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 April 11, 2011
New Preliminary Assessment Increases Tepal Project Net Positive Pre-Tax Cashflow 96% to an Estimated $749 Million

 
Vancouver, B.C., April 11, 2011 - Geologix Explorations Inc. (the "Company" or "Geologix") is pleased to announce the positive results from the Tepal project's updated National Instruments 43-101 Preliminary Assessment Study ("PA" or "2011 PA") completed by SRK Consulting (Canada) Inc. ("SRK") of Vancouver B.C. The new study is based on the recently released resource estimate announced by the Company in its news release dated March 16, 2011, which includes all project drilling data from the Tepal North, South, and Tizate zones up to December 2010. Please see the PDF version of this release on the Company's website for details of the new site plan. Significant highlights of this PA, including the revised mine plan include:

  Change from 2010 PEA
• $749 M net positive earnings EBITDA1 (undiscounted) +96%
• 3.48 M ounces gold equivalent2,3 in mine plan +69%
• 1.55 M ounces of gold mined in the life of mine ("LOM") plan +58%
• 677 M lbs. of copper mined in the LOM plan +93%
• 18.1 year mine life +118%
• 4.1 years of production to payback  
• 96% of 2011 resource tonnes converts to the PA mine plan tonnes (diluted)  

1 EBITDA: earnings before interest, taxes & depreciation allowance
2Gold equivalent is estimated using 2011 PA Base Case $1000/oz. Au, $16/oz. Silver and $2.75 Cu metal prices: (Ag oz.* $16)/$1000 = gold oz., (Cu lbs* $2.75)/$1000 = gold oz. Please refer to Tables 2 and 5 below for separated copper gold and silver production.
3It must be noted that the ounces gold equivalent does not represent actual ounces of gold in the mine plan, but rather their calculated equivalent value.


Dunham Craig, President and CEO stated, "We are very pleased with the updated PA, as it validates and quantifies the significance of the resource expansion work accomplished by the Company in 2010. In the six months since the previous PA was announced, Geologix has substantially increased the scale of the project's economics and has extended the mine life from 9 years to 18.1 years without significantly impacting the project's capital costs. These increased numbers have a positive impact on the mine plan, total gold and copper production, NPV, and other overall project economics. These results also give important guidance for the recently commenced pre-feasibility study, as well as ongoing resource expansion and target delineation programs throughout the project area. In completing our Tepal pre-feasibility, the Company intends to incorporate its 2011 exploration results, resize the operation to a higher production level, and optimize the project's NPV."

The mine plan included in this PA consists of conventional flotation concentration and smelting of 130,200,000 tonnes of sulphide ore, and heap leaching of 14,300,000 tonnes of the oxide cap. Metallurgical recoveries for the North and South pits are derived from the 2010 Preliminary Assessment ("2010 PA") and are based only on gold and copper recoveries. Silver and molybdenum mineralization is present in the North and South pits, however historical sampling is not sufficient for silver and molybdenum estimates to be included in this 2011 PA. Recoveries for the Tizate Zone are derived from test work completed in 2011, and have silver and molybdenum in both the March 2011 resource estimate and 2011 metallurgical test work. Tizate zone silver is included in the 2011 PA economics but molybdenum is not being included until further test work determines its commercial processing viability.

It must be noted that the PA is preliminary in nature, that it includes inferred mineral resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves, and there is no certainty that the results of the preliminary assessment will be realized.

Table 1 - Tizate Zone Metallurgical Recoveries to Concentrate

Au

Ag

Cu

Mo

66.2%

55.5%

85.3%

70.6%


The 2011 PA base case uses metal prices fixed at $1000/oz. gold, $2.75/lb. copper and $16/oz. silver. Financial estimates are earnings before interest, taxes, depreciation and amortization ("EBITDA") and all amounts are stated in $US. Highlights of the PA are:

Table 2 - Tepal 2011 PA Mine Plan4

Tepal Mine Plan

Tonnes

Average Au g/t

Gold Oz.

Average
Cu %

Copper lbs.

Gold Equiv2,3oz.

Sulphide Mined

130,200,000

0.33

1,370,000

0.22

608,000,000

3,013,000

Oxide Mined

14,300,000

0.40

180,000

0.22

69,000,000

374,000

Total Ore Mined

144,500,000

 

1,550,000

 

677,000,000

3,480,000

4The PA mine plan considers Indicated and Inferred resources and cannot be classified as "Reserves". Further infill drilling will be conducted for the purpose of improving Inferred Resources to Measured or Indicated categories.

The current Tepal resource to PA Mine Plan conversion rate is 96%. Approximately 38% of the mine plan resources are in the Indicated category and 62% are in Inferred category. The LOM average strip ratio is 1.14 tonnes waste to 1 tonne ore (1.14:1).

