Moneta Porcupine de-risks Golden Highway

Moneta Porcupine Mines (ME-T, MPUCF-O) and its Golden Highway project in northern Ontario could start generating some attention from mid-tier or major gold producers interested in bulk tonnage deposits in Canada, the junior’s management says.

“Golden Highway is one of a handful of open pit bulk-tonnage deposits of scale in Ontario and is situated in a great location,” says chief executive Ian Peres of the project, which spans 12 kilometres of a volcanic/sedimentary belt along the Destor Porcupine Fault Zone.

In October, Argonaut Gold (AR-T) announced a friendly takeover of Prodigy Gold (PDG-V) and its Magino project, and, in March, Iamgold (IMG-T, IAG-N) acquired Trelawney Mining and Exploration (TRR-V) and its Cote Lake gold project. Both acquisitions involved projects in northern Ontario and Peres says they could be harbingers of more to come.

Peres also says a preliminary economic assessment of the Golden Highway project released Nov. 1 has significantly de-risked the project, 20 km east of Matheson and 75 km west of Rouyn-Noranda.  

The PEA demonstrated a post-tax net present value (NPV) of $568 million, a post-tax internal rate of return (IRR) of 18.6%, and payback in 4.1 years using a base case gold price of US$1,350 per oz.  

When those numbers are recalculated at a gold price of US$1,500 per oz., the post-tax NPV rises to $821 million, the IRR to 23.8%, and the payback drops to 3.3 years.

The PEA was based on an updated resource the company released in October that puts indicated resources at 31.1 million tonnes grading 1.09 gram gold per tonne and inferred resources at 83.3 million tonnes averaging 1.20 grams gold.

Other significant numbers in the PEA include metal production of 3.8 million ounces of gold over a mine life of 12 years; pre-production capital costs of $607 million; and life of mine average cash costs of US$794 per oz.

The PEA was based on a processing scenario of 25,000 tonnes per day of blended feed from open pit and underground operations. The open pit would be designed as a conventional surface mining operation producing at an average rate of 22,500 tonnes per day, while the underground mining would be designed as a bulk tonnage mining operation producing at an average rate of 2,500 tonnes per day.

The open pit scenario would include development of a large Southwest Zone, Gap and Windjammer (south/central/north) pit, and a smaller 55 Zone pit. (The open pit has defined over 4 km of strike, up to 1 km in height and a vertical depth of 350 metres.)

The underground portion would be scheduled to start full production by way of a ramp in the second year of operations, accessing over 1.3 million ounces of bulk underground resources. The shaft would be developed in the second year and paid for with operating cash flow.

The project offers many areas of upside potential, Peres added, such as four additional gold zones on the property that are not part of the current resource estimate; undrilled areas within the conceptual pits; and potential lying below the current constrained pits, particularly in the South West Zone.

“The Southwest Zone is the only portion of the pit that has been drilled to depth so there is significant untested potential that may lie at depth below the pit,” he says. “When you look at the footprint of the pit, everything to the east, west and south of it is the same geology, but hasn’t been drilled, so we believe there is an opportunity to increase the already large footprint. We’ve got very strong mineralization continuity based on geo-statistics.”

Other advantages of the project, Peres says, is its excellent infrastructure. Golden Highway is accessible year-round from paved provincial Highway 101 and a network of gravel and sand logging roads. It also has access to water, electricity, skilled labor and nearby mills.

“We have a paved highway within five kilometres of our property limits, we have a labor force that can drive to work from home, and we have a power station less than 10 km away,” he said. “There are no significant water issues. There are no royalties affecting the resource and there’s room for substantial resource expansion.”

Moneta Porcupine plans to drill 20,000 metres at Golden Highway in 2013.

Currently, the company holds $2 million in cash and has no debt. But Peres isn’t worried about financing.

“Good projects will get financed and we are confident that we will have success in future equity financings,” he says. “We are now receiving unsolicited project valuations based on ounces rather than our current stock market capitalization.”

At presstime in Toronto, Moneta Porcupine was trading at 24.5¢ within a 52-week range of 12.5¢-39¢ per share. The company has about 168 million shares outstanding.