The project is located approximately 150 km by highway north-east of the city of Kamloops in south-central B.C. The Company now holds mineral tenures totalling 42,636 ha.
History
Noranda Exploration and US Steel discovered the deposit in 1966. The two companies conducted exploration separately until 1971, when they formed an exploration joint venture which ceased in 1981. Drilling on the main deposit totalled 25,806 metres in 161 holes. In 1996, American Comstock drilled 2,847 metres in 8 holes. Yellowhead has acquired and digitized the data from the prior programs and recovered partial or complete drill core from 128 historical holes on site.
Yellowhead Mining was formed in 2005 as a private British Columbia company. In 2005 and 2006, five claim groups were acquired or optioned by Yellowhead Mining on the historical drilling area and contiguous parts of the Eagle Bay Assemblage, the mineralogical group which includes the Harper Creek deposit.
Geology and Mineralization
The Harper Creek Project is an extensive volcanogenic sulphide system, with a mineralized envelope greater than 2.5 km along strike, over 2.0 km down dip, in a 1 km thickness of volcano-sedimentary stratigraphy.
Copper mineralization is tabular, striking east-west and dipping about 15°to 25° to the north with a number of high copper grade cores that persist with depth within a multi-phased stringer zone. The deposit is open along strike to the east, down dip and at depth.
Harper Creek is hosted in the Eagle Bay Assemblage, comprised of the Lower Paleozoic Greenstone Belt. There are intensely altered sequences of black shales, mudstones, mafic and felsic flows and tuffs.
A broad lower-grade zone of copper and gold/silver is linked to multi-phased stringer or feeder zones. Higher grade copper-bearing massive sulphides are adjacent to porphytic rhyolite flows. Vertical zonation ranges from upper lead/zinc/silver/barite/pyrite to deeper copper(some zinc)/silver/gold/pyhrrotite.
During late 2005 and early 2006, the company re-logged and re-analysed historical drill core recovered from the site, and produced a NI43-101 data compilation report. Beginning spring 2006, Yellowhead completed a 1,000 line kilometre airborne geophysical survey over approximately 90 square kilometres, identifying several high priority targets for further exploration. Also in 2006, a 12-hole, 4,077 metre in-fill drilling program intersected several high grade zones and confirmed the volcanogenic massive sulphide characteristics of the deposit. At least ten horizons have been identified, with both open-pit and underground potential.
In 2007, Yellowhead completed a 15,904 metre, 40-hole drill program. The first six step-out holes down-dip all encountered multiple mineralized horizons including massive sulphide zones.
In 2008 through April, the company drilled another 7,655 metres in 23 holes, for a total of 26,854 metres in 75 holes by the Company. The Company continued drilling with 8,870 metres in 12 holes (76 through 87) in late 2010 through May 2011 in a continuing program, for a total of 35,724 metres by Yellowhead and 65,425 metres including historical drilling.
May 2011 in a continuing program, for a total of 35,724 metres by Yellowhead and 65,425 metres including historical drilling.
In support of the Feasibility Study, the Company has completed a total of 12,468 metres of drilling in the nine months to July 31, 2011, including:
- 1,888 metres of geotechnical drilling for pit slope analysis;
- 351 metres of geotechnical drilling for tailings management facility, waste dump and foundation design; and
- 4,090 metres of infill resource drilling to improve confidence within the pit limit.
