facing the challenges of exploring and developing projects in remote mining...

Facing the Challenges of ExploringFacing the Challenges of Exploring and Developing Projects in Remote Mining Environments

Sabina Gold & Silver Corp.

A Gold Miner in the Making Wes Carson, P.EngVice President – Project Development

Global Mining Summit – Las Vegas, NV March 17, 2014

2Forward Looking Statements

Statements relating to future studies and operations at the Back River project and the Hackett River projectStatements relating to future studies and operations at the Back River project and the Hackett River projectand the expected results of this work are forward‐looking information that are not historical facts and aregenerally, but not always, identified by the words “expects”, “plans”, “anticipates”, “believes”, “intends”,“estimates”, “projects” and similar expressions, or that events or conditions “will”, “would”, “may” or “should”occur. Information inferred from the interpretation of drilling results may also be deemed to be forward‐looking information, as it constitutes a prediction of what might be found to be present when and if a project isactually developed. This forward‐looking information is subject to a variety of risks and uncertainties whichcould cause actual events or results to differ materially from those reflected in the forward‐lookinginformation, including, without limitation: risks related to fluctuations in metal prices; uncertainties related toraising sufficient financing to fund the planned work in a timely manner and on acceptable terms; changes inraising sufficient financing to fund the planned work in a timely manner and on acceptable terms; changes inplanned work resulting from weather, logistical, technical or other factors; the possibility that results of workwill not fulfill expectations and realize the perceived potential of the Company’s properties; risk of accidents,equipment breakdowns and labour disputes, access to project funding or other unanticipated difficulties orinterruptions; the possibility of cost overruns or unanticipated expenses in the work program; the risk of

l d l f b ’ d h k denvironmental contamination or damage resulting from Sabina’s operations and other risks and uncertainties,including those described in Sabina’s Annual Report for the year ended December 31, 2012.

Forward‐looking information is based on the beliefs, estimates and opinions of Sabina’s management on thedate the statements are made Sabina undertakes no obligation to update the forward looking informationdate the statements are made. Sabina undertakes no obligation to update the forward‐looking informationshould management’s beliefs, estimates or opinions, or other factors, change, except as required by applicablelaw.

3Challenges Facing Remote Projects

What can we do to restore market confidence in our

• Sabina and Back River Project Overview

What can we do to restore market confidence in our industry’s ability to execute large scale remote projects?

• Transportation and Logistics– 2013 Season at Back River

2013 PFS Options– 2013 PFS Options

• Recruitment and Retention– Exploration

– Construction

– Operations

• Cost Management• Cost Management– Capital Costs

– Operating Costs

• Summary

4Sabina Investment Highlights

• A growing high grade gold project at Back River• A growing high‐grade gold project at Back River – Pre‐feasibility Study = significant high grade gold production at good

margins in a mining friendly jurisdiction

• Continued de‐risking of Back River Project – Funded through engineering and permitting

– Many opportunities identified for mineral reserve additions and newMany opportunities identified for mineral reserve additions and new discoveries in 2013 program

• Major silver royalty on Xstrata’s Hackett River Project F ll i d t ti l f t h fl– Fully carried potential future cash flow

– Hackett River infrastructure would benefit Back River

• Low geopolitical riskg p– Assets located in Canada

• Strong treasury and experienced management$58 3 illi D b 31 2013 b l– $58.3 million December 31, 2013 balance

5Sabina Investment Highlights• Flagship assets located in Nunavut, in northern Canada g p ,• Bathurst Inlet Port and Road Project (BIPR), a Sabina/Xstrata venture, being

pursued in order to enhance infrastructure • Arctic resource development a priority for local and federal governments

Back River – 100% Sabina Hackett River – 100% GlencoreWishbone – 100% Sabina

• Gold hosted in banded iron formation

6Back River – A World Class Gold Project

• Acquired by Sabina from Dundee Precious Metals in 2009

• Sabina has made a number of high grade discoveries adding ~5Moz to the resource

• Significant exploration potential remains

Classification Tonnes (kt)Au(g/t) Metal (koz Au)Classification Tonnes (kt) (g/t) Metal (koz Au)

Measured 10,446 5.2 1,714Indicated 17,907 6.1 3,536Measured and Indicated 28,354 5.8 5,297Inferred 8,179 7.3 1,927

Mi l R th t t i l d t h d t t d i i bilit Mi lMineral Resources that are not mineral reserves do not have demonstrated economic viability. Mineral resource estimates do not account for mineability, selectivity, mining loss and dilution. These mineral resource estimates include inferred mineral resources that are normally considered too speculative geologically to have economic considerations applied to them that would enable them to be categorized as mineral reserves. There is also no certainty that these inferred mineral resources will be converted to measured and indicated categories through further drilling, or into mineral reserves, once economic considerations are applied.

