Ahead of a feasibility study due before year-end, Treasury Metals (TSX: TML; US-OTC: TSRMF) has increased by 44% the measured and indicated resources of its Goliath gold project near Dryden in northern Ontario.
Most of the resource is in the indicated category, with combined open-pit and underground resources totalling 1.1 million equivalent oz. gold in 19.4 million tonnes, grading 1.72 equivalent grams gold per tonne.
The measured category adds 90,300 equivalent oz. gold of open-pit and underground resources in 1.1 million tonnes grading 2.51 grams per equivalent tonne gold.
Inferred resources total 341,300 equivalent oz. gold in 3.5 million tonnes at 3.06 equivalent grams gold.
The resource incorporates another 173 diamond drill holes over a 2011 estimate.
Euro Pacific mining analyst Ryan Walker notes that while measured and indicated resources increased with the update, overall contained gold resources decreased by 11%. But the resource is at a higher confidence level (65% of the previous resource was in the inferred category), and calculated more conservatively, Walker wrote in a client note.
Underground resources at the project have also seen a boost to 4.95 equivalent grams gold per tonne, from 3.7 grams before.
The company used a 0.35-gram-per-equivalent-tonne gold cut-off grade to calculate open-pit resources, and 1.9 equivalent grams gold per tonne for underground resources.
The estimate used three-year average trailing prices of US$1,397 per oz. gold and US$22.93 per oz. silver, and a gold-to-silver ratio of 82.68, and did not incorporate potential by-product credits from lead or zinc.
Walker rates Treasury Metals as a “speculative buy,” with a 65¢-per-share price target. The permitting process for open-pit mining at Goliath is already underway, and Walker forecasts the start of production in the third quarter of 2017.
The company, which has a $6-million working capital deficit, is working to replace a $5-million loan from RMB Resources that matures in June 2016.
A 2012 preliminary economic study pegged Goliath’s preproduction capital costs at $92 million, and life-of-mine capex at $201 million.
The study forecast producing 80,000 equivalent oz. gold per year over a 10.3-year mine life, with total cash costs of $700 per oz., a $144.3-million after-tax net present value (at a 5% discount rate) and a 32.4% internal rate of return.
At press time Treasury Metals shares traded at 48¢, in a 52-week range of 25–62¢. It has 76.4 million shares outstanding.
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