Preliminary Economic Assessment
An independent Technical Report and Preliminary Assessment of The Harper Creek Project which commenced in September 2010 was completed on March 31, 2011 by Wardrop, a Tetra Tech Company, ("Wardrop") in conjunction with:
- Knight Piésold Limited ("KP"): mine waste and water management
- Dillon Consulting Limited ("Dillon") environmental
- G&T Metallurgical Services Limited ("G&T"): metallurgical test workwith the announced results of the Preliminary Economic Assessment:
Resources at Varying Cutoff Grades
*Inferred gold and silver grades cannot be correlated to the copper resource tonnage and shall not be used to calculate precious metal mineral content| Cut-off Grade [% Cu] |
Resource Tonnage [kt] |
Cu Grade [%Cu] |
Au Grade* [g/t] |
Ag Grade* [g/t] |
|---|---|---|---|---|
| Measured | ||||
| 0.10 | 146,402.4 | 0.24 | 0.029 | 1.04 |
| 0.20 | 89,992.9 | 0.30 | 0.033 | 1.18 |
| 0.30 | 38,632.4 | 0.38 | 0.039 | 1.37 |
| 0.40 | 12,391.7 | 0.47 | 0.046 | 1.55 |
| 0.50 | 3,701.7 | 0.56 | 0.055 | 1.66 |
| Indicated | ||||
| 0.10 | 847,302.0 | 0.23 | 0.026 | 0.91 |
| 0.20 | 442,071.1 | 0.31 | 0.032 | 1.06 |
| 0.30 | 190,133.7 | 0.39 | 0.040 | 1.22 |
| 0.40 | 72,464.5 | 0.49 | 0.051 | 1.36 |
| 0.50 | 25,128.2 | 0.58 | 0.065 | 1.54 |
| Measured and Indicated | ||||
| 0.10 | 993,704.4 | 0.23 | 0.026 | 0.93 |
| 0.20 | 532,064.0 | 0.31 | 0.032 | 1.08 |
| 0.30 | 228,766.1 | 0.39 | 0.040 | 1.24 |
| 0.40 | 84,856.2 | 0.48 | 0.050 | 1.39 |
| 0.50 | 28,829.9 | 0.58 | 0.063 | 1.55 |
| Inferred* | ||||
| 0.10 | 231,239.0 | 0.22 | 0.027 | 1.09 |
| 0.20 | 117,236.9 | 0.29 | 0.032 | 1.32 |
| 0.30 | 47,036.7 | 0.38 | 0.037 | 1.49 |
| 0.40 | 14,116.7 | 0.46 | 0.043 | 1.65 |
| 0.50 | 3,316.1 | 0.56 | 0.051 | 1.81 |
Yellowhead's management notes that the deposit is also open to the south, east and at depth. Further there are specific geophysical anomalies and mineralized outcrops occurring about 1.0 km to the south and 3.0 km to the east of the current pit limit. These are drill targets that will be followed up on in the next phase of drilling.
The base case economic analysis projects that the Harper Creek project would have a net present value of US$598million (@ 8% discount rate) and an internal rate of return of 19.8% based on 100% equity financing. The pre-tax economic results for the base case and two additional case scenarios are presented in the following table:
Summary of Harper Creek Pre-Tax Economic Results
| Base Case Scenario |
Alternate Case Scenario |
Lower Metal Price Scenario |
|
|---|---|---|---|
| Cu US$/lb | US$2.66 | US$3.01 | US$ 2.25 |
| Au US$/oz | US$1,058 | US$1,221 | US$980 |
| Ag US$/oz | US$16.57 | US$19.73 | US$15.50 |
| Exchange Rate (US$:C$) | 0.92 | 0.92 | 0.92 |
| Internal Rate of Return | 19.8% | 27.5% | 10.0% |
| Net Cash Flow (undiscounted) |
US$1,861 million | US$2,820 million | US$777 million |
| Net Present Value (8% discount rate) |
US$598M | US$1,051M | US$87M |
| Payback Years | 4.0 | 2.7 | 8.5 |
The Company estimates that using the base case prices and based on 35% equity and 65% project debt, the NPV8 is $552M with an IRR of 27.9%
The base case and alternate case metal prices are based on Wardrop's adopted consensus forecast metal prices from the Energy Metals Consensus Forecast (EMCF). EMCF is published by Consensus Economics Inc. (Consensus Economics) of London. Consensus Economics provide quarterly forecasts (the EMCF) for a variety of metals prices based on an average price from long term projections of 20 analysts representing international banks.
The following table details estimates of production statistics by period:
Harper Creek Production
| Average Annual Production |
Total Production | |||
|---|---|---|---|---|
| Metal | Years 1 to 8 | LOM | Years 1 to 8 | LOM |
| Copper (000 lb) | 149,049 | 132,040 | 1,192,388 | 2,856,901 |
| Gold (000 oz) | 16 | 12 | 127 | 265 |
| Silver (000 oz) | 274 | 225 | 2,194 | 4,873 |
Project Development
The PEA study concept is based on the development of a large-scale open pit mining and milling operation. The mine will employ 311mm (12 ¼") electric rotary blasthole drills, 42m³ (55yd³) electric hydraulic shovels, ~300t capacity haul trucks plus support equipment. Blasting will employ bulk heavy ammonium nitrate slurry delivered to site by a vendor. The mill feed will be crushed by a 1.5m (60") x 2.3m (89") gyratory crusher to a nominal 80% passing 150mm (6"). Crushed material will feed a stockpile of 70,000t live capacity, before being reclaimed to the process plant.