7

Key PFS ResultsPFS – Base Case Assumptions

2013 PFS Key Deliverables

Key PFS Results Base Case

Pre‐Tax NPV5% & IRR C$471M / 21.8%

Post‐Tax NPV5% & IRR C$290M / 16.5%

PFS – Base Case Assumptions• $1,350/oz Gold Price, 0.95 $US:$CN• Conventional open pit mine supported by

underground operationsPayback 3.3 Years

Mill Throughput 5,000 tpd

Mined Grade 5.69 g/t

• 5,000 tpd whole ore leach process plant

Area ClassificationTonnes (kt)

Au ( /t)

Metal (k A )

Mineral Reserves

Gold Recovery 88.0%

Mine Life 8.4 years

Avg. Gold Production 287,000 oz/a

(kt) (g/t) (koz Au)Total Open Pit Proven 1,890 4.56 277

Probable 10,935 5.40 1,900Total Underground Proven ‐ ‐ ‐

Probable 2 165 8 11 564 g

On‐Site Op Costs C$101/t milled

Avg. Total Cash Costs US$651/oz

Pre‐Production Capital C$605M

Probable 2,165 8.11 564Total Property Proven 1,890 4.56 277

Probable 13,100 5.85 2,464

PFS – Other Key Results Pre Production Capital C$605M

Sustaining Capital C$226M

For the open pit Mineral Reserve estimate, a 1.52 g/t COG was used for the Goose deposits and a 2.00 g/t COG was used for the George deposits. A COG of 6.00 g/t was used for the underground Mineral Reserve estimate, based on an operating cost estimate of $231.30/t. A gold price of US$1,250/troy ounce is assumed. Mineral reserves are based on Measured and Indicated Mineral Resources only An exchange rate of Cdn$1 00 to US$1 00 was assumed Mineral reserve numbers have been adjusted for dilution and mining

• 2.5 year construction starting Q3 2015• Planned first gold production Q4 2017

Measured and Indicated Mineral Resources only. An exchange rate of Cdn$1.00 to US$1.00 was assumed. Mineral reserve numbers have been adjusted for dilution and mining recovery. The mineral reserve estimate for the Back River deposits was estimated by Herbert Smith, P. Eng of AMC, a Qualified Person under NI 43-101.

The PFS was prepared under the direction of Tetra Tech by leading independent industry consultants, all Qualified Persons (QP) under National Instrument 43-101. The following consultants and QPs participated in the PFS: John Huang, Ph.d., P. Eng, Hassan Gharffari, P. Eng, Sabry Abdel Hafez, Ph.D.,P. Eng, Harvey Wayne Stoyko, P.Eng, all of Tetra Tech, John Morton Shannon, P. Geo, Andrew Fowler, Ph.D.MAusIMM, CP (Geo), Dinara Nussipakynova, P. Geo, Herbert Smith, P.Eng, all of AMC Mining Consultants (Canada) Ltd, Les Galbraith, P. Eng, Knight Piesold and Alistair Kent, P. Eng, Merit Consultants. The Qualified Person under NI 43-101 for Sabina Gold & Silver Corp. is Wes Carson, P.EngVice-President, Project Development, who has reviewed the content of this presentation and approved its dissemination.

