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.
Galleon Gold (TSXV: GGO) has delivered its first preliminary economic assessment (PEA), including an updated resource estimate, for its West Cache gold project near Timmins, Ontario. The study examines a 2,400-t/d underground mine with a mine life of 11 years and toll milling.
The project has a pre-production capital cost of C$150 million (about $120m). Average annual production would be 85,500 oz. of gold with an estimated 873,200 oz. recovered over the life of the mine. The all-in sustaining cost would be $987 per ounce.
Using a gold price of $1,700 per oz. and a 5% discount rate, West Cache has an after-tax net present value of C$240 million and an internal rate of return of 26.7%. The payback period would be 3.3 years.
Galleon is also considering building an onsite mill, but only gave pre-tax NVP (C$368 million), IRR (24.5%) and payback (3.7 years) numbers for that option.
The updated underground resource estimate, using a 1.6 g/t gold cut-off grade, is 4 million indicated resources grading 3.63 g/t gold for 472,000 contained oz. and 11.8 million inferred tonnes at 2.87 g/t gold for 1.1 million contained ounces.
Only the underground resource is considered in the current PEA. The September 2021 technical report included a pit-constrained resource as well.
“I believe West Cache has the potential to extend the life-of-mine beyond the initial 11 years by expanding the mineral resource downdip and along strike,” said Galleon president and CEO R. David Russell.
“Our primary exploration goal for 2022 is to add high-grade gold ounces and expand the mineral resource through surface drilling. In early to mid-2023, pending permits, we plan to commence underground test mining the high-grade zone #9 area.”
Zone #9 returned the following high-grade results during a 2020 drill campaign: 7.16 g/t gold over 9.7 metres, including 14.75 g/t over 3 metres; 5.87 g/t gold over 8.5 metres, including 10.1 g/t over 2 metres; 7.44 g/t gold over 10.7 metres, including 10.19 g/t over 2.9 metres; 8.68 g/t gold over 10 metres, including 12.04 g/t over 2 metres; and 8.25 g/t gold over 9 metres, including 19.7 g/t over 1 metre.
Galleon has held 100% of the West Cache project since the acquisition of Explor Resources in 2019. The company is planning a pre-feasibility study.
(This article first appeared in the Canadian Mining Journal)
