Pure Gold tables Madsen revival plan

VANCOUVER — Pure Gold Mining’s (TSXV: PGM) new preliminary economic assessment (PEA) culminates three years of detailed geological modelling and drilling at its past-producing Madsen gold mine in northwestern Ontario’s Red Lake district.

The company released an updated resource on the project in August, which president and CEO Darin Labrenz said is underpinned by a technical “breakthrough.”

Pure Gold has boosted global indicated resources 48% to 5.8 million tonnes grading 8.9 grams gold per tonne for 1.65 million contained oz. gold. Madsen’s inferred resources now total 587,000 tonnes at 9.4 grams gold for 178,000 oz. gold.

The resource update follows 178,300 metres of drilling.

“When I say ‘breakthrough,’ I’m referring to the idea that historically it was viewed as a rock, or stratigraphic, control for the mineralization,” Labrenz explained during a conference call.

“We’ve been able to identify cryptic structures and trace them across stratigraphy to generate our targets. That’s what we’ve captured in our model and our resource. That gives us a lot of confidence when it comes to opportunities in areas that have been previously mined.”

Core racks at the past-producing Madsen gold project in Ontario. Photo by Matthew Keevil.

Pure Gold estimates it will require nearly $51 million to get Madsen up and running.

The PEA examines a combination of conventional cut-and-fill and shrinkage mining methods that will target 3 million tonnes at a 10.3-gram-gold head grade.

Pure Gold plans to upgrade Madsen’s mill and tailings management facility, which have been on care and maintenance since 1999.

The company would run the carbon-in-pulp (CIP) circuit at 600 tonnes per day after upgrades on the reagent and grinding circuits, and new pump installation.

Inside the processing facilities at Pure Gold’s Madsen project in Ontario’s Red Lake camp. Photo by Matthew Keevil.

Madsen’s historic portal and ramp are 1 km from the mill, and provide access to the top 150 metres of mine workings. The PEA outlines a need for more ramp development to 1,430 metres deep.

Pure Gold models 92% gold recoveries via a single-stage crushing and two-stage grinding circuit followed by cyanide leaching.

Madsen has grandfathered permits — including environmental compliance approval — which allow for operation of a 1,090-tonne-per-day mill and CIP circuit, and use of the existing tailings facility.

“Our conviction in the property has led us underground. We’ve reopened the portal and ramp, built a new power line, installed new heating and ventilation systems and we’re well into advancing the reconditioning of the ramp,” Labrenz said.

“The ground is in great shape, and we’re testing the boundaries of the resource with underground drilling. Over the past three years we’ve consolidated our land position, identified gaps in our knowledge, and observed and recorded over 3,500 outcrops.”

Geologist Robert Scott maps geology underground at Pure Gold Mining’s Madsen gold project in Ontario’s Red Lake mining camp. Credit: Pure Gold Mining.

The current resource includes the Austin, South Austin, 8 Zone, McVeigh and A3 domains. Pure Gold said it could eventually incorporate “satellite deposits” that host more “near-surface mineralization,” including the Russet South and Fork Zone.

Assuming US$1,275 per oz. gold, the Madsen PEA features a 47% after-tax internal rate of return, and a $258-million net present value at a 5% discount rate.

The mine would produce 66,109 oz. gold annually over 14 years at direct operating cash costs of US$595 per ounce.

“We did take a look at a larger throughput study and we’re confident we can achieve some degree of expansion. The bottleneck comes down to the number of mining faces, so the key would be figuring out how to develop it fast enough to deliver the tonnes,” Labrenz said.

“Larger scenarios are possible, and that’s where we look at the satellite deposits and some of the opportunities there. The fact that we have a deposit near surface, and close to existing infrastructure, gives us a lot of flexibility,” he added.

Pure Gold says it is on track to deliver an updated project resource by year-end, which will feature maiden estimates for the Fork and Russet South satellite targets.

Canaccord Genuity analyst Kevin MacKenzie has a “speculative buy” rating on Pure Gold alongside a $1 price target. He comments that the PEA highlights “the material impact associated with Pure Gold’s ongoing focus on resource expansion.”

Pure Gold shares have traded in a 52-week range of 39.5¢ to 76¢, and closed at 63¢ per share at press time. The company has 192 million shares outstanding for a $121-million market capitalization. It reported $4.6 million in working capital at the end of June.