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| | Wed Oct 3, 2007
Etruscan's Youga Gold Mine Nears Completion
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Halifax, Nova Scotia, October 3, 2007 - Etruscan Resources Inc. (EET.TSX) reported today that construction at its Youga Gold Mine located in Burkina Faso, West Africa is nearing completion with commissioning of the main plant circuits scheduled to be completed in November and first gold production in December.
The Youga Gold Project will initially be comprised of open pit mining of five pits with the ore being processed though a conventional CIL/gravity plant having a design capacity of one million tonnes per annum. Mineable reserves are 6.6 million tonnes with an average grade of 2.7 grams per tonne containing 580,000 ounces of gold. The project will benefit from year-round water supply from a nearby major river system (the White Volta) and access to grid power supplied by the northern grid of the Volta River Authority in Ghana. A full back up power plant has been installed to ensure constant power to the site. The plant has been designed for maximum operating availability and in particular, the mill drive system is being supplied new with a second new drive train (motor and gearbox) being stocked on site as a spare.
Project Construction and Commissioning
Exceptionally heavy rains throughout West Africa over the past months, together with transport delays have extended the time required to complete the construction of the plant and related infrastructure at the Youga Gold Mine. In particular, the rains have delayed the completion of the tailings storage facility and have caused significant flooding near the pumping station location, which suspended its installation. The main access routes to the site have also been impacted by the heavy rains which have slowed the delivery of critical construction equipment and supplies.
Fortunately, the rains have started to subside and construction activities are ramping back up and repairs to the roads are underway. Notwithstanding these challenges, the project is in the final stage of completion as highlighted by the following:
- The contract mining fleet operated by PW Mining has been fully mobilized and has completed overburden and waste stripping of the main pit. The drill and blast contractor, Nitro Chimie, is also fully mobilized and has blasted in excess of 500,000 cubic meters to date. The on-site infrastructure for both contractors is nearing completion.
- The initial phase of the ROM (run-of-mine) pad has been completed which represented the placement of approximately 300,000 cubic meters of waste rock. The pad will be expanded over the life of the project to allow for extra ore stockpiling capacity.
- A clay liner and the starter wall and the return water pond for the tailings storage facility have been completed and the remaining piping and liners are currently being installed.
- A primary grade control drill rig is now on site and in operation. The initial ore will be mined from the main pit (A2 Main) and stockpiled on the ROM pad for commissioning and early production. The grade control staff has been hired and is now on site.
- The 10 MVA diesel-fired back up power plant has been completely installed and is ready to operate.
- Construction of the main electrical power line from Ghana is continuing and the first phase power delivery is scheduled to be completed by December.
- Installation of the 11 kilometer water pipeline to the Volta River and the overhead power line to power the pumping station has been completed. Installation of the pumping units will be completed when the water in the Volta River recedes. Temporary pumping capacity is being put in place.
- Important plant circuits (including the crushing and screening, the mill and cyclone tower, the carbon in leach and process building) are nearing completion with the majority of the steelwork erected and the mechanical equipment placed.
- The mine camp is complete and fully operational. Construction of various infrastructure buildings such as the main workshop, chemical stores, crusher workshop, security/change building and the office blocks are complete.
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| View of site from top of conveyor no. 6 |
Motors and electrical in place on CIL tanks |
Plant Commissioning Sequence
The Youga Gold Project is being commissioned in three phases before ramping up to full production. Each circuit will go through an initial dry, then wet and finally an ore based commissioning process. The commissioning of the main plant units is scheduled to be completed in November with testing of the carbon in leach (CIL) circuit, the crushing and screening circuit, grinding and cyclone circuit and finally the elution and gold room areas. With a successful commissioning achieved, the first gold pour is scheduled for December.
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| Tailings building with CIL tanks in background |
Cone crushers with feed bin |
Geological Potential to Increase Mine Reserves
An updated feasibility study for the Youga Gold Project was completed in October 2006 by RSG Global of Perth, Australia (see news release dated October 31, 2006). The Updated Youga Feasibility Study and project financing was based on an initial reserve of 580,000 ounces from five pits. (See Figure 1). The potential to extend the Youga mine life beyond the initial 6.6 year period is considered to be excellent. In addition to the current mineable reserves, six additional mineralized zones have been identified by drilling and trenching and all are within a three kilometer distance of the central milling facility. These additional zones will be systematically upgraded into resource and reserve categories as mining progresses in the first five open pits.
Etruscan also holds a strategic land position covering 1,075 km2 of contiguous ground in the Youga Gold Belt in Burkina Faso and an additional 773 km2 of the continuation of the belt into Ghana. Regional exploration on these permits has identified target areas at Zerbogo (25 kilometers southwest of Youga), Bougré (13 kilometers southwest of Youga) and Bitou (25 kilometers northeast of Youga). Three historic mining sites are known on the Ghanaian side at Nangodi, Dusi and Zug. Etruscan has on-going exploration programs covering all these targets and is evaluating the potential to develop stand alone and/or satellite mining operations from these areas.
