TORONTO (miningweekly.com) – Great Lakes-focused Aquila Resources on Wednesday reported the positive results of a new preliminary economic assessment (PEA) on its flagship Back Forty gold/zinc project, in Michigan, US.

Completed by consulting engineering firm Tetra Tech, the new PEA considered various trade-off studies that looked at different mine configurations to determine the optimal scenario for the project and incorporated a revised mine plan based on results from Aquila’s 2013 resource update.

The PEA envisioned mining 16.1-million tonnes of ore over the 16-year mine life, of which 12.5-million tonnes would come from the openpit and 3.6-million tonnes from an underground operation.

Aquila said the PEA demonstrated the potential for a diverse earnings stream, representing a payable metal value mix of 41.2% gold, 40.5% zinc, 12% copper, 5.7% silver and 0.6% lead.

The PEA assumed a base price of $1 293/oz of gold and $20.46/oz of silver, while the zinc price was modelled at $0.96/lb, copper at $3.18/lb and lead at $0.96/lb.

Under the base case scenario, the Back Forty project was expected to have an after-tax net present value at a 6% discount of $184.7-million, providing an internal rate of return of 28.9% and a capital expenditure (capex) payback period of 2.1 years.

Operating at an initial throughput rate of 5 350 t/d, the mine’s total payable output was expected to be 532 000 oz of gold, 704-million pounds of zinc, 63-million pounds of copper, 4.65-million ounces of silver and 11-million pounds of lead.

The project would cost $261-million to build, more than the previous estimate of $224.7-million. Capex comprised $177-million of direct preproduction capex, a $44-million contingency and $40-million of indirect and owner’s costs.

The PEA estimated the average on-site operating costs at $29.25/t for processed ore from the openpit and $66.20/t of ore processed from the underground mine.

Further, the near-surface characteristics of the orebody provided the company with the opportunity to develop a low-capex, high-grade initial phase operation, the economics of which were still being evaluated as part of the PEA.

“The results from our PEA validate our decision to acquire 100% of Back Forty and focus on strategic assets in this promising region. The PEA and new mine plan show marked improvements across key metrics. Ultimately, we believe this PEA demonstrates the potential of Back Forty while carefully considering the interests of all our key stakeholders,” Aquila CEO Barry Hildred said.

Aquila chairperson Mark Burridge added that the company’s focus now shifted to restarting project development at Back Forty. “The PEA provides a path forward for the next set of project milestones, including the ramp-up of permitting activities and the start of a feasibility study and an exploration programme initially focused on near-mine satellite targets,” he pointed out.

Aquila and TSX-V-listed REBgold in November announced that the companies would combine their businesses, after which the merged entity would buy the remaining 51% interest in the Back Forty from Hudbay and complete nonbrokered financing through a private placement of REBgold shares of up to $6-million, at a price of $0.13 a share. The deal closed in January.

The Back Forty project is an advanced-staged exploration project delineating a zinc- and gold-rich volcanogenic massive sulphide deposit located within the Penokean volcanic belt. Over the past ten years, Aquila and various joint venture partners have spent more than $50-million exploring and advancing the Back Forty project.

The project currently holds 15.1-million tons in the measured and indicated categories, and 2.3-million tons of inferred resources.

The updated measured and indicated resource estimate contained 987 236 oz of gold, 11.91-million ounces of silver, 1.02-billion pounds of zinc, 74.3-million pounds of lead and 110.4-million pounds of copper. The inferred category also held an estimated 155 885 oz of gold, 1.99-million ounces of silver, 113.3-million pounds of zinc, 17.2-million pounds of lead and 18.6-million pounds of copper.

Despite gaining C$0.02 a share on the TSX on Wednesday, at C$0.11 apiece, Aquila’s stock was down 37.5% from the start of the year.