Plant design is based on a single line flowsheet employing SAG and ball milling, flotation including regrinding, thickening and filtering to produce a concentrate for export averaging 27% Cu and 1.7g/t Au and 32g/t Ag. The primary grinding circuit includes an 11.6m (38') x 6.7m (22'), 20,000kW (26,800HP) SAG mill feeding two 7.9m (26') x 11.6m (38'), 15,500kW (20,800HP) ball mills providing a primary grind size of 80% passing 100µm. Coarse rejects from the SAG mill are crushed in two 600kW (800HP) pebble crushers. Primary grinding circuit discharge feeds two banks of eight 200m³ rougher flotation cells. The rougher concentrate will be reground by four 1,120kW (1,500HP) tower mills to 80% passing 20 µm to 25 µm prior to three stages of cleaner flotation by conventional flotation cells. The primary and regrind product sizes were determined by G&T Metallurgical Services. A comprehensive metallurgical testwork program is scheduled to be completed as part of the Feasibility Study that commenced in April 2011. This testwork will include variability testing to determined metallurgical performances of the mineralization from different areas of the deposit.
Concentrate will be loaded on B-Trains of nominal 40t capacity for hauling to the a rail loadout facility in the town of Vavenby, a distance of 25km, for shipment from the Port of Vancouver, a distance of 450km, to smelters/refineries in the Pacific Rim. Testwork indicates that the concentrate is clean with no smelter penalties expected.
Water from the tailings slurry will be reclaimed from the Waste Management Facility (WMF) for use in the milling process. The WMF includes the ability to store all tailings and submerge any potentially acid generating waste rock. Low grade material will be stockpiled to the south of the pit for easy reclaim for processing in the latter years of the mine life. The tailings management system is located in a natural valley to the south of the plant in an area devoid of any fish habitat.
Mine infrastructure includes upgrading of an existing logging road over a distance of approximately 12km. While a 450 man camp will be established during construction, all mine and plant operating and maintenance labour are expected to be drawn from the local area.
The Harper Creek mine site is in BC Hydro's load interconnection process. Yellowhead has requested BC Hydro to study at the Company's expense the feasibility of supplying power to the Harper Creek Project. BC Hydro has identified potential options to provide an additional source of power to the North Thompson Valley. One of the options is to run a new 230kV powerline from 100 Mile House to Clearwater. BC Hydro has not finalized the interconnection option study yet. When the option is finalized and approved, the Company will be required to put up a letter of credit ("LOC") for a portion of the capital cost. The LOC will be reduced annually by the amount of the Company's annual power purchases when the mine comes on line.
The project is expected to employ 312 hourly and staff personnel. Based on industry experience approximately 1,000 jobs will be created in the surrounding communities to provide support to the project.
Following exhaustion of reserves, the project will close and be reclaimed according to the requirements of current legislation. All equipment and facilities will be removed and the area graded and seeded. Any contact water from the waste rock dumps will be directed into the open pit or waste management facility. The pit is estimated to fill more than 100 years post-closure. It is assumed that the pit water will require treatment prior to release to the receiving environment. This annual surplus will be treated in a water treatment plant that will recover metals, including copper. The project capital cost includes funding for a surety bond to meet future reclamation obligations.
Environment
Dillon Consulting has been collecting a wide range of project-specific environmental baseline data since 2007. A Project Description has been delivered to the BC Environmental Assessment Office ("BCEAO") and is available on their website at:
http://a100.gov.bc.ca/appsdata/epic/documents/p333/1295903690301_5aa204813a3a
28bbaad434d7890ebbdd62ee07f028154720b0c5f52e258d5011.pdf
On 8 February, 2011, the Company submitted its draft Application Information Requirements (dAIR) to the BCEAO for review by both provincial and federal regulators.
First Nations and Local Communities
The Company is cognizant of its responsibility to address the needs and aspirations of the local and regional First Nations and local communities, and has begun consultation with these groups including visits from their representatives to the site. The Company plans to conduct its exploration and development of Harper Creek in an economically, socially and environmentally responsible manner, and to set objectives and maintain operations that are in the best business interests of the Company's shareholders, First Nations and local communities.
Future Work Program
The Company's plans for 2011 are:
- Conduct a Feasibility Study, which commenced mid-April 2011, completion is expected in Q1 2012.
- Drilling to support the Feasibility Study including geotechnical, hydrological, foundation testing, metallurgical and condemnation.
- Continue with the Environmental Impact Study with concurrent permitting
- Step out drilling to the east and north to increase the resource
- Investigate and implement opportunities for improvement in project economics.
TO Management Interview (2minutes)