TORONTO (miningweekly.com) – Gold project developer GoldSource Mines announced that a medium-scale mining permit was issued by the Guyana Geology and Mines Commission for operations on a 250 ha portion of its Eagle Mountain deposit located within the 5 050 ha Eagle Mountain prospecting licence.

The permit granted permission to mine gold, diamonds, precious metals and precious minerals within the permit area, located in Potaro Mining District No 2.

The Eagle Mountain prospecting licence is held by GoldSource’s Guyana subsidiary, Stronghold Guyana. However, owing to Guyana’s legal requirements, a medium-scale mining permit was required to be held by a Guyanese national, prompting Stronghold to sign agreements with Kilroy Mining, a private arm's length Guyanese company under which Stronghold and Kilroy would jointly operate the property.

Kilroy, as holder of the permit, had granted Stronghold the exclusive right to conduct mining operations on the property, including any additional areas acquired by Kilroy. Stronghold would fund all expenditures on the property and receive all revenues, subject to applicable government royalties and a 2% net smelter return royalty to Kilroy as compensation for its participation.

"Following the recent announcement of the positive results of our preliminary economic assessment for the Eagle Mountain gold deposit, we are extremely pleased with the grant of the permit. The project is now fully permitted for mining activities and ready for construction financing and subsequent Phase 1 development,” GoldSource president Ioannis Tsitos said.

As part of the agreement, GoldSource agreed to issue Kilroy 250 000 common shares, subject to regulatory approval.

POSITIVE METRICS

GoldSource at the end of July published the positive results of a preliminary economic assessment (PEA) on the Eagle Mountain deposit, saying it planned to take a four-pronged approach to developing the project over four years.

Phase 1 would target a milling rate of 1 000 t/d, ramping up to 4 000 t/d by its fourth year. The company would use conventional openpit mining and downhill-gravity slurry to transport weathered saprolite ore for processing.

The study expected the strip ratio to be low at 0.9:1, while the operation would not require blasting or surface haulage.

Eagle Mountain’s total capital costs were pegged at $24.2-million, with Phase 1 expected to cost about $5.9-million.

The PEA estimated that the project would process about 7.3-million tonnes of ore at a head grade of 1.2 g/t, producing about 168 700 oz of gold at cash costs of $480/oz over the project’s eight-year mine life.

The conceptual approach entailed the first four years of output being 5 600 oz, 14 400 oz, 21 600 oz and 28 800 oz of gold, respectively.

Eagle Mountain hosted 3.9-million tonnes, grading 1.49 g/t gold for 188 000 oz, in the indicated category and 20.6-million tonnes, grading 1.19 g/t gold for 792 000 oz, in the inferred category.

About 40% of the project’s overall ounces comprised saprolite, or weathered ore, which could allow GoldSource to fast-track operations through low-cost gravity processing, potentially starting production by the end of the year.

GoldSource would have an inventory of about 162 000 oz of gold in its settlement ponds, owing to the gravity processing, that could potentially be milled at a later date.

Also not considered in the PEA were Eagle Mountain’s in-situ ‘fresh-rock’ resources of 2.3-million tonnes, grading 1.52 g/t gold for 114 000 oz, in the indicated category and 13.4-million tonnes, grading 1.13 g/t gold for 486 000 oz, in the inferred category. Resource calculations were modelled on a 0.5 g/t gold cutoff grade.

At an assumed gold price of $1 250/oz, GoldSource's PEA placed a 63% after-tax internal rate of return, and a $46-million net present value at a 5% discount rate, on the project. Pretax undiscounted operating cash flow before capital expenditures were estimated at $123-million, while the PEA pointed towards a favourable sensitivity analysis for a potential dip in the gold price or recoveries.

GoldSource's TSX-V-listed stock on Tuesday rose 11.36% to C$0.25 apiece, having gained 70% in value since the start of the year.