Cadillac announces "positive" PEA for Thierry project, 19% IRR

Junior miner Cadillac Ventures (CVE:CDC) announced Tuesday what it called a "positive" preliminary economic assessment (PEA) report for its Thierry project in northwestern Ontario.
The Thierry project is comprised of both the underground massive sulphide Thierry deposit, and the open pit disseminated sulphide K1-1 deposit.
The company said the NI 43-101 PEA report, prepared by P&E Mining Consultants, showed the "technical and potential economic viability" of re-opening the Thierry mine and processing material from both the underground and open pit deposits, on a combined basis.
At a 15,000 tonne per day mining rate, the project would produce a total of 5.25 million tonnes per year, comprised of 3.85 million tonnes from open pit, and 1.4 million tonnes from the underground operation.
"Cadillac has been focused on the development of the Thierry Project and that focus has been validated by the receipt of this positive preliminary economic assessment of the project providing a total mine life of 17 years of potentially economically viable production based upon the currently defined NI 43-101 resources," said Cadillac president and CEO Norman Brewster in a statement.
"This report supports the company's ongoing focus on the development of the Thierry Project."
The preliminary report showed a pre-tax net present value of $380 million using a six per cent discount rate, allowing for a 10 per cent contingency on operating costs and a 15 per cent contingency on capital costs, the company said.
The internal rate of return, on a pre-tax basis, was calculated at 19 per cent, with a life-of-mine NSR revenue total of $3.7 billion.
Total estimated capital costs were seen at $843 million, or $11.93 per tonne, with a payback period of four years from the start of commercial production on pre-production capital.
Capital costs include undergound and open pit development costs, Cadillac said, as well as a 15 per cent contingency.
Total operating costs were projected at $2.0 billion, or $27.72 per tonne, which includes undergound and open pit mining costs, tailings retention development, processing, treatment plant construction and a 10 per cent contingency.
The project, which is expected to have a mine life of over 16 years, including three years of pre-production development, was estimated to have a pre-tax cash flow of $881 million.
The company said the mine plan, which would see a longhole sublevel retreat mining method along with the construction of a new shaft and the deepending of the existing ramp, includes some underground mineralization being mined during years two and three.
The Thierry Mine is a past producing mine, with a recently updated resource estimate consisting of 8.8 million tonnes measured and indicated grading 1.66% copper, 0.19% nickel, 4 g/t silver, 0.05 g/t gold, 0.04 g/t platinum and 0.13 g/t palladium.
The deposit, which remains open at depth and to the west, also hosts 14.9 million tonnes inferred grading 1.64% copper, 0.16% nickel, 6.4 g/t silver, 0.10 g/t gold, 0.07 g/t platinum, 0.21 g/t palladium, using a cut-off NSR of C$41/tonne.
The open pit K1-1 deposit, which also saw a resource update in February, consists of 53.61 million tonnes inferred, grading 0.38% copper, 0.10% nickel, 1.8 g/t silver, 0.03 g/t gold, 0.05 g/t platinum, and 0.14 g/t palladium, at an NSR cut-off of C$11/tonne.
The K1-1 is an open-pit, large tonnage, low grade deposit located approximately three kilometres from the past producing Thierry Mine.
Cadillac said the mined material from the Thierry project would have a forecast NSR value averaging C$52.12 per tonne, after smelter and shipping costs are deducted, and assuming 24 month April 30, 2012 trailing average metal prices of US$3.77 per pound of copper, US$10.11 per pound of nickel and US$29.60 per ounce of silver.
The concentrate recovery rates used in the PEA report were 94 per cent for copper, 65 per cent for nickel and 53 per cent for silver.
The Thierry underground potentially mineable tonnage was diluted by 20 per cent, and has a 90 per cent mine extraction factor applied, while the K1-1 potentially mineable tonnage was diluted by 8 per cent and has a 97 per cent mine extraction factor applied.
Cadillac is a development-focused copper company currently advancing its 100 per cent owned Thierry Property, near Pickle Lake, Ontario.