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The Mine
The first gold pour at Etruscan's Youga Gold Mine occurred in March, 2008. Youga presently has a mineable gold reserve of 6.6 million tonnes at an average grade of 2.7 grams per tonne containing 580,000 ounces gold. The initial open pit mining operation is comprised of five pits with the ore being processed over an initial 6.6 year mine life through a conventional gravity-CIL (carbon-in-leach) plant with a design capacity of one million tonnes per annum.
Location
The Youga Gold Mine is located approximately four kilometers north of the Ghanaian border and 180 kilometers southwest of Ouagadougou, the capital city of Burkina Faso on the 80 kilometer Youga Gold Belt.
Ownership
In December 2003, Etruscan acquired the Youga mining permit and three contiguous exploration permits along the Youga Gold Belt from Ashanti Goldfields Company Limited and Echo Bay Mines Limited for cash consideration of US$6.5 Million. Etruscan, through its wholly owned subsidiary Cayman Burkina Mines Ltd, holds a 90% interest in Burkina Mining Company (BMC) which has been granted the rights to exploit the Youga Gold Deposit. The remaining 10% of BMC is held by the Government of Burkina Faso.
Youga Resource and Reserve
The Youga Gold Deposit feasibility study completed January, 2005 by RSG Global (Pty) Ltd. and MDM Ferroman (Pty) Ltd. as updated October, 2006, concludes that Youga will produce an average of 88,000 ounces of gold per year over a 6.6 year mine life from five deposits.
The resource estimates (which include mineable reserves) at a 0.7 gram per tonne cutoff grade for the five zones ( A2 Main, A2 East, A2 West Zone- One, A2 West Zone-Two and A2 West Zone-Three) were prepared by RSG Global in accordance with National Instrument 43-101 and are summarized as follows:
| Youga Mineral Resource |
| Measured |
Indicated |
Inferred |
| Tonnes |
Grade |
Ounces |
Tonnes |
Grade |
Ounces |
Tonnes |
Grade |
Ounces |
| 4,591,000 |
2.9 g/t |
429,000 |
6,890,000 |
1.9 g/t |
423,000 |
2,458,000 |
1.4 g/t |
114,000 |
| Youga Mineral Reserves |
| Proven |
Probable |
Total |
| Tonnes |
Grade |
Ounces |
Tonnes |
Grade |
Ounces |
Tonnes |
Grade |
Ounces |
| 4,000,000 |
3.1 g/t |
388,000 |
2,700,000 |
2.3 g/t |
193,000 |
6,600,000 |
2.7 g/t |
580,000 |
Mine Development and Operations
The initial mining operation is comprised of five pits with the ore being processed through a conventional gravity-CIL (carbon-in-leach) plant with a design capacity of one million tonnes per annum. The initial ore reserve is estimated at 6.6 million tonnes, allowing for a mine life of 6.6 years at the proposed processing rate. All of the ore and waste will be mined from the open pits using conventional mining equipment by a mining contractor.
The treatment plant includes direct-dump ore receiving followed by three stages of crushing and one stage of milling. The ground ore is fed to a bank of cyclones where the over size is fed to the gravity circuit, consisting of a centrifugal concentrator and a shaking table. The under size is fed to the leaching circuit. A total of six tanks are being used to leach and recover the non-gravity recoverable gold on activated carbon. The gold is then extracted from the activated carbon and deposited using an electrowinning step. The recovered gold is heated in a smelting furnace and then poured into gold dore bars. Based on the Youga Feasibility Study test work, the overall gold recovery is anticipated to be in the range of 93 to 94%.
Drilling and blasting is required prior to mining. All of the pits contain hard-rock (ore and waste) material, and there are mineral free digging areas. Following blasting, the ore is excavated and transported by conventional mining gear. The primary fleet consists of a 120 tonne excavator and 100 tonne haul trucks. The drilling and blasting is being undertaken under contract with Nitrochimie SNC and the mining (load/haul) under contract with PW Mining International Limited.
The primary water supply for the plant is pumped from the nearby Nakambe River via an 11 kilometer pipeline to a raw water storage pond. The tailings area is designed to maximize water recovery in an effort to minimize the primary water demand.
Permanent power supply will be by way of grid power from the nearby Ghanaian national power grid operated by the Volta River Authority. A 15 kilometer powerline is being built from the town of Zebila in Ghana directly to site. The capacity of the line is designed for a minimum transmission of 10 MW. Full on site back up power generation capacity (8 mega watts) is provided via diesel generators. The diesel generators are presently being utilized until grid power is available and thereafter will ensure that milling operations continue uninterrupted should there be any periodic load shedding during the summer months. The power plant was supplied and commissioned by SDMO of France.
