comprised of 68.6 Mt @ 1.26 g/t Au, 2.83 g/t
Ag material and a stockpile of 40.6 Mt @ 0.35 g/t Au, 2.00 g/t Ag.
2. Stockpile material processing begins.
Table 8(b) - Gold and Silver Production Profile: Underground
----------------------------------------------------------------------------
UNDERGROUND
----------------------------------------------------------------------------
Gold Silver Gold Silver
Year Tonnage Grade Grade Production Production
----------------------------------------------------------------------------
000's tonnes g/t g/t 000's oz 000's oz
----------------------------------------------------------------------------
1 - - - - -
----------------------------------------------------------------------------
2 - - - - -
----------------------------------------------------------------------------
3 100 4.13 2.57 12 6
----------------------------------------------------------------------------
4 300 4.13 2.57 37 17
----------------------------------------------------------------------------
5 730 4.13 2.57 89 41
----------------------------------------------------------------------------
6 730 4.13 2.57 89 41
----------------------------------------------------------------------------
7 730 4.14 13.69 89 217
----------------------------------------------------------------------------
8 730 4.13 7.14 90 113
----------------------------------------------------------------------------
9 730 4.13 6.74 89 106
----------------------------------------------------------------------------
10 730 4.32 5.73 94 90
----------------------------------------------------------------------------
11 730 4.36 6.30 92 99
----------------------------------------------------------------------------
12 730 4.22 2.01 88 32
----------------------------------------------------------------------------
13 571 4.28 1.67 69 21
----------------------------------------------------------------------------
14 - - - - -
----------------------------------------------------------------------------
15 - - - - -
----------------------------------------------------------------------------
16 - - - - -
----------------------------------------------------------------------------
17 - - - - -
----------------------------------------------------------------------------
6,811 4.20 5.30 837 782
----------------------------------------------------------------------------
Table 9 - Combined Open Pit and Underground Production, Cash Costs
----------------------------------------------------------------------------
Tonnes Gold Silver Gold Silver Cash
Year Milled Grade Grade Production Production Costs(1)
----------------------------------------------------------------------------
000's
tonnes g/t g/t 000's oz 000's oz US$/oz
----------------------------------------------------------------------------
1 6,418 1.4 2.5 260 340 $ 415
----------------------------------------------------------------------------
2 7,218 1.4 2.0 293 309 $ 379
----------------------------------------------------------------------------
3 7,293 1.5 1.9 323 295 $ 367
----------------------------------------------------------------------------
4 7,306 1.3 2.6 284 406 $ 495
----------------------------------------------------------------------------
5 7,305 1.3 3.5 287 547 $ 606
----------------------------------------------------------------------------
6 7,299 1.4 4.3 305 674 $ 573
----------------------------------------------------------------------------
7 7,299 1.4 5.4 310 860 $ 533
----------------------------------------------------------------------------
8 7,306 1.5 4.1 332 644 $ 544
----------------------------------------------------------------------------
9 7,307 1.5 2.4 328 380 $ 511
----------------------------------------------------------------------------
10 7,297 1.7 2.1 364 329 $ 441
----------------------------------------------------------------------------
11(2) 7,300 0.9 2.4 199 376 $ 663
----------------------------------------------------------------------------
12 7,300 0.7 2.0 152 317 $ 825
----------------------------------------------------------------------------
13 7,300 0.7 2.0 135 313 $ 859
----------------------------------------------------------------------------
14 7,300 0.3 2.0 65 317 $ 1,206
----------------------------------------------------------------------------
15 7,300 0.3 2.0 65 317 $ 1,206
----------------------------------------------------------------------------
16 7,300 0.3 2.0 65 317 $ 1,206
----------------------------------------------------------------------------
17 196 0.3 2.0 2 9 $ 1,206
----------------------------------------------------------------------------
116,043 1.11 2.7 3,768 6,750 $ 560
----------------------------------------------------------------------------
Note:
1. Cash costs are inclusive of Royalties and net of silver credits
2. Stockpile material processing begins.
The updated PEA study returns a 21.0% IRR and a pre-tax NPV of $846 M, at a 5%
discount rate. Parameters are provided in Table 10 below with sensitivities in
Table 11. The PEA assumes that capital costs commence upon the initiation of
construction.
