Gold miner Artemis will adopt a phased approach to build the newly acquired Blackwater project, which will eventually be a C$1.4-billion mine producing 400 000 oz/y, south-west of Prince George, in British Columbia.

In a revised prefeasibility study (PFS), Artemis detailed plans to develop the Blackwater project into a new 250 000 oz/y operation, which will cost less than C$600-million, and then finance two subsequent expansion stages from future operating cashflows.

This approach compares with New Gold’s 2014 feasibility study, which proposed a 20-million-tonne-a-year operation, which would require C$1.96-billion to build.

“We believe that this disciplined approach is the most prudent way to advance one of the largest undeveloped gold projects in Canada,” said Artemis chairperson and CEO Steven Dean.

Shares in Artemis jumped 12% to close at C$4.80 a share on Wednesday.

The company explained that Phase 1 wouldhave a throughput of 5.5-million tonnes and would require an initial capital investment of C$592-million. Phase 2 would expand throughput to 12-million at a cost of C$426-million and Phase 3 would achieve the full-scale project throughput of 20-million tonnes a year, at an expansion capital cost of C$398-million.

“The strategy of staging the ultimate development of the mine, among other derisking initiatives, allows for much improved economics, while allowing the company to phase the development before ramping up to full throughput of 20-million tonnes per annum,” said Dean.

Using a gold price of $1 541/oz and a silver price of $19.60/oz, the study outlines a new project on an unlevered basis and including the gold stream granted to New Gold as part of the acquisition cost, with a payback period of two years, an after-tax internal rate of return (IRR) of 35%. On the basis of an expected achievable 60% debt leverage of initial capital costs, the project after-tax IRR increases to 50%. The net present value (NPV), at a 5% discount, is C$2.25-billion.

A 2014 feasibility study, which was based on a gold price of $1 300/oz and a silver price of $22/oz, delivered an aftertax NPV of $616-million, an IRR of 9.3% and a payback period of 6.4 years on a capital cost of $1.96-billion.

Artemis is proposing to start the British Columbia and federal government permitting process in September.