West High Yield (W.H.Y.) Resources Ltd. ("West High Yield" or the "Company")
(TSX VENTURE:WHY) announces the release of the results of a Preliminary Economic
Assessment ("PEA") on its 100% owned Record Ridge Project (the "Record Ridge
Property" or the "Project"). The Record Ridge Property is an
intermediate-advanced exploration-stage magnesium ("Mg") project located in
southern British Columbia (BC), Canada. The PEA was prepared by SRK Consulting
(U.S.), Inc. ("SRK") of Lakewood, Colorado and has been filed on the Company's
SEDAR profile at www.sedar.com and is also available on the Company's website
www.whyresources.com.
The PEA presumes a conventional open pit mine, a novel hydrometallurgical
processing plant, a calcined magnesia intermediate product plant along with a
fused magnesia production plant with pre-tax Net Present Value ("NPV") using a
5% discount rate of US$1.339 billion and Internal Rate of Return ("IRR") of 21%,
and a post-tax NPV of US$830 million using a 5% discount and post-tax IRR of
17%.
Highlights
Highlights of the PEA include the following:
-- Pre-tax NPV 5% of US$1.339 billion and IRR (pre-tax) of 21% (100%
equity).
-- Post-tax NPV 5% of US$830 million and IRR (post-tax) of 17% (100%
equity).
-- Initial capital cost estimation of US$608 million.
-- Payback - Estimated before tax at end of fifth year of production.
-- An estimated mine life of 42 years.
-- Measured and Indicated Mineral Resources of approximately 43 million
tonnes averaging 24.6% Mg, using a 21.9% cut-off. Approximately 10.6
million tonnes of contained Mg.
-- Throughput - 3,000 tonnes per day.
-- Market price - US$1,100/tonne Fused Magnesium Oxide ("MgO") and by-
product credit of US$75/tonne for Sodium Sulfate.
-- An initial assumed overall average process recovery rate of 80% Mg based
on laboratory scale metallurgical test work producing an intermediate
calcined MgO product. This will be subject to additional test work to
confirm the recovery into a fused MgO product, which has not been
demonstrated to date.
-- Low variation in grade throughout the deposit suggests that the need for
detailed grade control and selective mining methods will be limited.
The following table includes excerpts from Table 4 (page v) of the PEA with
respect to the mine and plant economic results.
Table 1: PEA Mine and Plant Economic Results (in US$ Millions)
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Pre-Tax Results Post-Tax Results
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MgO Electro Fused Magnesia Sales $15,826 $15,826
Sodium Sulfate Sales 4,958 4,958
Gross Sales 20,784 20,784
Freight and Marketing (2,254) (2,254)
Net Revenue $18,530 $18,530
Total Operating 12,317 12,317
Operating Margin (EBITDA(i)) 6,213 6,213
Capital 984 984
Federal + Provincial Income Tax - 1,146
Provincial Mining Tax - 695
Cash Flow Available for Debt Service 5,229 4,083
NPV 5% $1,339 $830
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(i) EBITDA - Earnings Before Interest, Taxes, Depreciation and Amortization.
The following table is from Table 2 (page iv) of the PEA with respect to the
Project Mineral Resource Statement.
Table 2: Record Ridge Project Mineral Resource Statement dated April 18,
2013
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Resource Category % Mg Cut-off Total Mt % Mg Grade Contained Mg (Mt)
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Measured 21.9 28.4 24.82 7.05
Indicated 21.9 14.6 24.21 3.54
M&I 21.9 43.0 24.61 10.59
Inferred 21.9 1.07 24.37 0.26
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Notes:
-- Mineral Resources are not Mineral Reserves and do not have demonstrated
economic viability. There is no certainty that all or any part of the
Mineral Resources will be converted into Mineral Reserves;
-- Open pit resources are contained within a pit optimization shell and are
stated at the internal cut-off grade ("CoG") of 21.9% Mg calculated in
the Whittle(TM) optimization. The CoG is based on the following
parameters: US$2.00/t mining cost, US$244.75/t processing cost, 60%
recovery, General &Administrative cost of US$1.00/t, no NSR and a
US$1,100/t value for Fused MgO at 98% lump;
-- Note that the above cut-off grade is based on the early assumption of an
overall 60% metallurgical recovery, and has not been updated to reflect
the most recent metallurgical lab leaching test work which suggests an
80% recovery. It may be expected that using this updated recovery could
lower the cut-off grade for the Whittle(TM) internal cut-off, likely
resulting in more tonnes and a longer life of mine (LoM).
