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.
A preliminary economic assessment (PEA) of Sonoro Gold’s (TSXV: SGO; US-OTC: SMOFF) Cerro Caliche project in Mexico’s Sonora state envisions an open-pit heap leach operation capable of producing an average of 45,700 gold-equivalent oz. a year over a seven-year mine life for total life-of-mine production of 323,500 gold-equivalent ounces.
In the first three years, the mine would produce 56,500 oz. gold-equivalent annually at an average grade of 0.51 gram gold per tonne.
The early stage study forecast cash costs of $1,227 per gold-equivalent oz. and all-in sustaining costs of $1,351 per gold-equivalent ounce.
Using base case prices of $1,750 per oz. gold and $22 per oz. silver, Cerro Caliche would deliver an after-tax net present value at a 5% discount rate of $41.5 million and a post-tax internal rate of return of 532.4%.
Initial capex of $32.2 million, including a contingency of $3.8 million, could be paid back in 2.2 years.
The PEA estimated recoveries from a three-stage crushing circuit of 74% for gold and 27% for silver.
The project has measured and indicated resources of 26.70 million tonnes grading 0.41 gram gold per tonne and 3.43 grams silver per tonne (0.42 gram per tonne gold-equivalent for 364,000 gold-equivalent ounces. Inferred resources stand at 5.46 million tonnes averaging 0.40 gram gold per tonne and 7.34 grams silver per tonne (0.44 gram gold-equivalent per tonne) for 77,000 gold-equivalent ounces.
Sonoro has an option to acquire 100% of the project, about 45 km from the town of Magdalena de Kino.
The junior says the 1,400-hectare property is near Equinox Gold’s (TSX: EQX; NYSE-AM: EQX) Mercedes mine and Agnico Eagle Mines’ (TSX: AEM; NYSE: AME) Santa Gertrudis project.
Over the last year, the junior explorer has traded in a range of C16¢ and C39¢. Sonoro has a market cap of C$21.5 million ($16.9m).
(This article first appeared in The Northern Miner)