Table 3 - Tepal Individual Pit Strip Ratios

 

North Pit

South Pit

Tizate

Strip Ratio:

0.81:1

2.04:1

0.87:1



Table 4 - Tepal NPV and IRR at Base Case ($1000 Au, $16 Ag$ 2.75 Cu)
and Variable Metal Prices

  Case A Case B (Base) Case C

Tepal PA ($ Millions)

$900 Au
$16 Ag
$2.75 Cu

$1000 Au
$16 Ag
$2.75Cu

$1200 Au
$16 Ag
$3.50 Cu

Project NPV (0% Discount Rate)
Project NPV (5% Discount Rate)

$653 M
$347 M

$749 M
$412 M

$1,320 M
$786 M

Project IRR

20%

22%

34%


The PA mine plan is designed, and capital is estimated on a 23,000 tonnes per day ("tpd") processing plant facility and a 10,000 tpd heap leach facility. Average annual production for the life of the mine is displayed in Table 5 below:

Table 5 - Payable Production: Base Case

 

 

Average

Average

LOM

Average Mine Production

Unit

Years 1-9

Years 10-18.4

Total

Gold

oz.

64,300

40,000

979,000

Copper

lbs.

30,700,000

26,100,000

520,700,000

Silver

oz.

6,300

171,000

1,767,000

Gold Equivalent12,3

oz.

146,200

112,400

2,438,000


Table 6 - Base Case Average Operating Cost on a Co-Product Basis5

OPEX per Au equivalent

$/oz. Eq. Au payable

$478

OPEX per Cu equivalent

$/lb.  Eq. Cu payable

$1.31

5Base Case Operating Cost ("OPEX") per Equivalent Payable Metal

Table 7 - Project Capital Cost6

Tepal PA Base Case

 

Year 0

Year 1

Year 2

Total

Initial Capital (pre-full production)

M$

$134

$150

$25

$312

Sustaining Capital (post full production)

M$

 

 

 

$35

6 Initial and sustaining capital are inclusive of EPCM and closure costs. A 10% contingency has been applied. Working capital is excluded.

Table 8 - 2011 Tepal PA Mine Plan Details - Base Case Life of Mine Averages

Mine Type

 

Open Pit (3)

Mine Life

 

18.1 Years

Payback Period (in production years)

 

4.1 years

Strip Ratio (Average Life of Mine)

 

1.14:1

Oxide

 

 

Oxide tonnes processed

 

14,300,000

Daily Heap Leach Rate

 

6,700 tpd

Oxide Gold Recovery

 

77.3%

Oxide Copper Recovery

 

13.4%

Oxide Processing

 

Crush 1/2", Heap Leach

Sulphide

 

 

Sulphide tonnes processed

 

130,200,000

Sulphide Plant Design Capacity

 

25,000 tpd

Sulphide Mine Plan Throughput

 

23,000 tpd

Sulphide Gold Recovery

 

62.8%

Sulphide Copper Recovery

 

86.6%

Sulphide Processing

 

Grind/Standard Flotation/Concentrate

Primary Grind Size

 

~140 micron

Concentrate Grade

 

24.8% Cu, 28 g/t Au, 125 g/t Ag

Smelter Penalties

 

None

Operating Costs

 

 

Mining (Owner fleet)

$/t mined

$1.36

Mining (Owner fleet)

$/t processed

$2.92

Sulphide ore

$/t milled

$4.30

Oxide Ore

$/t leached

$4.31

G&A and sustaining capital

$/t milled

$0.68

Average operating cost

$/t ore

$8.05

Royalties

 

 

NSR Royalty

 

2.5%


Mr. Gordon Doerksen, P. Eng., PE, Principal Consultant and Project Manager, SRK Consulting (Canada) Inc., Vancouver, BC, Canada and Mr. Dunham L. Craig, P.Geo, President and CEO of Geologix Explorations Inc., Vancouver, BC, are 'qualified persons' for the purposes of National Instrument 43-101 Standards of Disclosure for Mineral Properties of the Canadian Securities Administrators, have reviewed and verified the data contained in this news release.

Geologix Explorations Inc. is a mineral exploration company focused on acquiring, exploring and developing mineral resource opportunities with the potential to host world class mineral deposits. The Company's primary focus is the Tepal Gold-Copper Porphyry Project in Michoacán State, Mexico, where the Company has substantially increased the project's resource estimate and completed an updated Preliminary Assessment. While commencing a pre-feasibility study on the three main mineralized zones, the Company is continuing its exploration programs as it seeks to expand the size of the resource and increase the scale of its possible future mining operation.

Contact:

Dunham Craig

President & CEO
dcraig@geologix.ca

Jeffrey Wilson
VP Corporate Communications
jwilson@geologix.ca

T: 604.694.1742
Toll Free: 1.888.694.1742
www.geologix.ca

The Toronto Stock Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.
 
 

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