Blue Lagoon delivers positive preliminary economic assessment for its Dome Mountain Gold Mine Project

VANCOUVER: Blue Lagoon Resources Inc. announced a mineral resource and a positive preliminary economic assessment (PEA) for the company’s Dome Mountain Mine gold deposit, located a short 50 minute drive from the town of Smithers, B.C.

The PEA was completed by Roughstock Mining Services of Bozeman, Montana.

The Dome Mountain Gold Mine Project currently holds a Mining Permit and Environmental Management Act Permit (EMA) providing for up to 75,000 tonnes annually. The PEA considers the economics of a 100 tonnes per day mining operation, (36K tonnes annually) which is half the tonnage provided for under the existing permit.

Over the 12 year planned mine life, the PEA projects that 85,000 payable ounces are recoverable, with the first five years recovery to be 45,000 payable ounces, at a per ounce cash cost of $US 987 and selling price of $US 1,450 per ounce of gold, providing on average $CAD 2.32 million per year after tax free cash flow, using a discount rate of 5%, during that initial five year period.

The fact that this project has extensive existing development and infrastructure results in the additional projected capital cost to resume mining operations being only $CAD 1.46 million, primarily for completing items under three required amendments to the existing mine permit. These items include the completion of the water treatment plant, underground bolting and vent raise, and the completion of the mine reclamation and closure plan. This low capital cost results in an internal rate of return of 277% using a 5% discount.

Furthermore, extensions along the Boulder Vein 43-101 resource area and the existing 17 high-grade vein targets located on the 10,970-hectare property, offer an attractive opportunity to add additional ounces to the current mineral resource through step-out and exploration drilling.

Blue Lagoon’s President and CEO, Rana Vig stated: “Dome Mountain is a technically simple gold project in a safe, politically stable jurisdiction with a long tradition of gold mining. The PEA projects positive project economics and IRR based on the relatively low capital expenditures which come from the fact that much of the investment in the mine infrastructure was already made before we acquired the project, leaving less than $1.5 million needed to complete the three key amendments required by the existing mine permit to re-commence mining.”

Mr. Vig added: “At US $1,450 per ounce gold, the PEA includes a projected free cash flow of $11.6 Million using a discount rate of 5%, over the first 5 years of mining. This cash flow is prior to applying significant available tax credits of Gavin Mines, the Company’s subsidiary that holds the project. This represents potential cash that, if realized, will allow the company to focus on expanding future drill programs to explore the other 17 high grade veins that surround the mine – while reducing potential dilution to shareholders.”

Tax credits, including tax loss carry-forwards, CDE and CEE total $23 million. After applying those tax credits, the Company projects a five year after-tax cash flow of $13.9 million using a 5% discount rate, or approximately $2.8 million per year for that period.

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