Table 10 - Economic Parameters and Summary of PEA Results
----------------------------------------------------------------------------
PEA Base Case
Economic Parameter Units Assumptions
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Metal price - Au US$ / oz $ 1250.00
Metal price - Ag US$ / oz $ 25.00
Currency exchange rate C$ / US$ $ 1.05
Discount Rate for NPV % 5%
Development Capital - Open Pit $ millions $ 594
Contingency $ millions $ 100
Sustaining Capital - Open Pit $ millions $ 340
Development Capital - Underground $ millions $ 67
Sustaining Capital - Underground $ millions $ 148
5 year cash cost / oz Au(1) US$/oz Au $ 450
10 year cash cost / oz Au(1) US$/oz Au $ 486
millions, 5%
Net Present Value, pre-tax $ discount $ 846
Internal Rate of Return % 21.0
Payback period Years 3.8
1. Including royalties and net of silver credits.
All scenarios in the Preliminary Economic Assessment are preliminary in nature
and include Measured, Indicated and Inferred Mineral Resources. Inferred Mineral
Resources are considered too speculative geologically to have the economic
considerations applied to them that would enable them to be categorized as
Mineral Reserves. There is no certainty that the Preliminary Economic Assessment
will be realized.
Table 11 - Sensitivities to Metal Prices(1)
----------------------------------------------------------------------------
Base Case
Gold, Silver, US$/oz $1250 / $25 $1600 / $30 $1800 / $35 $2000/$40
----------------------------------------------------------------------------
----------------------------------------------------------------------------
NPV $ millions 846 1,806 2.364 2,922
IRR % 21.0 34.3 41.1 47.5
1. Assumes constant exchange rate of 1.05 C$/US$.
Comparison Table
Table 12 below compares metrics from the new PEA against the November 2011 PEA.
Table 12 - PEA Comparison
----------------------------------------------------------------------------
Parameter Units November 2011 August 2012
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Mine Life years 13.3 16
Open Pit Depth m 500 400
Mill Throughput ktpd 32 20
143.9Mt @ 0.9 68.6 Mt @ 1.26
g/t Au, 1.9 g/t g/t Au, 2.83
Mine plan - open pit Ag g/t Ag
40.6 Mt @ 0.35
g/t Au, 2.00
Mine plan - stockpile -- g/t Ag
6.36Mt @ 3.5 6.81 Mt @ 4.20
g/t Au, 5.7 g/t g/t Au, 5.30
Mine plan - underground Ag g/t Ag
Contained gold Moz 4.3 4.2
Waste Mt 586 311
Overburden Mt 91 72
Waste+Overburden/Mineralized Strip
Material ratio 4.7 3.50
Strip
Waste/ Mineralized Material ratio 4.1 2.84
Waste-Capitalized Waste
(Operating)/ Mineralized Strip
Material ratio 3.3 2.50
Recoveries - gold % 88.5 91.0
Recoveries - silver % 65 67.4
Year 1 - 10 mill Au grade gpt 0.97 1.45
Year 1 - 10 Au production koz/y 311 308
Year 1 - 10 cash costs USD/oz Au 569 486
Open pit, Pre-production
capital C$ M 681 694
Open pit, Sustaining capital C$M 598 340
Underground, Development
capital (1) C$M 67 67
Underground, Sustaining
capital (1) C$M 110 148
Pre-tax NPV @ 5% C$M 786 846
Pre-tax IRR % 19.4 21.0
Payback Years 3.4 3.8
1. Funded from free cash flow.
2. Including royalties, net of silver credits.
Opportunities and Risks
Opportunities to improve RRGP project economics include the following:
-- The PEA is based on the February 24, 2012 mineral resource cut-off date
and does not include subsequent infill drilling completed to date in
2012. The next resource update is planned for Q3/2012 and is expected to
include assays from metreage drilled in the first half of 2012. New data
will be incorporated into the upcoming feasibility study and is
primarily expected to increase confidence levels of existing ounces.
