Anaconda sheds old study at Pine Cove (May 16, 2005)

Additional drilling has allowed Anaconda Gold (ANX-V) to revise its feasibility study for the Pine Cove project, 6 km northeast of Baie Verte, Nfld.

The 12-hole, 940-metre program tested several mineralized lenses for depth extensions and was designed to convert inferred resources to probable reserves.

Diluted probable reserves in the prospective open-pit deposit are now pegged at 2.3 million tonnes grading 2.76 grams gold per tonne. The estimate is based on a cutoff grade of 0.95 gram gold, a gold price of US$400 per oz., and a mining recovery rate of 97%.

The new study replaces a feasibility study completed last year that inadvertently included inferred resources in an economic cash flow model, something prohibited under National Instrument 43-101.

The revised analysis, based on mineral reserves only, indicates a net present value (at a 5% discount) of $7 million, down from the previous figure of US$7.6 million. Life-of-mine cash costs have also increased, by US$6 per oz., to US$289 per oz., and cash costs in the first year are expected to average US$217 per oz., down from the previously projected US$238 per oz.

On the plus side, the operation’s internal rate of return (IRR) has increased to 25.1% from 23.9%, the estimated life-of-mine production grows slightly to 183,497 oz., and the mine life has increased to 6.7 from 6 years.

In the end, the preproduction capital cost remains unchanged at $11.4 million.

Anaconda plans to start building the mine later this year, pending governmental approvals and the completion of project financing.

Excluded from the revised study are 66,700 tonnes of inferred resources (currently classified as waste) grading 2.43 grams gold. An economic assessment of the potential impact of these resources suggests total production would climb to 188,434 oz., the IRR would come in at 26.3%, and the cash cost would slip to US$286 per oz. The net present value would be just shy of $8 million.

Anaconda says there is potential for expansion in the Romeo and Juliet zone, which hosts a high-grade quartz vein. Further drilling is required there.

Anaconda has earned a 30% interest in the 28-sq.-km project from New Island Resources (NIS-V). Anaconda can double its stake to 60% by arranging project financing and bringing the property to commercial production. Barrick Gold (ABX-T) retains a 7.5% net profit interest on the property.

Under the option deal, Anaconda is entitled to all project cash flow until its recoups its capital expenditures.