A preliminary economic assessment (PEA) conducted by TSX-V-listed Pure Gold Mining for its Fork, Russet South and Wedge deposits has demonstrated the potential to add about $51-million to the Madsen gold project’s after-tax net present value.

As a result of high gold grades, near surface resources and use of existing infrastructure, mining of these zones will yield a 39% after-tax internal rate of return.

“The results of this PEA highlight the tremendous prospective upside as Madsen-Red Lake, the economic viability of Madsen and demonstrates how Pure Gold will phase new discoveries into future mine plans. Based on the current resource, development of these new discoveries could add around four years of production at below-industry average costs, while generating robust cash flows,” CEO and president Darin Labrenz stated in a release on Wednesday.

Labrenz added that the PEA provided the company with a blueprint of how it could expand its mine life and production profile at Madsen, illustrating how impactful and accretive new discoveries could be to the future of the district.

“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,” he said.

Other highlights of the PEA include a mine life extension of 3.7 years for Madsen, with total production of 210 000 oz of gold. Life-of-mine direct operating cash costs are estimated at $557/oz of payable gold. Initial capital required will be $57-million for development of the zones.

The PEA evaluated a range of mine plans from 400 t/d to 800 t/d 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 was 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 optimisations 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 t/d. At Russet South, only the shallow portion of the

mineral resource was considered to fit for the 800 t/d base case, excluding about 52 400 potential ounces from the base case plan.

The PEA implementation schedule spans 12 months, with portal construction and underground mine development at the three deposits starting about 12 months before the first gold pour.