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Avanti Mining Releases NI 43-101 Feasibility Study Results on Kitsault Molybdenum Property

Avanti Mining Inc. (TSX-V:AVT) has released the results of the NI 43-101 Feasibility Study prepared by AMEC on its 100% owned Kitsault Molybdenum property in northwest British Columbia, Canada.

Highlights include:

  • An increased resource estimate containing Measured and Indicated mineral resources totaling 298.8 million tonnes grading 0.072% molybdenum and 4.20 g/t Ag containing 472.5 million pounds of Mo and 40.3 million ounces of Ag. This represents a 9.7% increase of contained molybdenum and an 18% increase of contained silver over our prior estimate for measured plus indicated mineral resources. In addition, the Inferred category totals 157.1 million tonnes grading 0.050 % Mo and 3.65 g/t Ag containing 172.2 million pounds of molybdenum and 18.4 million ounces of silver an increase of 330% of contained molybdenum and 360% of contained silver over our previous resource estimate for inferred mineral resources.
  • The mine plan calls for a total of 232.5 million tonnes of proven and probable reserves grading 0.081% molybdenum to be mined over a 16 - year mine life, producing 373.9 million pounds of molybdenum. The first five years of production averages 0.101% Mo;
  • A long term exchange rate of .92 has been used to convert CDN$ to US $
  • Initial capital costs are estimated at $770 million (+/- 15% accuracy estimated in C$ at $837 million);
  • Cash operating costs (mine gate) are estimated to be $4.76/lb of molybdenum;
  • The average annual price of molybdenum for the base case scenario over the mine life as forecast by  the CPM Group ranges from $13.75/lb to $18.25/lb based upon their June 2010 Molybdenum Market Outlook. The average over the Kitsault mine life is $16.76 per pound of molybdenum. Forecasts were also prepared for a low and a high price scenario.
  • The base case after-tax NPV(8%) is $798 million, with an IRR of 26.8%
  • Projected undiscounted net cash flow (after-tax) is $2.0 billion;
  • Annual metal production for the mine life averages 23.4 million pounds of molybdenum with the first five years averaging 29.6 million pounds per year;
  • There is a life of mine roasting agreement in place with Molymet that assures roasting capacity for the project;
  • The mine has certain infrastructure in place with road and ocean freight access to the mine site and will be serviced by the existing BC Hydro transmission grid;
  • The reopening of the mine is projected to create over 350 high paying local jobs during its 16 year life, and at the peak of construction, over 650 jobs. The construction period is estimated at 25 month;
  • The project is progressing through environmental assessment process under the BC and federal legislation as well as the Nisga'a Final Agreement and expects to submit its Application in April 2011.

"We are delighted with the plan developed in this Feasibility Study by AMEC and other contributors" stated Craig J. Nelsen, Avanti's President and CEO.  "We are pleased with the projects robust economics and plan to utilize this study as the basis for negotiating strategic partnerships to assist with the financing plan for Kitsault. Our schedule anticipates receipt of permits toward the end of 2011 and construction to follow in early 2012 with initial production in 2014"

Project Description

The Kitsault property is located about 140 km north of Prince Rupert, British Columbia, and south of the head of Alice Arm, an inlet of the Pacific Ocean.  The property includes three known molybdenum deposits, Kitsault, Bell Moly, and Roundy Creek.  The Kitsault mine was a producer of molybdenum between 1967 and 1972 and from 1981 to 1982 with total production on the property during both periods being approximately 31 million pounds of molybdenum.

Kitsault has road access to the mine site, which is approximately 12 km from ocean transport routes and is serviced by the BC Hydro transmission grid.  The Feasibility Study estimates that the Kitsault Mine would operate at an annual resource throughput rate of 14.6 million tonnes, or 40,000 tpd, with a strip ratio of 0.77:1 during a mine life of 16 years.  The ore mined will be crushed in a gyratory primary crusher, then ground using a SAG-ball mill configuration. Conventional flotation and five stages of cleaning will produce molybdenum concentrate that will be dried and packaged into bags for shipment.  The life-of-mine molybdenum production is estimated at 373.9 million pounds of molybdenum contained in 326,150 tonnes of molybdenum concentrate produced from the processing of 233.7 million tonnes of reserves plus planned dilution grading 0.081%Mo.  Total molybdenum recovery varies depending on mill head grade but is estimated to average 89.9%.

Mineral Resource/Reserves Statement

The mineral resources are reported in accordance with Canadian Institute of Mining, Metallurgy and Petroleum (CIM) Definition Standards for Mineral Resources Mineral Reserves and their Guidelines, and are compliant with National Instrument 43-101 ("NI 43-101").  The resource estimate was prepared under the supervision of Greg Kulla, P.Geo, an independent Qualified Person (QP), as this term is defined in NI 43-101.

