PIR 0.00% $1.49 papillon resources limited

ASX RELEASE | 17 October 2012 | ASX:PIRPOSITIVE SCOPING STUDY...

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    ASX RELEASE | 17 October 2012 | ASX:PIR
    POSITIVE SCOPING STUDY CONFIRMS ECONOMIC VIABILITY
    OF FEKOLA PROJECT
    Highlights:
    Positive Scoping Study confirms technical and economic viability of the Fekola Project;
    Average annual production of 231,000 ounces gold;
    Initial mine life of eleven years, with strong potential to increase;
    Life of mine average operating costs of US$596 per ounce of gold;
    Capital cost, including all associated project infrastructure, of US$298 million; and
    Pre-Feasibility Study to commence immediately, targeting completion in Q2 2013.
    Papillon Resources Limited (‘Papillon’ or ‘the Company’) is pleased to announce that the Scoping Study
    for the Company’s flagship Fekola Project (‘Fekola’ or ‘the Project’) in Mali has confirmed the technical
    and economic viability of the Project and its capacity to operate with positive cash margins.
    Utilising the current Mineral Resource Estimate (‘MRE’) of 40.1 million tonnes of ore at an average grade
    of 2.4 g/t for a contained 3.14 million ounces of gold (at a lower cut-off grade of 1.0 g/t gold) as a base
    case scenario, the Project can support an average annual production profile of 231,000 ounces of gold
    over a minimum eleven year mine life. There is strong potential to increase the production profile and
    mine life with ongoing exploration work.
    The Scoping Study is based on open pit mining and a conventional gravity concentration and Carbon in
    Leach (‘CIL’) processing plant. The open pit is mined to a maximum depth of 250 metres, with an
    average strip ratio over the life of mine of 1:1.9 (ore to waste). The Company currently favours a
    contractor mining scenario. The average annual throughput of the processing plant during steady state
    operation is 4.0 million tonnes.
    Operating cost estimates average US$596 per ounce over the life of mine. The capital cost (nominally ±
    30% accuracy) for the Project is US$298 million comprising US$160 million for the processing plant and
    US$138 million for project infrastructure.
    The Scoping Study results confirm the potential for strong economics on the Project which has the
    capacity to generate average pre-tax cash margins of approximately US$145 million per annum, at a
    gold price of US$1,300 per ounce, over the life of mine. This indicates that the capital cost for the
    process plant and associated project infrastructure could be paid back within a three year period from
    the commencement of production.

    Papillon will award and commence the Pre-Feasibility Study (‘PFS’) immediately and anticipates
    completion of the PFS in the second quarter of 2013. During the PFS phase, the Company will
    undertake a more detailed metallurgical test program and further mine scheduling, geotechnical, project
    infrastructure and power studies aimed at identifying opportunities to further enhance the Project
    economics through capital and operating cost reductions. An extensive drilling campaign will be
    undertaken concurrently with the PFS.
    The drilling completed at Fekola to-date extends over a strike length of approximately 2 kilometres,
    which represents a small portion of the strike extent of the highly prospective Fekola Corridor, and
    extends to a maximum vertical depth of 260 metres. Mineralisation remains open at depth and along
    strike to both the north and south. The next drilling campaign, scheduled to commence in late October
    2012, will be focussed on upgrading the resource classification and expanding the current MRE, as well
    as testing priority targets along the Fekola Corridor. An increase in the overall resource base will
    facilitate future expansion in production rates and the contemplation of a longer mine life for the Project.
    The Directors believe that the positive results of the Scoping Study are a further demonstration of the
    outstanding potential of the Fekola Project. The Scoping Study results clearly show the development
    potential of the Fekola and underpin the Company’s strategy of fast tracking the exploration and
    appraisal of the widespread gold mineralisation identified within the Project area to enable the Company
    to fulfill its objective of becoming a Western African gold producer in the near-term.
 
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