-- West High Yield has acknowledged that the final overall process recovery
must be confirmed in conjunction with locked-cycle testing of the
downstream intermediate calcined MgO and final fused MgO unit operations
efficiencies and recoveries which to date have not been tested or
demonstrated.
-- Mineral Resource tonnage and contained metal have been rounded to
reflect the accuracy of the estimate and numbers may not add due to
rounding: and
-- The Mineral Resources are reported in accordance with Canadian
Securities Administrators (CSA) NI 43-101 and have been classified in
accordance with standards as defined by the Canadian Institute of
Mining, Metallurgy and Petroleum (CIM) Definition Standards - For
Mineral Resources and Mineral Reserves.
Summary
The majority of the initial PEA engineering and design work was conducted based
on the open cycle preliminary metallurgical recovery of solubilized Mg of
approximately 60% based on a Report prepared by Met-Solve Laboratories
("Met-Solve") dated October 31, 2012. Subsequent open cycle lab scale test work
was conducted by Met-Solve and was reported on April 18, 2013. This work
demonstrated an improvement of the solubilized Mg leaching recovery to an
estimated 80% with new estimates of increased capital and operating costs
included. This work has not evaluated the potential for these recoveries to
extend to locked-cycle testing or fused MgO production. The effect of the higher
Mg leach recovery may potentially lower the cut-off grade for the stated mineral
resources, thereby increasing tonnes and extending the life of the mine.
The PEA is preliminary in nature, in that it includes inferred mineral resources
that are considered too speculative geologically to have the economic
considerations applied to them that would enable them to be categorized as
mineral reserves and there is no certainty that the PEA will be realized. A
Prefeasibility Study ("PFS") is required to demonstrate the economic merit of
mineral resources in order for their potential conversion to reserves. At this
time, no such study has been completed and therefore the Project currently has
no reserves.
SRK has recommended that the next steps should include a PFS along with
extensive detailed and large scale closed cycle metallurgical testing along with
focused engineering on any and all aspects of the proposed process with
associated costs of an estimated $US10 million. West High Yield intends to take
steps which include financing a PFS.
Property Description and Ownership
The Record Ridge Property is an intermediate-advanced exploration-stage Mg
project located in southern British Columbia (BC), Canada. It is located 7.5
kilometers west to southwest of the town of Rossland, B.C., Canada, 5 kilometers
north of the U.S.-Canada border and approximately 400 kilometers east of the
Vancouver, B.C. Mineralization is related to the elevated Mg content in
serpentinized mafic rocks. West High Yield retains 100% of the mineral rights to
the property, has agreements with the BC government for exploration access, and
is in the process of evaluating options for procurement of surface rights for
continued development of the property.
Mineralization
Mineralization containing economically significant concentrations of Mg is known
to occur in the ultramafic rocks which have undergone serpentinization. This
rock type makes up the predominant lithology described in the Project and occurs
on a widespread basis.
Exploration Status
During the 2007, 2008 and 2011 field seasons, West High Yield conducted surface
mapping, surface sampling and diamond drilling on the Project. The Project
resource estimation is based on information from 77 diamond core drillholes
totaling 10,310 meters, with 5,836 assays.
Metallurgical Test Results
During 2012, Met-Solve conducted test work to evaluate the potential of using a
hydrometallurgical process to extract Mg from mineral samples provided by the
Company. Met-Solve completed this test work and delivered its Report on October
31, 2012 (included in the PEA as Appendix B). The conceived process was for the
potential conversion of Mg to a marketable fused magnesia product. However, the
production of fused magnesia has not yet been tested or confirmed to date. The
test program also utilized some of the variables that affect the amount of Mg
extracted via acid leaching, slurry neutralization and impurity removal. The
Report indicates that certain additional metallurgical optimization of variables
such as leach duration, leach temperatures, acid concentration, locked cycle
testing, pulp density, and pilot scale fused MgO testing have not been fully
undertaken which could confirm the viability of the process and potentially lead
to a more efficient extraction process. West High Yield has acknowledged that
the final overall recovery must be confirmed in conjunction with locked-cycle
testing of the downstream intermediate calcined MgO and final fused MgO unit
operations efficiencies and recoveries which to date have not been tested or
demonstrated. This will be the focus of the Company's efforts in ongoing
metallurgical test work.
The Company requested Met-Solve to perform the recommended supplementary
testing. Met-Solve completed this additional testing and reported the results in
the Supplementary Report dated April 18, 2013 (included in the PEA as Appendix
C), which is available on the Company's SEDAR profile at www.sedar.com.
