Alexis’ Lac Pelletier downgraded in feasibility study

Vancouver – A feasibility study on Alexis Minerals’ (AMC-T, AXSMF-O) Lac Pelletier property in western Quebec has outlined a much shorter mine life than the pre-feasibility study following a downgrade of much of the resource.

In the feasibility study, proven and probable reserves sit at 168,000 tonnes grading 6.46 grams gold per tonne for 34,900 oz. gold between the 50- and 150-metre elevations of the mine.

Indicated resources below the 150-metre elevation, which were included in the prefeasibility study, were bumped down to inferred resources because of the need for more delineation drilling, which also affected the overall grade of the resource. The pre-feasibility study had 483,300 tonnes grading 7.6 grams gold.

Alexis wrote in a statement that “management recognizes that future mining at Lac Pelletier offers challenges.” The company, however, plans additional surface and underground drilling to move the resources back into the indicated category and believes there is room for further expansion at the mine.

The feasibility study set out a 14-month operation mining 33,500 oz. at a cash cost of US$747 per oz. gold and total cost of US$981 per oz. Capital costs are estimated to be $7.1 million with a payback period of 12 months. The mine is projected to have a 61% internal rate of return and a net present value of $3.5 million assuming a gold price of US$1,127 per oz. gold and an exchange rate of $1.05 per US$1.

The company also released a 4-year mine model that incorporates inferred resources and “presuming exploration success to simulate a typical Abitibi type deposit.” The 4-year model is based on a figure of 658,000 tonnes grading 6.46 grams gold. With the longer mine life, total costs decrease to US$871 per oz., the internal rate of return increases to 92% and the net present value goes up to $18.1 million.

The low capital costs of the project can be achieved in part because the mine is planned as a satellite deposit to its small Lac Herbin mine, 100 km east in Val d’Or.

Lac Herbin threw up its own challenges earlier this year, with lower gold grades and a delay of stoping that led to the company not meeting its production target. The problems led to cash costs per ounce increasing to US$1,027 and a reduction in projected 2010 production by 3,000 oz. to 32,000 oz. gold.

Following a 5.5¢ or 17.5% share price drop on the news the company issued a release clarifying that grades improved in April and May, which is “evidence that the isolated problems encountered in the first quarter were anomalies.” The company expects cash costs of US$750 – 800 per oz. at the mine for the rest of the year.

Alexis says it plans to delay a production decision at Lac Pelletier until it finds out the results of a feasibility study on its recently acquired Snow Lake gold project in Manitoba. Snow Lake was acquired as part of a take-over of Garson Gold completed in April. Alexis issued 43 million shares to pay for the takeover and now has 222 million shares outstanding.

The Snow Lake project has historically produced over 1.4 million oz. gold, while a preliminary assessment released in March had it producing another 423,000 oz. over six years. The company expects a feasibility study on Snow Lake to be completed by September.

The company recently discovered two new gold zones at the project that it reports are of significantly higher grade than the established Main and No.3 zones. At the Footwall zone, 40 metres south of the Main zone, hole 10-55 cut 2.19 metres carrying 25.05 grams gold per tonne from 392 metres depth and hole 10-59 hit 8.15 metres averaging 11.92 grams gold from 390 metres.

At the Hangingwall zone, 450 metres north of the No. 3 zone, hole 10.65 intercepted 1.73 metres grading 5.28 grams gold from 289 metres downhole, hole 10-66 cut 2.77 metres grading 4.89 grams gold from 373 metres and hole 10-71 returned 1.92 metres averaging 63.59 grams gold from 35 metres depth.

Alexis’ stock price closed unchanged at 23¢ on news of the feasibility study. The company’s stock price has made a fairly steady decline from the 52-week high of 49¢ set in October.