8Logistics and Transportation

• Summary of the 2013 Season• Options from the Prefeasibility Study• Options from the Prefeasibility Study

9Logistics and Transportation – 2013 Season Summary

Aircraft Type Total• ~83,000m drilled, combination of exploration,Hercules 96

737 78

Electra 53

Buffalo 47

83,000m drilled, combination of exploration, geotechnical, geomechanical, infill and extensional drilling

• Significant environmental baseline program to support th DEIS Buffalo 47

Dash‐7 18

Dash‐8 79

Twin Otter 81

the DEIS• 2,297 passengers, 5M lbs of freight and 2M L of diesel

fuel flown into site on 517 aircraft• Mobilized earthworks fleet to site by air

Dornier 50

King Air 15

Total 517

y• Pioneered quarry and completed all-season air strip

19Logistics and Transportation – 2013 PFS Options

Transport Optionsp pOption 1: Ocean Freight to Winter Road via Bathurst Inlet• Ocean freight from Belledune, NB (80%) and Hay River, NWT (20%) to Sabina built

port site 10km north of the proposed BIPR site on Bathurst InletL d t B th t I l t t it• Laydown at Bathurst Inlet port site

• New 160km winter road from Bathurst Inlet to Goose Site (40% Land, 60% Water)

Option 2: Winter Road via Yellowknife• 650km winter road access to Goose Site from Yellowknife using the existing Tibbit

to Contwoyto Winter Road (currently built to the Ekati Mine turnoff, 70km from Pellatt Lake)

• Laydown at Pellatt Lake and transfer to off road tractors for remaining 220km• Laydown at Pellatt Lake and transfer to off‐road tractors for remaining 220km• New 220km winter road construction from Pellatt Lake to Goose Site (50% land,

50% water)

Option 3: Air Freight via Edmonton• Would still require Option 1 or Option 2 during construction for some items• 2,500m hard surface airstrip at Goose Lake• Regular flights with DC‐10 or 767 sized wide body aircraftRegular flights with DC 10 or 767 sized wide body aircraft• Opportunities to combine passenger and freight haulage

20Logistics and Transportation – Shipping Routes

21Logistics and Transportation – Road Corridors

22Recruitment and Retention

• Exploration

• Construction

• Operations

• Technical Expertise

23Recruitment and Retention – Exploration (Current)

• Peak at ~200 employees and contractors onPeak at 200 employees and contractors on site for 2013

• Primarily seasonal contractors

Skill Sets

• Technical: Geology, Survey, Engineering

• Operators: Drillers, Heavy Equipment

• Trades: Mechanics, Electricians, Carpenters,Trades: Mechanics, Electricians, Carpenters, Welders

• Support: Kitchen, Camp/Site Maintenance, General Labour

• Supervision: Operations, Logistics, Safety, Environmental, Geology

Challenges

• Training

• High turnover

• Northern/Local Hires

24Recruitment and Retention ‐ Construction

• Peak at ~800 employees contractors and consultants• Peak at 800 employees, contractors and consultants.

• Continual change in skill sets required during the 2.5 year construction period

V i d k h d l• Varied work schedules

• Significant number of specialists required on site, particularly during the commissioning phase.

Challenges

• Developing and maintaining project culture– Managing multiple on‐site contractors and their personnel with varying levels

of training, experience, etc.

• Retention of highly mobile (when in demand) construction management team

• Managing continuous state of transition through the construction phase

• Lack of communications infrastructure during early construction

• Tracking project progress for both internal and external stakeholders.g p j p g

25Recruitment and Retention ‐ Operations

W kf 500 f ll ti l d i ti h• Workforce average ~500 full time employees during operations phase, with ~300 on site at any one time– Mining (~300): Supervision, Open Pit Operators, Underground Operators,

Maintenance Technical (engineering geology survey)Maintenance, Technical (engineering, geology, survey)

– Process Plant (96): Supervision, Operators, Maintenance, Technical (metallurgy)

– Site Services (22): Camp Maintenance Kitchen Equipment OperatorsSite Services (22): Camp Maintenance, Kitchen, Equipment Operators, Labourers

– G+A (42): Accounting, Human Resources, Health & Safety, Environmental, Community Relations

Challenges

• Recruitment of initial operating team

• Initial and ongoing training for all site personnelInitial and ongoing training for all site personnel

• Competing with other FIFO operations

• Recruiting and retaining technical staff

E i i i ( idi l )• Ensuring continuous improvement (avoiding complacency)

• Ability to communicate effectively with stakeholders

26Recruitment and Retention – Technical Expertise

Ch ll i d i h i i d i i hi h• Challenges associated with recruiting and retaining high quality technical staff

• Competing with other FIFO operations, particularly the oilCompeting with other FIFO operations, particularly the oil sands

