Trek sets stage for Aurizona restart in Brazil

VANCOUVER — Trek Mining (TSXV: TREK) is on track to revive its flagship Aurizona gold mine in northwestern Brazil.

On July 31, the company unveiled a revised feasibility study of a $131-million redevelopment that would result in gold being poured again within 18 months.

Trek was formed earlier this year when debt-heavy, former Aurizona operator Luna Gold merged with JDL Mining.

The Aurizona project was shuttered in the third quarter of 2015 amidst falling gold prices and operational problems principally related to material crushing and processing.

Luna Gold’s plant during the first production attempt at the Aurizona gold mine in Brazil, 320 km from Sao Luis in Maranhao state. Credit: Luna Gold.

Trek hopes its new mine plan, which includes increasing throughput from 5,500 tonnes per day to 8,000 tonnes per day, will result in sustainable operations.

The new feasibility study foresees an open-pit gold mine producing 136,000 oz. gold annually, with an initial 6.5-year mine life, at all-in sustaining costs of US$754 per ounce.

Aurizona’s proven and probable reserves now total 19.8 million tonnes at 1.52 grams gold per tonne for 971,000 contained ounces.

The US$49-million, re-engineered plant includes an expanded crushing and grinding circuit that Trek says will allow “all known types of mineral-bearing rock at Aurizona to be processed through the gold recovery plant.”

The plan requires a new jaw crusher, semi-autogenous grinding mill, ball mill and pebble crusher. Trek would also invest in new hydro-cyclones, an intensive leach reactor, three leach tanks, a refurbished carbon-in-pulp circuit, a pressurized elution circuit, a carbon regeneration kiln and a high-rate thickener.

The existing processing plant at the suspended Aurizona gold mine in Brazil’s Maranhao state. Credit: Trek Mining.

“One year ago we identified this study as a milestone in pouring gold again at Aurizona by the end of 2018. It’s a simple open-pit mine with a compact footprint,” Christian Milau, Trek’s CEO, said during a conference call.

“The thesis here is really the near-term development of a good-sized gold mine, which are becoming especially scarce in the current market. There aren’t many single-asset developers coming into production over the next few years, and we’ve seen many takeovers by majors recently,” he added.

The Piaba pit at Trek Mining’s Aurizona gold project in northwestern Brazil. Credit: Trek Mining.

Trek’s operating assumptions include US$2.44 per tonne mined (excluding taxes), a 91% gold recovery rate and a 5.7 strip ratio. The company will also transition to contract mining.

At a US$1,250 per oz. gold price, Aurizona has a US$197-million, after-tax net present value at a 5% discount rate, along with a projected 33.8% internal rate of return.

“It’s still not a great financing market, but we’ve pulled together equity and we’re working on the next steps,” Milau said. “We’d prefer to address the balance with debt. The sweet spot is low capital intensity and high returns, but the real kicker is that the valuation at Aurizona doesn’t include the exploration upside yet.”

In March, Trek closed a $83.4-million, non-brokered private placement wherein it issued 41.7 million subscription receipts, each entitling the holder to one share and a $3 purchase warrant exercisable through October 2021.

The company said its most significant opportunity to add value is exploration across its expansive land package, which covers 2,250 sq. km in Maranhao state in northeastern Brazil.

Trek inherits a regional joint venture with AngloGold Ashanti (NYSE: AU; LON: AGD) that encompasses 2,000 sq. km of greenfield property across what Trek calls  “underexplored greenstone belts hosting orogenic gold systems.” AngloGold can earn a 70% interest in JV by spending $14 million over four years.

A worker studies drill core at the Aurizona gold mine in Brazil. Credit: Trek Mining.

In May, Trek reported initial results from a 30,000-metre drill program that indicated the central Piaba gold deposit continues at depth and along strike west of the pit.

The project’s pit-constrained, measured and indicated resource stands at nearly 30 million tonnes grading 1.67 grams gold for 1.6 million contained oz., and inferred of 2.7 million tonnes at 0.72 gram gold for 61,600 contained ounces.

Trek’s first 18 drill holes were headlined by 3.9 grams gold over 11 metres in drill hole 575, which was 300 metres beyond the westernmost edge of the Piaba open pit, and starting from 49 metres deep.

Trek’s vice-president of exploration Scott Heffernan told The Northern Miner the results signalled a “fantastic start,” and the company would follow Piaba mineralization along strike and down-plunge.

Trek shares have traded within a 52-week range of 96¢ to $2.55 per share, and closed at 99¢ at press time. The company has 176 million net shares outstanding for a $176-million market capitalization.

Trek has requested an amended operational licence after changes to Aurizona’s operating parameters, including the 8,000-tonne-per-day increased plant throughput and raises to the Vene tailing facility. The company expects its installation licence by the third quarter.