Employment on the Youga Gold Project during production is approximately 350 full time employees including both expatriate and local positions. There is a program of extensive training of the local work force for the management and skilled positions. In the longer term, it is anticipated that Burkina Faso nationals will fill the majority of the operating and management positions within BMC.
Economics and Financing
Development costs incurred on the Youga Gold Project to January 31, 2008 aggregate US$70 million including capital costs, preproduction costs, working capital and financing costs. These costs were funded in part by a US$35 million senior debt facility and a US$7.5 million subordinated debt facility provided by RMB Australia Holdings Ltd. ("RMB") and Macquarie Bank Limited ("Macquarie"). The debt facilities were arranged by RMB Resources Limited of Australia. The senior debt facility is structured as a full recourse loan to the Company until economic and technical completion conditions have been satisfied, upon which the debt facility converts and becomes non-recourse to the Company and is secured by all of Etruscan's interests in the Youga Gold Project. Standard project finance security provisions apply. The loan is repayable on a quarterly basis over a 4-year term and bears interest at LIBOR plus 3% pre-completion and LIBOR plus 2.5% post completion. The facility was fully drawn down during 2007. Subsequent to November 30, 2007 the Company completed and drew down the US$7.5 million subordinated debt facility. The subordinated loan is repayable in two equal quarterly instalments following the repayment of the senior debt facility and bears interest at LIBOR plus 3.5%. The terms of the loan also included the issuance to the lenders of 1,452,222 financier warrants. Each warrant entitles the holder to purchase one common share of Etruscan Resources Inc. at a price of $2.56 until November 30, 2012.
Initial draw down under the senior debt facility was subject to the Company satisfying a number of conditions precedent including the implementation of a gold price protection program. In January 2007, the Company implemented a gold price protection program for the Youga Gold Mine comprised of a combination of bought put options and sold call options whereby 100% of gold production for the first 60 months (456,102 ounces) is price protected at a minimum price of US$629 per ounce. The put options were funded by writing call options covering 246,296 ounces over the same 60 month duration having a strike price of 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 in the October 2006 Youga Feasibility Study Update. The program requires no cash or other margin.
As a result of the extended construction schedule, primarily due to the exceptionally heavy rains during the July to September period, the Company elected to settle for cash the delivery obligations under the $700 call options for the first six months of the program (September 2007 to February 2008) aggregating 21,672 ounces at a net cost of $2.64 million. During the same period put options aggregating 40,140 ounces expired unexercised.
The base case financial analysis in the Youga Feasibility Study Update (October 2006) was prepared using a gold price of US$525 per ounce and a life-of-mine cash cost of US$317 per ounce and indicated an undiscounted net present value of US$66.7 million for the Youga Gold Project on a before tax and debt services basis. The Project economics as updated by the Company incorporate a re-optimized mine plan (based on a gold price of $525 per ounce), a hedged gold price of US$700 per ounce for 40% of production and an unhedged gold price of US$850 per ounce for 60% of production and a life-of-mine cash cost of US$396. The Project capital cost estimate has been revised to US$75 million from the Youga Feasibility Study Update estimate of US$46 million. The updated capital cost estimate includes the addition of the power plant, spare mill motor and gearbox as well as pre-production costs, working capital and financing costs, which the prior estimate did not. The updated economic assessment indicates a before tax and debt service internal rate of return for the Project of 23% and an undiscounted net present value of US$140 million.
Additional Exploration on Youga Mining Permit
Etruscan has completed regional and detailed mapping as well as airborne and ground geophysics identifying a number of exploration targets within the Youga mining permit. Etruscan continues to evaluate near-surface mineralized zones that can provide additional mine reserves. The most recent drilling program focused entirely on a three kilometer radius of the Youga mill site. To date, six additional mineralized zones have been identified outside of the existing mineable reserve base including the Nanga Zone, the Leduc Zone, the A2 Village Zone, the Village Tail Zone, A2 West Zones 4 & 5, and the Zegoré Zone.
The most advanced zone is the Nanga Zone where Etruscan has completed 4,600 meters of drilling and 1,700 meters of trenching. Continuity of gold mineralization has been confirmed over a strike length of 400 meters to a vertical depth of 60 meters. The mineralization remains open along strike and at depth. Average grades of 1 to 2 grams per tonne over widths of 10 to 30 meters have been encountered through much of the zone. Higher grade intercepts within the Nanga Zone include 5 meters at 3.1 grams per tonne, 13 meters at 3.9 grams per tonne, 7 meters at 4.6 grams per tonne and 15 meters at 7.0 grams per tonne.
Satellite Deposits and Strategic Land Package
click to enlarge
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