VANCOUVER (miningweekly.com) – Dual-listed precious metals producer McEwen Mining has published a preliminary economic assessment (PEA) on its El Gallo Complex, in Sinaloa state, Mexico, outlining a redevelopment plan called Project Fenix that could add between 10 and 12 additional years to the operation.
Based on an updated resource estimate comprising 13-million tonnes grading on average 0.39 g/t gold and 77 g/t silver in the measured and indicated categories, containing 591 000 oz of gold equivalent, and 5.7-million tonnes grading 0.81 g/t gold and 27 g/t silver in the inferred category, containing 214 000 oz gold equivalent, the PEA calculated a 25% after-tax internal rate of return and a $60-million net present value at 5% discount rate.
The phased redevelopment plan is expected to cost $41-million for the first prong, and $30-million for the second phase. The capital payback period is calculated at four years.
From year two, the redeveloped operation is expected to generate free cash flow of $12-million a year, producing on average 47 000 oz of gold equivalent, at a cash cost of $598/oz and $797/oz for the first and second phases, respectively.
“Project Fenix shows that El Gallo has the potential to be retooled to produce silver and gold for years into the future. The current heap leach gold mine would transform first to a mill and process the residual heap leach pad material, then additional mill modifications would enable processing of silver and gold ores from four other deposits,” chief owner Rob McEwen explained.
He added that the redevelopment plan hinges on innovative in-pit tailings disposal.
“Over the coming quarters, we intend to advance environmental permitting and refine our plans with a feasibility study before making an investment decision next year.”
GOLD BAR DEVELOPMENT
Meanwhile, McEwen also announced on Friday that it intends to issue up to $50-million in senior secured notes to complete construction of the Gold Bar mine, in Nevada.
The company advised that negotiations are under way with an independent third-party lender, whereby they would buy 50% of the notes issued and Rob McEwen would buy the remaining 50%. The notes contemplated will have a term of three years and bear interest at a rate of 9.75% a year.
The proposed transaction remains subject to the final agreement of terms and satisfactory completion of due diligence.
BLACK FOX POTENTIAL
Further, McEwen also announced this week that it has identified a new potential stream of revenue at its Black Fox Complex, in Ontario.
McEwen on Thursday released a new resource estimate on the Tamarack gold and base metal deposit, highlighting the first base metal resource estimate on any of the four deposits comprising the operation.
Centred on the Tamarack zone, McEwen said the new resource estimate lifted the known inferred resource from 41 000 oz of gold grading 6.23 g/t gold, to 127 000 oz of gold equivalent in the indicated category, grading 5.08 g/t gold equivalent, and includes silver, lead and zinc mineralisation.
“This is the first time that base metals have been incorporated into a resource estimate for the Tamarack project. With further drilling, we are excited to see how the project develops into what could be an additional revenue stream at Black Fox,” McEwen stated.
The polymetallic Tamarack deposit is centered on a north-south striking quartz breccia, which cross-cuts the faulted contact between Tisdale Assemblage ultramafic- to mafic-volcanic flows and Porcupine Group sedimentary rocks.
McEwen advised that exploration drilling will continue to test possible southerly strike extensions of the Upper Lens, where a few narrow intercepts of gold +/- base metal mineralisation lie outside of the current mineralised envelope. The Lower Lens remains open along strike to the south and down dip.
The exploration programme across the Black Fox Complex, which includes the Black Fox mine and the Tamarack, Gibson-Grey Fox, Froome and Stock zones, continues with a total exploration budget of $15-million for 2018. The main goals of the ongoing programme are to extend mineralisation around known deposits and to test targets close to our mine and mill.