Under the preferred leach conditions of the supplementary test program,
Met-Solve achieved:
-- Greater than an estimated 80.0% Mg leach recovery by open cycle
laboratory leaching at an elevated temperature and higher pulp density
(Met-Solve's previous 2012 testing was estimated at about 60% Mg leach
recovery).
-- Due to the exothermic reaction during acid addition, the temperature is
only required to be maintained and not raised.
-- The open cycle laboratory leach results to date demonstrate consistency
and repeatability.
-- A finer grind size is not necessary for better leach recoveries.
-- Improved acid utilization.
-- An MgO intermediate calcined product purity of greater than 97.7% with
test YO901 (see Table below) achieving a product purity of great than
99.7%.
The Acid Leach Table below is taken from Met-Solve's Supplementary Report (page
6 of Appendix C of PEA) which summarizes Acid Leach test results: tests YO 901
and YO 902 under the preferred method for slurry neutralization using MgO
additions whereas YO903 used a NaOH addition as a prospective alternative
thereby reducing the circulating MgO load (and cost).
Table 3: Acid Leach Test Summary
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Assayed Calculated Leach
Mg Leach Feed Feed Residue Acid
Test # P80 Recovery Grade Grade Grade Consumption
(microns) (%) (%) (%) (%) (%)
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YO607/YO608 228 62.6 23.7 22.4 13.09 64.1
(Previous Test Work)
YO901a 53 86.0 23.7 24.5 6.6 N/A
YO901b 53 86.9 23.7 26.7 6.5 92.0
YO902a 228 80.5 23.7 24.3 8.1 N/A
YO902b 228 84.3 23.7 24.2 6.7 90.8
YO903a 53 81.2 23.7 23.5 7.0 N/A
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P80 - Percent passing 80 Mesh
The technical economic models within the PEA are sensitive to many factors
including the Mg recovery rate.
Development and Operations
As proposed in the PEA, Record Ridge will be mined using conventional open pit
methods using a default 365 day production cycle comprising one 12 hour shift
delivering approximately 3,000 tonnes/day of material to the crusher. Waste
material below specified cut-off will be hauled from the pit and placed in a
designated waste dump location. With further optimization of the tailings dam
facility, it is foreseeable that waste could be used as bulk earthworks for the
downstream construction of the dam wall. Material will be mined from the pit and
transported to the processing facility near the mine and placed in a stockpile
and subsequently fed into the crusher bin by front-end loader.
Significant Risks and Uncertainties
Surface Rights
The surface rights for the Project area include a number of parcels that are
designated as privately-held by the B.C. Government's Integrated Cadastral
Fabric. The Company would need to secure lease agreements or ownership of these
parcels in order to operate the project as it is currently designed. SRK sited
facilities independent of the current surface ownership, and are subject to
change based on the Company's ability to acquire the rights to this land for
operational purposes.
Metallurgy and Processing
The PEA proposed flowsheet and associated economics are based upon limited and
un-optimized testing and several key assumptions will need to be actually
confirmed with further investigation and optimized testing. This includes, but
is not limited to, locked cycle leach and precipitation testing, effective
industrial scale liquid solid separations, comprehensive heat and mass balances
and the actual bulk availability and pricing of key reagents such as soda ash
and sulfur.
Key parameters such as crushing energy indices as well all comminution abrasion
indices need to be determined. As well, further work needs to be done to
determine the optimal crush and grind size for effective leaching recovery.
The Mg leaching recovery is estimated to be 80% overall assuming that with
closed cycle plant operations coupled with effective heat input, the majority of
the leached Mg will eventually report as a final product and not be lost due to
crystallization or ineffective liquid solid separations. This needs further
optimization and verification at the laboratory and pilot scale in a closed
operational system.
It is assumed that waste and by product MgO containing materials will be
available and may effectively be used for neutralization of excess acid and
solubilized iron precipitation in conjunction with aeration of solutions after
leaching in lieu of peroxide oxidation. Further test work needs to be done to
confirm and optimize this.
It is assumed with on-site sulfuric acid production and the subsequent excess
exothermic energy production, the overall process is net positive in heat energy
or at least balanced. This needs to be carefully analyzed, quantified, and
confirmed.
It is assumed that electrical energy is available at the rates disclosed herein
for key energy consuming unit operations such as comminution and MgO fusion.
It is assumed that a ready supply of bulk elemental sulfur and soda ash are
available at the plant site. This needs to be further investigated.