  • The mineral resources are reported at a cut-off grade to reflect the "reasonable prospects" for economic extraction. This estimate of the Kitsault molybdenum deposit is based open pit extraction and Avanti and AMEC has not considered underground mining methods for deeper portions of the deposit. Although silver has been reported in the mineral resource, it has not been included in the economic analysis or the reserve statement below. There is sufficient metallurgical testwork to suggest it could be an economic contributor but this work has not yet reached the feasibility level of confidence. The recovery of silver remains a potential project upside contributor, as well as the opportunity of conversion of Inferred to higher confidence categories through additional drilling. Additional drilling will continue through the 2011 field season in parallel with Basic and Advanced Engineering studies

    AMEC conducted a complete re-evaluation of all old historic and recent drilling information and recalculated the mineral resources from first principals. 10 holes from the previous database were not used in the calculation because of inability to verify core quality (recoveries) and assay methods.

    The Kitsault mine Mineral Reserves have been prepared in accordance with NI 43-101 standards and CIM Definition Standard (2010). This statement has been prepared by Mr. Ryan W. Ulansky (P.Eng.) of AMEC, a QP as defined in NI 43-101. These reserves are sufficient for 16 years of operation at an annual production rate of 40,000 t/d.

    Mining

    The single ultimate pit will be mined in six phases, with elevated cut-offs in the early years and low grade stockpiling.  A bulk mining approach has been selected, mining on 10m benches.  The selected mining fleet features one 26 m3 rope shovel, one 28 m3 electric hydraulic shovel, one 18 m3 front end loader, and up to ten 218-tonne haul trucks with related support equipment. Benches will be drilled with 8 m by 8 m production drill patterns and wall control patterns as required. The holes will be loaded and shot with a 70% emulsion/30% ANFO blend blasting agent. Ore control will be based on blasthole samples assayed for molybdenum.

    Waste rock will be stored in an expansion to the existing Patsy Waste Management Facility. Low grade ore will be stockpiled throughout the mine life on the top of the existing Clary Waste Management Facility. This ore stockpile will be reclaimed and processed during the last two years of the operation.

    Processing

    The proposed concentrator in this study is based on an annual resource throughput rate of 14.6 Mt, or 40,000 tpd at 92% plant availability, for the production of a molybdenum concentrate.  The processing plant is expected to operate 24 hours/day, 365 days/year.  Over the life of mine, the processing plant will produce an estimated 326,150 t of molybdenite concentrate grading 52% Mo.  The molybdenum recovery is variable with the average estimated at 89.9%.

    The proposed process design is based on historical testwork results, the results from a recent (2009 and 2010) test program and utilizing plant data from the previous Kitsault concentrator operations. Plant design, principally the crushing-grinding circuit has been revised to reflect current technologies using a primary crusher-SAG-ball mill configuration. The process design is composed of the following unit processes:

    • Primary crushing using a gyratory crusher;
    • Grinding using a SAG-ball mill-pebble crusher configuration with cyclones for flotation feed size classification;
    • Rougher and scavenger flotation;
    • Five stages of cleaner flotation with three stages of regrinding;
    • Final molybdenum concentrate thickening, leaching for the removal of contaminants, and the filtering, drying and packaging of the final concentrate; and
    • Flotation to produce desulfidized tailings which will have a portion cycloned for dam construction and the remainder will be deposited by gravity into an on-site Tailings Management Facility (TMF). Pyritic tailings will be deposited in a separate submerged cell in the TMF to prevent oxidation.

    Capital Costs

    Initial capital costs are estimated at $770 million, which includes $50 million for mobile mining equipment.  Preproduction stripping costs of $13 million are reflected in the initial operating costs.  Life of Mine sustaining mine capital was estimated to be $50 million, which is comprised mainly of mobile equipment and TMF embankment ongoing construction.  All capital costs are [+/-15%] in this estimate.

    Operating Costs

    LOM unit cash operating costs are US$7.64/t milled and operating costs for the processing plant are estimated at $4.36/t milled (±15% accuracy).  General and administrative costs have been estimated at $1.00/t milled.

    Project Economics

    The FS economic model for the base case in this study assumes a LOM average molybdenum price of $16.76/lb for revenue purposes, as projected by CPM Group.

    The after-tax NPV at an 8% discount rate over the estimated mine life is $798 million.  The after-tax IRR is 26.8%.  Payback of the initial capital investment is estimated to occur in 2.6 years after the start of production

    Sensitivity

    The analysis suggests that the project is most sensitive to exchange rates followed by commodity prices.   The Project is least sensitive to operating and capital costs.

    Development Timetable

    The NI 43-101 Preliminary Feasibility Study, Avanti Mining Inc., Kitsault Molybdenum Property, British Columbia, Canada was prepared by industry consultants, all of whom are independent of Avanti Mining Inc. and are QP's under National Instrument 43-101.  The QP's have reviewed and approved this news release.

    Source: Avanti Mining Inc.

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