Nevada Pacific sees potential to revive Magistral

Vancouver — An updated technical report prepared for Nevada Pacific Gold (NPG-V, NVPGF-O) shows that the past-producing Magistral gold mine in Mexico’s Sinaloa state is technically feasible and could be recommissioned at a gold price of US$450 per oz.

Nevada Pacific acquired the open-pit heap-leach mine from a previous operator in early 2004 for a bargain price of about US$7 million and 2 million shares. The mine was supposed to produce 30,000 oz. in 2005 at a cash cost of about US$250 per oz., and achieved cash-flow positive status that spring, but rising costs for mining-related items led to a decision to suspend operations a few months later.

The technical report included updated measured and indicated resources, which stand at 9.3 million tonnes averaging 1.81 grams gold per tonne, or 541,000 contained ounces at a cutoff grade of 0.4 gram gold per tonne.

Proven and probable reserves are estimated to be 3.02 million tonnes averaging 2.97 grams gold, or about 289,000 contained ounces at a strip ratio of 8.1:1 waste-to-ore.

The study reviewed new drilling data, previous production results and cost data, and other factors before determining that the project is feasible at a gold price of US$450 per oz. Nevada Pacific notes that the recommissioned mine would move fewer tonnes at a higher gold grade than in the past, based on a better understanding of the leach recovery curve.

The conservative base-case project would produce a total of 185,000 oz. gold at a cash cost of US$323 per oz. and a total cost of US$447 per oz. Over the estimated 6-year project life, the mine would generate a net cash flow of US$17.4 million, resulting in a 49% internal rate of return (IRR) and pretax net present value of US$12.7 million and US$9.3 million at 5% and 10% discount rates, respectively.

At a gold price of US$600 per oz., the project economics are robust, with an IRR of 118% and net cash flow of US$42.3 million over six years.

Along with the existing resource base, Magistral hosts a significant amount of lower-grade material that could be economic if gold prices remain strong.