Gold holds gain as rate-cut hopes rise before US payrolls data
Bullion rose 0.8% on Thursday following a report that showed US companies added the fewest jobs last month since the start of 2021.
A new study combining Thesis Gold’s (TSXV: TAU; US-OTC: THSGF) Ranch gold-silver project in British Columbia with Lawyers, acquired through its takeover of Benchmark Metals last year, shows a 35% post-tax internal rate of return (IRR).
The now-merged adjacent projects near Dease Lake in northern B.C. has an after-tax net present value (NPV) just shy of C$1.3 billion at a 5% discount rate, Thesis said Thursday. Initial capital costs are pegged at C$598.4 million, the payback could take two years and annual production may increase by nearly a third to 215,000 gold-equivalent oz. compared with a 2022 preliminary economic assessment (PEA).
That study for Benchmark concerned just the Lawyers section and forecast an after-tax NPV of C$589 million at a 5% discount rate, an IRR of 24% and 2.8-year payback. Initial capex was C$484 million. The new study includes early-stage underground mining at Lawyers to enhance economics, Thesis said. A prefeasibility study and permit applications are next, it said.
“With today’s gold price near $2,500 per oz., the substantial economic potential of the Lawyers-Ranch Project is clear,” president and CEO Ewan Webster said in a release. “We will continue to explore new targets within our expansive, highly prospective land package.”
Shares in Thesis Gold gained 2.7% to C$0.75 apiece in Toronto Thursday afternoon, valuing the company at C$130.5 million. They’ve traded in a 52-week range of C$0.37 to C$0.87.
The 495-sq.-km project in the Toodoggone district is about 45 km northwest of Centerra Gold’s (TSX: CG; NYSE: CCAU) underground project at the Kemess South mine that produced about 3 million oz. gold and 750 million lb. copper between 1998 and 2011. Also in the area 750 km north of Vancouver, Amarc Resources (TSXV: AHR; US-OTC: AXREF) and Freeport-McMoRan (NYSE: FCX) are developing the Joy copper-gold property. Mining analysts at Raymond James Financial said the PEA bodes well for M&A.
“The strong results could garner interest from gold producers looking to initiate or expand their presence in Canada,” Craig Stanley wrote in a note on Thursday. “One Canadian gold developer has already been acquired this year (Marathon) and another acquisition could close next month, Osisko Mining (TSX: OSK).”
Webster called Lawyers-Ranch straightforward and low-risk, benefiting from high-grade open-pit and underground ounces and proximity to roads and power. A new 230,000-volt transmission line to Lawyers-Ranch from Kemess and a 13,800-volt distribution system would need to be constructed.
The updated PEA, using gold at $1,930 per oz. and silver at $24 per oz., forecasts all-in sustaining costs of $1,013 per oz. of gold-equivalent compared with $824 per oz. in the 2022 study.
The 24% increase in construction costs from one PEA to the next is attributable mostly to inflation and an 18% increase in the plant throughput rate to 12,600 tonnes per day from 10,700 tonnes a day, Thesis said. Sustaining and closure capital costs total C$594.2 million.
The new PEA, which extended the mine’s lift to 14 years from 12, suggests a conventional truck and shovel open-pit mining operation from four pits at Lawyers and several small pits at Ranch. They would feed an industry standard plant with crushing, grinding, flotation, leaching and a Merrill Crowe recovery circuit.
The study identifies 58 million tonnes of open pit ore with a grade of 1.44 gold-equivalent grams per tonne containing more than 2 million oz. gold and 54.7 million oz. of silver. Precious metal concentrate and gold-silver doré would be poured onsite, according to the PEA.
A crossover to underground mining is seen from years 2 to 14 using longhole stoping and a small zone of drift and fill to feed up to 2,500 tonnes per day from the Duke’s Ridge, Cliff Creek and Ranch deposits, Thesis said.
Underground mining is to extract 6.5 million tonnes at an average grade of 3.17 grams gold-equivalent, about 10% of the plant feed and 20% of the contained ounces, the company said.
“This change brought forward higher grade ounces in the mine schedule, increased life-of-mine production, extended mine life and reduced the strip ratio of open-pit mining,” Thesis said.
Lawyers-Ranch holds 94.4 million measured and indicated tonnes, a 31% increase from the two-year-old PEA, according to a resource update in May. Ore grading 1.51 grams gold-equivalent could produce 4 million oz. gold-equivalent although the new PEA envisions output of 3 million oz. gold-equivalent over the mine’s life.
The resource update was calculated using an 80 to 1 silver-to-gold ratio and metal prices of US$1,850 per oz. gold and US$24 per oz. silver, the company said.
The underground at Lawyers is still open at depth while Ranch zones also remain open, Thesis said. The site holds more than 20 unexplored targets, it added.
“The 2024 PEA confirms the positive potential of the Lawyers-Ranch project, utilizing industry-standard open-pit and underground mining methods alongside an optimized processing flowsheet that ensures exceptional recoveries from both Lawyers and Ranch streams,” non-executive chairman Bill Lytle said in the release. “The project is rapidly moving towards prefeasibility and an accelerated permitting timeline.”
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