Re-leaching at Lluvia

Crushing and re-leaching material on old pads at the Lluvia de Oro gold deposit in Sonora state, Mexico, could start in mid-May, with a gold pour possible by October.

Operator Columbia Metals (COL-V, CBMLF-O) has set out that plan for the deposit, following receipt of a preliminary economic study that indicates production at around 40,000 oz. gold annually would be economic at a gold price of US$550 per oz.

The study, authored by consulting firm DENM Engineering, examined the economics of open pits on Lluvia de Oro and the neighbouring La Jojoba deposit, placing 6,500 to 6,800 tonnes per day on the leach pads. The mine would operate for five years based on current resources.

Those resources include 640,000 tonnes grading 0.53 gram gold per tonne on the existing leach pads, where leaching was stopped by earlier operators. Another 2.4 million tonnes grading 0.64 gram per tonne is in unmined parts of the Lluvia deposit’s Upper Zone, while La Jojoba has 9.1 million tonnes at an average gold grade of 0.75 gram per tonne.

DENM put the capital cost of the operation at US$11.8 million, and estimated that average cash production costs would be US$436 per oz. The project essentially breaks even at US$550 per oz. gold, with a 1% internal rate of return and a 5-year payback.

Economic analyses at higher gold prices show a profitable project; at US$650 gold, the internal rate of return grows to 42% and the net cash flow from the project would be US$12.3 million. At US$695 gold, it has a rate of return of 62% and net cash flow of US$18.7 million.

Adding inferred resources from Lluvia’s Upper Zone — 3.4 million tonnes at 0.59 gram gold per tonne — shows a 51% rate of return and US$12.3 million in net cash flow at US$650 gold.

Tara Gold Resources (TRGD-O) holds a 20% net cash flow interest in Lluvia. (The study’s net cash flow figures are the cash flow to Columbia after the Tara royalty is taken out.)

The analysis did not consider development of the Lower Zone mineralization at Lluvia, which has been estimated at 636,000 tonnes, measured and indicated, grading 1.03 grams gold per tonne. Another 5.8 million tonnes, at 0.72 gram gold, is in an inferred Lower Zone resource.