Potential impacts are to mining grade, which improves with confidence
levels, and the possible conversion of waste material to mineralized
material.
Risks requiring mitigation strategies include:
-- Management of construction/engineering and procurement costs, and cost
containment.
-- Operating risks related to recruitment and training of open-pit and
underground workforces.
-- Currency risk relating to equipment purchases denominated in US
currency.
Next Steps
Technical:
-- Updated NI 43-101 resource estimate;
-- Initiate Basic Engineering.
Exploration
-- Focussed exploration of district targets;
Community and Environment:
-- Ongoing community engagement programs and consultation with the First
Nations to continue;
-- Begin development of the Project Environmental Assessment report in
support of Mine permitting.
The full NI 43-101 Technical Report for the PEA will be filed on SEDAR within 45
days, and will be posted to Rainy River Resources' website at
www.rainyriverresources.com at that time.
Rainy River will hold a conference call on Thursday August 30, 2012 at 9:00 a.m.
Eastern Daylight Time. During the call, senior management will be available to
discuss the study and respond to questions from analysts and investors. To join
the call, please dial:
-- 1-800-319-4610 in Canada and USA toll-free
-- 1-604-638-5340 outside Canada and USA
The conference call will be recorded and available until September 28, 2011.
Playback details are as follows:
-- 1-800-319-6413 in Canada and USA toll-free
-- 1-604-638-9010 outside Canada and USA
-- Passcode: 5589 followed by the # sign.
Independent Qualified Persons ("QPs")
Independent QPs from BBA, Golder, AMEC and SRK who have prepared or supervised
the preparation of the technical information relating to the Preliminary
Economic Assessment include:
-- David Runnels, Colin Hardie (BBA)
-- Donald Tolfree (Golder)
-- David Ritchie, Sheila Daniel (AMEC)
-- Glen Cole, Dorota El-Rassi (SRK)
The mineral resource statement was prepared by Dorota El-Rassi, P.Eng. (APEO
#100012348) and Glen Cole, P.Geo (APGO #1416), of SRK, both "independent
qualified persons" as that term is defined in National Instrument 43-101.
Forward Looking Statements
This news release contains "forward-looking information" as defined in
applicable securities laws (referred to herein as "forward-looking statements").
Forward looking statements include, but are not limited to, statements with
respect to the cost and timing of the development of the Rainy River project,
the other economic parameters of the project, as set out in its preliminary
economic assessment; the success and continuation of exploration activities;
estimates of mineral resources; acquisitions of additional mineral properties;
the future price of gold; government regulations and permitting timelines;
estimates of reclamation obligations that may be assumed; requirements for
additional capital; environmental risks; and general business and economic
conditions. Often, but not always, forward-looking statements can be identified
by the use of words such as "plans", "expects", "is expected", "budget",
"scheduled", "estimates", "continues", "forecasts", "projects", "predicts",
"intends", "anticipates" or "believes", or variations of, or the negatives of,
such words and phrases, or statements that certain actions, events or results
"may", "could", "would", "should", "might" or "will" be taken, occur or be
achieved. Forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the Company's actual results,
performance or achievements to be materially different from any of its future
results, performance or achievements expressed or implied by forward-looking
statements.
