Pure Gold’s New Discoveries at Madsen-Red Lake Demonstrate Potential For Increased Profitability
Results of Pure Gold Mining Inc. Preliminary Economic Assessment (“PEA”) for its Fork, Russet South, and Wedge deposits indicates a potential to add approximately $51 million to the Madsen Gold Project (“Madsen”) after-tax net present value (NPV).
Pure Gold states that the high gold grades, near surface resources, and use of existing infrastructure, the mining of these zones will yield an after-tax initial rate of return (IRR) of 39%.
The results of this PEA highlight the economic viability of the Madsen Gold Project, and demonstrates how Pure Gold would phase new discoveries into future mine plans. Based on the current resource, development of these new discoveries could add approximately four years of production at below-industry average cash costs while generating robust cash flows.
“Our PEA provides us with a blueprint of how we could expand our mine life and production profile at Madsen, and illustrates just how impactful and accretive new discoveries can be to the future of our district,” stated Darin Labrenz, President and CEO of Pure Gold. “We have deployed a modest amount of capital in discovering and delineating these new resources and the return on our investment is exceptional. This PEA, represents the first conceptual expansion scenario for the future phased growth of the Madsen Mine complex.”
The base case parameters used in the PEA assume a gold price of US$1,275/oz and an exchange rate (C$ to US$) of 0.75. All currencies reported in Canadian dollars unless otherwise specified.
The results of the PEA envision:
Mine life extension of 3.7 years with total production of 210,000 ounces of gold;
Life of mine (“LOM”) direct operating cash cost(1) estimated at US$557 per ounce of payable gold;
LOM all in sustaining cash cost (“AISC”) estimated at US$712 per ounce of payable gold;
Pre-tax Net Present Value of 5% and IRR of $79 million and 57% respectively with a 1.6 year payback of initial capital; and
After-tax NPV5% and IRR of $51 million and 39% respectively with a 2.0 year payback of initial capital;
Initial capital requirement of $57 million including a 14% contingency
The PEA is preliminary in nature and includes inferred mineral resources that are too speculative geologically to have economic considerations applied to them that would enable them to be categorized as mineral reserves. There is no certainty that PEA results will be realized. Mineral resources are not mineral reserves and do not have demonstrated economic viability.
The PEA evaluated a range of mine plans from 400 tonnes per day (“tpd”) to 800 tpd, and considered ramping up throughput to concurrently process the material from the PEA with the Madsen reserve. However, unless the Inferred Resources from Russet South, Fork and Wedge are converted to Indicated, the only scenario the PEA could contemplate is to conceptually mine the three deposits after the end of the feasibility mine plan. Pure Gold intends to continue work to upgrade and expand mineral resources so that further mine plan optimizations may be advanced.
Each of the PEA deposits will be mined from underground, with separate portal and ramp systems established to access the mineral resources in the mine plan. The PEA mine plan relies on the surface and milling infrastructure described in the Madsen Feasibility Study. Mining will be conducted concurrently from Russet South, Fork and Wedge to support a milling rate of 800 tpd. At Russet South, only the shallow portion of the mineral resource was considered to fit for the 800 tpd base case, excluding approximately 52,400 potential ounces from the base case plan.
The PEA implementation schedule spans a period of 12 months, with portal construction and underground mine development at the three deposits commencing approximately 12 months before the first gold pour. The project requires initial capital of C$57 million (including contingency) to support the construction of the underground mines and associated infrastructure. The mine plan is expected to produce 210,000 ounces over LOM with all in sustaining costs of US$712/oz gold, which are below industry averages.
JDS Energy and Mining Inc. led the PEA, which included contributions from industry-leading consultants such as Knight Piésold Ltd., Lorax Environmental Services Ltd, Ginto Consulting Inc., and Equity Exploration Consultants Ltd.
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