TORONTO (miningweekly.com) – The updated results of a 2013 prefeasibility study (PFS) on Canadian miner Argonaut Gold’s Magino gold project, located near Wawa, Ontario, have resulted in improved economics, even at a lower gold price.

"The market conditions have changed since the December 2013 PFS on the Magino gold project was published. By using updated parameters, the project as defined, demonstrates solid economics, with an improved net present value (NPV) and internal rate of return (IRR).

“In fact, under prevailing market conditions, the price of gold would have to drop below $825/oz before this project has a negative NPV. This information, coupled with the recent drilling results, continues to strengthen the project and provide us with additional confidence that the Magino gold project is one of the top undeveloped multimillion-ounce deposits in Canada,” Argonaut president and CEO Pete Dougherty stated this week.

Working together with JDS Energy & Mining, Argonaut had updated the financial model to reflect current market conditions. These changes included adjusting the US dollar/Canadian dollar exchange rate from $0.95 to $0.80, the fuel price from $0.90/ℓ to $0.74/ℓ and the cyanide price from $2.97/kg to $2.40/kg, as well as cyanide consumption from 0.75 kg/t to 0.50 kg/t, based on updated metallurgical testwork.

The IRR of the project, according to management's estimates, had improved to 29% from 18%, using an unchanged price of $1 250/oz gold. The company also updated the capital estimates based on current mining fleet costs, calling for initial capital of $302-million, as opposed to the previous estimate of $356-million and life-of-mine sustaining capital of $49-million, down from the previous estimate of $58-million.

As a result, the update pointed to an NPV, at a 5% discount rate, of $359-million on an after-tax basis. At a gold price of $1 100/oz, the company estimated an after-tax NPV of $235-million and an IRR of 21%.

At present, using a 0.35 g/t gold grade cutoff, the Magino project hosted an indicated resource of 127.8-million tonnes, grading at 1.01 g/t, for 4.2-million ounces of gold and an an inferred resource of 30-million tonnes, grading 1.08 g/t, for one-million ounces of gold.

Using a cutoff grade of 0.31 g/t of gold, the probable mineral reserve was 60.2-million tonnes at a grade of 0.90 g/t, for 1.75-million ounces of gold, with a strip ratio of 2.6:1. This update did not include any of the drilling recently completed at the project, the company advised.

The December 2013 PFS used less than half of the measured and indicated resource, or 60.1-million tonnes of the 127.8-million tonnes, and less than 40% of the resource if the inferred tonnes were included. The low percentage of usage of the resource was owing to land boundary restrictions that had subsequently been removed since the December 2013 PFS was issued. Argonaut continued to work on scenarios to realise greater returns on the total resource.

Argonaut advised that 2015 Magino drilling results and optimisation studies would be incorporated into an updated mineral resource and updated PFS for the Magino project, and were expected to be released late this year.