Financing, Gold Price Protection Program and Project Economics
The total funding required for the development of the Youga Gold Mine is estimated at US$67 million including capital costs, preproduction costs, working capital and financing costs. These costs are being funded in part by a US$35 million senior debt facility provided by RMB Australia Holdings Limited ("RMBAH") and Macquarie Bank Limited (Macquarie). The senior debt facility was arranged by RMB Resources Limited ("RMB Resources") of Melbourne, Australia. RMB Resources and RMBAH are members of the FirstRand Group of South Africa which specializes in the financing of mineral resource projects in Africa. The loan is structured as a secured facility with limited recourse to Etruscan until economic completion conditions are achieved when it becomes non-recourse project financing. Standard project finance undertakings and security provisions apply. The loan is repayable on a quarterly basis over a 4-year term. The Company drew down the remaining balance of the facility in September 2007.
The Company has also received an offer of subordinated project debt financing for up to US$7.5 million from RMBAH and Macquarie. These proceeds will be used to fund the completion of the Youga Project and for other Etruscan working capital requirements. The offer of finance is subject only to completion of the formal financing agreements, which are currently being prepared. The subordinated loan is repayable in two equal quarterly installments following the repayment of the senior debt facility and bears interest at LIBOR plus 3.5%. The terms of the loan also include the issuance to the lenders of a calculated number of financier warrants with the number of warrants estimated at 1.2 million. The exercise price of the warrants will be set at issue on the basis of the lowest of $3.50 per share, 120% of the closing market price on the date of acceptance of the offer of finance and 120% of the closing market price on the date of execution of the subordinated facility documentation. RMB Resources also acted as arranger in the structuring of the subordinated debt facility.
In conjunction with the senior debt facility, RMBAH and Macquarie provided Etruscan with a margin free credit line for purposes of implementing a gold price protection program. The gold price protection program is comprised of a combination of bought put options and sold call options whereby 100% of gold production for the first five years of the project (456,000 ounces) is price-protected at a minimum price of US$629 per ounce. The put options were funded by writing call options covering 45% of the feasibility study life-of-mine production (246,000 ounces) having a strike price of US$700 per ounce. Consequently 100% of production is available to be sold at spot prices up to US$700 per ounce with 55% of the feasibility study life-of-mine gold production (298,000 ounces) uncapped and fully exposed to any upward increase in the gold price above US$700 per ounce. The fixed monthly ratio of call options to put options is 0.54 to 1 (246,296 ounces / 456,102 ounces) with the put option volumes matched to the production schedule from the October 2006 Youga Feasibility Study Update. During August the Company closed out the end of September call options (3,518 ounces) and put options (6,516 ounces) at no cost to the Company
The life of mine average cash operating costs are estimated to be US$345 per ounce assuming 100% grid power. The Project will be commissioned with on-site diesel generated power with grid power to be installed in two phases that will be completed by end of first quarter 2008. When used, the on-site diesel power generation is expected to add approximately US$50 per ounce to the operating costs. The operation is forecast to ramp up in terms of mill through put and head grades over the first full two months of operation with steady state production rates being achieved in the third month of operation.
About Etruscan Resources Inc.
Etruscan Resources Inc. is a gold focused Canadian junior mining company with dominant land positions in district scale gold belts covering more than 10,000 square kilometers in West Africa. Its principal properties include the Youga Gold Project in Burkina Faso, the Agbaou Gold Project in Côte d'Ivoire with an 11,000 meter feasibility study diamond drilling program in progress (Press release dated May 31, 2007), the Diba Gold Project in Mali where a major drill program was recently completed (Press release dated July 26, 2007), the Finkolo Gold Project in Mali where an 8,200 meter reverse circulation and diamond drilling program is being carried out (Press release dated August 30, 2007) and the Banfora Gold Belt in Burkina Faso with eight major gold targets identified and where a single sample auger drilling program began in March 2007 (Press release dated November 27, 2006). Etruscan recently announced a significant acquisition of strategic properties in Ghana (Press release dated August 7, 2007). Etruscan also has a 51% interest in Etruscan Diamonds Limited which has a dominant land position in the Ventersdorp Diamond District located in South Africa. (Press release dated March 14, 2007). The common shares of Etruscan are traded on The TSX Exchange under the symbol "EET". More extensive information on Etruscan can be found on its home page at http://www.etruscan.com.
For more information from Etruscan contact:
This press release may contain certain forward-looking statements which involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Forward-looking statements may include statements regarding exploration results and budgets, mineral reserve and resource estimates, work programs, capital expenditures, mine operating costs, production targets and timetables, future commercial production, strategic plans, market price of precious metals or other statements that are not statements of fact. Although the Company believes the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. Various factors that may affect future results include, but are not limited to: fluctuations in market prices of precious metals; foreign currency exchange fluctuations; risks relating to mining exploration and development including reserve estimation and costs and timing of commercial production; requirements for additional financing; political and regulatory risks, and other risks and uncertainties described in the Company's annual information form filed with the Canadian Securities regulators on SEDAR (www.sedar.com). Accordingly, readers should not place undue reliance on forward-looking statements.
NO REGULATORY AUTHORITY HAS APPROVED OR DISAPPROVED THE CONTENT OF THIS RELEASE
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