Further focused leach testing with optimization and closed cycle testing of
representative samples needs to be done to confirm reagent consumptions and to
achieve enhanced Mg recoveries to solution.
No actual production of fused magnesia from West High Yield materials has been
tested or confirmed. This needs to be carefully tested and confirmed with
representative samples at a laboratory, pilot and industrial scale. In addition
only very limited calcinations of magnesium carbonate have been done to produce
an intermediate calcined magnesia product. This also needs to be carefully
tested further confirmed with representative samples at a laboratory, pilot and
industrial scale.
It is assumed that a large volume of high quality by product sodium sulfate may
be produced and sold. As no actual sodium sulfate product has been produced from
West High Yield materials to date, this confirmatory testing needs to be carried
out.
An overall mass, heat and water balance needs to be carried out to hone in on
actual recoveries, net energy use and the quantified need and nature of air,
water and solid discharges.
The flow sheet supporting the metallurgical processing is at an early stage of
development and has never been tested in a commercial application. There are no
comparable commercial operations that use Mg-silicates as a mill feed or use the
flow sheet proposed in this report to create an EFM product.
Commodity and Reagent Price
There are three major commodity and reagent price assumptions that have been
made in the PEA report. There are several different methods used to estimate
commodity and reagent prices. The methods used by SRK, rely on trailing average
prices or expert opinions on future prices. The prices cited here may not
reflect actual future cost associated with delivery to the project.
Soda Ash - There are no negotiated terms for the purchase of soda ash or
estimated transportation from Wyoming to the project site. What information
could be found suggested US$140 was a reasonable price given that the production
of soda ash is available from Wyoming. For each tonne of rock processed
approximately one tonne of soda ash is required for processing and will make up
approximately 50% of the total operating cost. Variation in soda ash price and
additional transportation costs may be a benefit but also a significant risk to
profitability if it were to increase.
EFM - Based on reports supplied by the Company, the quality of the end-product
suggested by Met-Solve and historic information of EFM at a 98% quality, SRK has
used a US$1,100/t price. Because EFM is an industrial mineral, there are no
specific spot prices and contract terms governing the sale of the product in
bulk quantities. The infusion of additional EFM from West High Yield on a
massive scale onto the global market may negatively impact the price achieved.
As the effective cash cost of the EFM is US$668/t, any reduction below that
price would require additional credit from sodium sulfate or reduction in soda
ash prices to remain profitable. There is a possibility that the project could
contribute enough EFM to influence the world supply and pricing structure.
Sodium Sulfate - Based on reports supplied by West High Yield and investigation
to the use of sodium sulfate, SRK has used a price of US$75/t. While the price
information shows less volatility than EFM, the largest risk will likely be the
surplus supply Record Ridge would make on the global market (estimated at 10%).
When combined with other potential hydro metallurgical operations that may be
commissioned, the market could easily be over supplied with low priced sodium
sulfate as the cost of disposing it is very high.
Due to the extended period of feasibility, permitting and construction
envisioned for the Project, the price projections will remain a significant risk
until off-take and purchasing agreements can be formalized.
Sulfuric Acid - The cost of sulfuric acid is directly predicated on a low cost
and available source of high quality sulfur. If sulfur costs rise or their
availability is restricted, this will have a negative impact on the technical
and economic viability of the project.
Infrastructure and Tailings
Risks associated with the infrastructure include:
Capacity of local infrastructure to provide for truck transportation of the
significant quantities of reagents and products that the Project will
require/generate respectively. There may need to be additional infrastructure
improvement and community involvement associated with the trucking of these
quantities to and from Trail, BC.
The actual power and water requirements of the project have been estimated at a
scoping level of detail. These will need to be investigated to determine
sufficient capacity or any additional costs that might be associated with the
Project's requirements.
Permitting
The regulatory process to permit mine development in British Columbia requires
active management by the proponent. The schedule and budget for this process
varies. The accuracy and certainty of the Project Description and Environmental
and Socio-Economic Impact Assessment directly affect the schedule. Stakeholder
participation also affects the schedule and budget. Both the B.C.EAA and CEAA
2012 have regulated timelines that must be met by authorities reviewing
applications. The regulated timelines do not include time required by the
proponent to deal with the results of the consultation process and to amend the
application to address concerns raised. This project is currently at an early
stage of environmental assessment and permitting.
Foreseeable Impacts of Risks
The foreseeable impacts of the aforementioned risks should not be understated.
Certain risks such as the ability to permit the operation, availability of key
reagents, and certain unknown parameters within the proposed process have the
capacity to outright stall development of the project, reduce operating
parameters, or drive costs to a point where the project becomes uneconomic.