These risks, uncertainties and other factors include, but are not limited to,
the assumptions underlying the preliminary economic assessment not being
realized, decrease of future gold prices, cost of labour, supplies, fuel and
equipment rising, changes in equity markets, actual results of current
exploration, changes in project parameters, exchange rate fluctuations, delays
and costs inherent to consulting and accommodating rights of First Nations,
title risks, regulatory risks and uncertainties with respect to obtaining
necessary surface rights and permits or delays in obtaining same, and other
risks involved in the gold exploration and development industry, as well as
those risk factors discussed in the section entitled " Description of
Business-Risk Factors in Rainy River's 2011 Annual Information Form and its
other SEDAR filings from time to time. Forward-looking statements are based on a
number of assumptions which may prove to be incorrect, including, but not
limited to, the availability of financing for the Company's exploration and
development activities; the timelines for the Company's exploration and
development activities on the Rainy River Property; the availability of certain
consumables and services; assumptions made in mineral resource estimates,
including geological interpretation grade, recovery rates, and operational
costs; and general business and economic conditions. All forward-looking
statements herein are qualified by this cautionary statement. Accordingly,
readers should not place undue reliance on forward-looking statements. The
Company undertakes no obligation to update publicly or otherwise revise any
forward-looking statements whether as a result of new information or future
events or otherwise, except as may be required by law.
For additional information with respect to the key assumptions, parameters,
risks and other technical information underlying to the mineral resource
estimates and the preliminary economic assessment discussed in this news
release, refer to: (i) the technical report entitled "Technical Report for the
Rainy River Gold Project, Northwestern Ontario, Canada", dated April 9, 2012,
with respect to the mineral resource estimates, available at www.sedar.com; and
(ii) the technical report entitled "Preliminary Economic Assessment of the Rainy
River Gold Property, Ontario, Canada", with respect to the preliminary economic
assessment, to be filed at www.sedar.com.
This new release uses the terms "measured resources", "indicated resources" and
"inferred resources". The Company advises readers that although these terms are
recognized and required by Canadian regulations NI 43-101, the United States
Securities and Exchange Commission does not recognize them. Readers are
cautioned not to assume that any part or all of the mineral deposits in these
categories will ever be converted in to reserves. In addition, "inferred
resources" have a great amount of uncertainty as to their existence, and
economic and legal feasibility. It cannot be assumed that all or any part of an
inferred mineral resource will ever be upgraded to a higher category. Under
Canadian rules, estimates of inferred mineral resources may not form the basis
of feasibility or pre-feasibility studies, or economic studies, except for a
Preliminary Assessment as defined under NI 43-101. Investors are cautioned not
to assume that part or all of an inferred resource exists, or is economically or
legally mineable.
Non-GAAP Measures
Cash cost per ounce has no standardized meaning under IFRS.
Qualified Persons
Rainy River's engineering assessment in Richardson Township is being supervised
by Garett Macdonald, P.Eng. (PEO #90475344), Vice-President Operations and a
Qualified Person as defined by National Instrument 43-101. Garett Macdonald,
P.Eng. (PEO #90475344), is also the person responsible for the content of this
news release. Rainy River's exploration program in Richardson Township is being
supervised by Kerry Sparkes, P.Geo. (APEGBC #25261), Vice-President Exploration,
a Qualified Person as defined by National Instrument 43-101.
About Rainy River
Rainy River Resources Ltd. is a Canadian precious metals exploration company
whose key asset is the Rainy River Gold Project, a large gold system centred in
Richardson Township (part of Chapple Township). As of June 30, 2012, the Company
had approximately $81 million in cash and cash equivalents, and remains well
funded for its 2012 plans to 1) commence a feasibility level study on the RRGP;
2) continue growing the existing resource through exploration; 3) conduct a
condemnation program in areas identified for potential mine facilities; and 4)
continue regional exploration. RRGP is very well located in the southwestern
corner of northern Ontario, near the U.S. border. It is accessed by a network of
roads and is close to hydro-electric infrastructure. The Rainy River district
has a skilled labour force and is one of the lowest-cost areas for mineral
exploration and development in Canada. The Company is working to advance the
early-stage discoveries at its TPK Joint Venture Property, also in Ontario,
where it can earn a 51% interest in the property from Northern Superior
Resources Inc. Ontario has low political risk and, according to the annual
Fraser Institute global survey of the mining industry, has consistently ranked
as one of the top jurisdictions embracing mineral development.
RAINY RIVER RESOURCES LTD.
Raymond W. Threlkeld
President & CEO
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