Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
The Toronto-quoted shares of Canadian project developer Newcore Gold (TSX-V: NCAU, OTCQX: NCAUF) surged nearly 15% on Tuesday morning following an updated preliminary economic assessment (PEA) on the flagship Enchi project in southwest Ghana.
The updated study, prepared by BBA E&C, considers a 6.6 million tonnes per day open-pit, heap-leach operation, producing on average 104,171 oz. gold between years two through five. The total output is estimated at 983,296 oz. gold over an 11-year mine life.
Enchi hosts an inferred resource of 70.4 million tonnes grading 0.62 gram per tonne gold for 1.4 million oz
The project is expected to turn a profit at the base gold price assumption of $1,650 per oz., which provides an after-tax net present value (NPV5%) of $212 million and a 42% after-tax internal rate of return (IRR). At $1,850 per oz gold, not far from current spot levels at about $1,900 per oz., the post-tax NPV climbs to $302 million, and the IRR increases to 54%.
The initial construction capital is estimated at $97 million, with sustaining capital and reclamation costs estimated at $23 million and $22 million, respectively.
The life-of-mine strip ratio is 2.1:1, with a mined grade of 0.57 gram per tonne gold and recovery stated at 79%.
Cash costs are expected to average $1,043 per oz. gold, with all-in sustaining costs expected to come in at $1,066/oz over the mine life.
The economic study is underpinned by an update to the resource estimate, which incorporates about 20,000 metres of drilling completed at Enchi between 2020 and early 2021.
Enchi hosts an inferred resource of 70.4 million tonnes grading 0.62 gram per tonne gold for 1.4 million oz. of the yellow metal.
Newcore has expanded the resource estimate by extending the existing resources along strike and down dip. This includes an initial resource estimate at the Kwakyekrom deposit, interpreted as an extension of the same structure hosting the project’s cornerstone Nyam deposit three kilometres to the north.
“We believe that the project and economics have a tremendous amount of upside from resource expansion both from shallow, near-surface oxide mineralisation, but also from the higher-grade structures that we are starting to define at depth.”
CEO Luke Alexander
The PEA only includes 20,195 metres of drilling from an ongoing 66,000-metre drill program and only incorporates the shallow, open-pit oxide material defined to date. The company has recently started drilling deeper to test for higher-grade sulphide mineralisation at depth.
Including the Kwakyekrom deposit in the new resource update highlighted the potential to discover more deposits across the project, said vice president of exploration Greg Smith in a release.
“We will continue to work towards defining the district-scale potential of the Enchi gold project through our ongoing 66,000-metre drill program.”
Recent drilling results not included in the PEA resource update have intersected broad zones of oxide gold mineralisation as well as high-grade core structures, including 5.4 gram per tonne gold over nine metres, 5.78 gram per tonne gold over seven metres, 6.25 gram per tonne gold over six metres, 3.31 gram per tonne gold over nine metres, and 2.95 gram per tonne gold over nine metres. The mineralisation remains open along strike and to depth.
The company’s equity trading in Toronto achieved an intra-day high at C71c per share before settling at around C65c per share early in the afternoon trading session. Newcore has a market capitalisation of about C$66 million ($54.5m).