• Alternatives– Consultants

– Supplier Representatives

– Contractors

– Remote Communications Solutions

27Cost Management

• Capital Costs

• Operating Costs

• Planning and Execution

28Cost Management ‐ Capital Cost

Capital Cost ($M)

Direct CostsOverall Site 16Mining 98Ore Handling 24

Overall Site2.6%

Mining16.2%

Ore Handling

Owner’s Costs4.6%

Contingency13.6%

gProcess 68TSF and Water Management 30On‐site Infrastructure 55Airstrip 3Port Facility 21

Ore Handling4.0%

Process11.2%

Port Facility 21External Access Roads 24Sub‐total Direct Costs 339Indirect CostsProject Indirects 156Owner’s Costs 28

TSF and Water

Management5.0%

On-site Infrastructure

Airstrip0.5%External

Project Indirects25.8%

Owner s Costs 28Contingency 82Total Capital Cost 605

Infrastructure9.1%

Port Facility3.5%

Access Roads4.0%

Logistics and Transportation Costs ($94M – 16% of total CAPEX):• Logistics Freight and Brokerage $58M• Logistics, Freight, and Brokerage – $58M • Freight on Fuel – $12M• Winter Roads – $24M

Construction Labour Costs ($167M – 28% of total CAPEX):($ )• Direct Labour – $140M ($110/hour)• Flights – $12M ($1,600/person/turnaround)• Camp Operating Costs – $15M

29Cost Management – Operating Costs

$000/a $/t Milled $/ozMining 77,325 43.33 269.26

Milling 42,958 24.08 149.59G&A 25,970 14.55 90.43

Surface Services* 12,014 6.73 41.83Tailings Management 1,844 1.03 6.42

Freight Costs (Ocean/Port/Ice Roads)** 15,253 8.55 53.12Ore Hauling (George to Goose Site)*** 5,387 3.02 18.76Total 180,751 101.29 629.41Total 180,751 101.29 629.41

* Includes surface services at the Goose, George, and port sites.** Excludes fuel freight costs, which are included in operating cost estimates for related areas.*** Ore haulage from the George site to Goose site is only required in Years 7 to 9.

d ($ / f l )Logistics and Transportation Costs ($27M/year – 15% of total OPEX)• Logistics, Freight and Brokerage – $7M/year• Freight on Fuel – $12M/year• Winter Roads – $8M/year$ /y

Operating Labour Costs ($80M/year – 44% of total OPEX)• Direct Labour – $65M/year

Fli ht $7M/• Flights – $7M/year• Camp Operating Costs – $8M/year

30

• Significant costs associated with labour at a remote site both direct

Cost Management – Planning and Execution

• Significant costs associated with labour at a remote site, both direct salaries and indirect costs require evaluation of off‐site alternatives for as many aspects of the project as possible (modularization, vendor packages, factory verification, etc.)factory verification, etc.)

• Logistics and transportation costs at a remote site encourages evaluation of alternatives that would not be possible elsewhere

• Costs associated with technology implementation need to be carefully• Costs associated with technology implementation need to be carefully weighed to include “intangible” benefits and risks (employee recruitment and retention, site culture, corporate communications and integration)

• All possibilities to share costs and/or risk with suppliers contractors localAll possibilities to share costs and/or risk with suppliers, contractors, local communities and government need to be investigated

• Project controls at a remote site are essential as “minor” slipups in schedule can have massive impacts on budget and quality due toschedule can have massive impacts on budget and quality due to transportation costs and seasonality

• Trade‐off studies and creative alternatives need to be evaluated as early as possible during the project development processas possible during the project development process.

31Summary – Challenges for Remote Projects

32Summary – Challenges for Remote Projects

What can we do to restore market confidence in our

• Review existing and “proven” technologies against viable

What can we do to restore market confidence in our industry’s ability to execute large scale remote projects?

• Review existing and proven technologies against viable developments for cost and benefits weighed against risk.

• Emphasis on planning and studies (solid engineering)p p g ( g g)

• The need for innovation and creative solutions

• Building technical strength within your own organization

• Early stakeholder engagement

• Manage project scale (right sizing a project) focusing on profitability over reservesprofitability over reserves.

Develop realistic, achievable plans and execute them!Develop realistic, achievable plans and execute them!

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