Drilling at Back River lifts Sabina

Shares of Sabina Gold & Silver (TSX: SBB) were up 7% in mid-day trading in Toronto after the Nunavut-focused junior released more infill drill results from the Umwelt deposit, part of its 100%-owned Back River project.

The Umwelt deposit is sequenced to be the first open pit and the first underground deposit to be mined on the company’s Goose property, about 75 km from tidewater at the Bathurst inlet in Nunavut.

Highlights of the most recent assays from Sabina’s 2013 drill program include 21.96 grams gold per tonne over 19.72 metres and 17.30 grams gold over 25.60 metres. The results of the drill program this year will be folded into updated remodeling and resource estimates that will be completed early next year.

The drill program this year concentrated on converting and upgrading resources in the proposed open pit over a strike length of 300 metres and to a depth of 305 metres and the company believes that Umwelt has “significant” potential at depth. The deposit’s current indicated resource continues down 1,350 metres to a depth greater than 600 metres below surface.

Currently Back River’s measured and indicated resources stand at 23.65 million tonnes grading 6 grams gold for 4.6 million contained oz. with inferred resources adding 7.28 million tonnes grading 8 grams gold for 1.88 million contained oz.

The mine plan used in the prefeasibility study completed earlier this month on Back River used less than 50% of the project’s 2012 mineral resources and did not reference any of the mineralization identified by drilling completed in 2013, the company says.  

According to the PFS, Back River’s 5,000-tonne-per-day mill would process 14.9 million tonnes of material over its lifetime at an average grade of 5.7 grams gold per tonne using open-pit and underground methods, which would recover 2.4 million oz. gold over 8.4 years.

The project would be built over two years at an initial capital cost of $605 million with an estimated payback of 3.3 years. The PFS projected an after-tax internal rate of return of 16.5% and an after-tax net present value at a 5% discount rate of $290 million, producing gold at cash costs including royalties of about $685 per oz.

The company expects to end the year with $60 million in cash and equivalents.

Over the last 52 weeks Sabina has traded within a range of 91¢ and $3.11 and has about 189 million shares outstanding.