If the Company were to achieve profitable operations, there is a risk that other
companies in different parts of the world may use comparable Mg-Silicate
deposits, construct a processing facility and produce Mg products at a lower
price that may adversely affect the profitability of the Company's operation.
At this time, SRK and the Company have no reason to assume that the risks
disclosed above will not be able to be mitigated or eliminated through continued
study. SRK has provided recommendations pursuant to addressing these risks, and
suggests that a PFS be completed to gain further perspective.
Qualified Persons
Bart Stryhas, Ph.D. CPG, Bret Swanson, BEng Mining, MAusIMM, MMSAQP, Corby
Anderson, PhD, CEng, FIChemE, FIMMM, MMSAQP, and Arlene Laudrum, PGeo are the
qualified persons and authors of the PEA and are independent of the Company. The
authors of the PEA have approved the disclosure of the scientific or technical
information contained in this news release.
About West High Yield
West High Yield is a publicly traded junior mining exploration and development
company focused on the continued development of its intermediate-advanced stage
magnesium Record Ridge exploration project based on the recommendations
contained in a Preliminary Economic Assessment. The Company controls a 100%
interest in its Record Ridge project which consists of 20 contiguous mineral
claims, 8 Crown-granted claims and one private claim covering 6,515 hectares.
Record Ridge is located near the town of Rossland, B.C., Canada. The
mineralization on the Company's property is related to the elevated magnesium
content in serpentinized mafic rocks. Additional information with respect to the
property can be found on the Company's website at www.whyresources.com.
Reader Advisory and Forward-Looking Statements
This press release may contain forward-looking statements, including, but not
limited to, the timing of the Company's receipt of the PEA, the test work being
conducted, the expected results and recommendations of the PEA and mineral
resource estimates relating to the Record Ridge South Property. Often, but not
always, forward-looking statements can be identified by the use of words such as
"plans", "expects" or "does not expect", "is expected", "budget", "scheduled",
"estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or
"believes", or describes a "goal", or variation of such words and phrases or
state that certain actions, events or results "may", "could", "would", "might"
or "will" be taken, occur or be achieved.
Forward-looking statements involve known and unknown risks, future events,
conditions, uncertainties and other factors which may cause the actual results,
performance or achievements to be materially different from any future results,
prediction, projection, forecast, performance or achievements expressed or
implied by the forward-looking statements. Such factors include, among others,
the actual results of current exploration activities; delays in the timing of
SRK's review and the preparation of a NI 43-101 compliant technical report;
conclusions of economic evaluations; changes in project parameters as plans
continue to be refined; future mineral prices; as well as those factors
disclosed in the Company's MD&A. Although the Company has attempted to identify
important factors that could cause actual actions, events or results to differ
materially from those described in forward-looking statements, there may be
other factors that cause actions, events or results not to be as anticipated,
estimated or intended. There can be no assurance that forward-looking statements
will prove to be accurate, as actual results and future events could differ
materially from those anticipated in such statements. Accordingly, readers
should not place undue reliance on forward-looking statements. The Company
disclaims any intention or obligation to update or revise any forward-looking
statements whether as a result of new information, future events, or otherwise,
except in accordance with applicable securities laws.
When relying on the Company's forward-looking information to make decisions,
investors and others should carefully consider the foregoing factors and other
uncertainties and potential events. The Company has assumed a certain
progression, which may not be realized. It has also assumed that the material
factors referred to in the previous paragraphs will not cause such
forward-looking information to differ materially from actual results or events.
The Company cautions that the foregoing list of material factors is not
exhaustive and is subject to change and there can be no assurance that such
assumptions will reflect the actual outcome of such items or factors. The
forward-looking information contained in this news release represents the
expectations of the Company as of the date of this news release and,
accordingly, is subject to change after such date. Readers should not place
undue importance on forward-looking information and rely upon this information
as of any other date. While the Company may elect to, it does not undertake to
update this information at any particular time.
47,397,894 Common Shares Issued
FOR FURTHER INFORMATION PLEASE CONTACT:
West High Yield (W.H.Y.) Resources Ltd.
Frank Marasco
President and Chief Executive Officer
(403) 660-3488
(403) 206-7159 (FAX)
frank@marasco.ca
West High Yield (W.H.Y.) Resources Ltd.
Dwayne Vinck
Chief Financial Officer
(403) 257-2637
(403) 206-7159 (FAX)
vinck@shaw.ca
www.whyresources.com
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