Integra develops DeLamar project in Idaho

Integra Resources (TSXV: ITR; US-OTC: IRRZF) plans to complete a resource update and a preliminary economic assessment (PEA) of an open-pit mine at its DeLamar project in Idaho this year, and National Bank Financial has initiated coverage of the company with an outperform rating and a 12-month target price of $1.40 per share.

The junior, currently trading at 63¢ per share, acquired the project from Kinross Gold (TSX: K) in September 2017 for $7.5 million in cash, a 9.9% equity interest in Integra and a variable net smelter return royalty payable to Kinross.

The project, which consists of the past-producing DeLamar mine and the past-producing Florida Mountain deposit, has an inferred resource estimate weighing in at 154.5 million tonnes grading 0.45 gram gold per tonne and 21.92 grams silver per tonne for 2.27 million contained oz. gold and 108.5 million oz. silver. On a gold-equivalent basis, the project has a grade of 0.71 gram gold-equivalent for 3.54 million gold-equivalent ounces. The resource was calculated using a 0.3 gram gold-equivalent cut-off grade.

In 2018, Integra completed over 23,400 metres of drilling in 80 holes at DeLamar and Florida Mountain, most of which were situated outside the inferred resource estimate’s boundary. This year, Integra plans to drill 20,300 metres: 10,000 metres at Florida Mountain, 6,000 metres at DeLamar and 4,300 metres on regional targets.

A drill site at Integra Resources’ DeLamar gold-silver property in southwestern Idaho. Credit: Integra Resources.

The past-producing DeLamar mine produced 1.6 million oz. gold and 100 million oz. silver from open pit and underground operations. It was put on care and maintenance in 1998 due to low gold prices.

“Considering that the exploration work that did take place over 20 years ago was looking for grades that would be economic in a US$300/oz. gold price environment, we expect that there is plenty of low hanging fruit on the property to build up the resource,” National Bank of Canada analyst John Sclodnick writes in a research report. “In the near term, we look forward to more strong drill results from the Sullivan Gulch area, which is adjacent to the current resource area.”

Drill results released in January include holes from Sullivan Gulch, which sits at the southeastern tip of the DeLamar deposit. One of the highlights was hole 18-59, which returned 1.71 grams gold and 69.03 grams silver (2.53 grams gold-equivalent) over 110 metres starting from 338 metres downhole, including 1.93 grams gold and 185.24 grams silver (4.11 grams gold-equivalent) over 21 metres.

Two others from Sullivan Gulch include hole 18-46, which cut 145 metres of 1.29 grams gold and 9.90 grams silver (1.41 grams gold-equivalent) starting from 261 metres downhole, including 9 metres of 12.01 grams gold and 57.86 grams silver (12.69 grams gold-equivalent), and hole 18-52, which returned 196 metres of 0.97 gram gold and 30.46 grams silver (1.33 grams gold-equivalent) from 201 metres downhole.

National Bank’s Sclodnick says the DeLamar project “bears similarities” to Integra Gold’s Lamaque project, which was sold to Eldorador Gold for $590 million in 2017.

“DeLamar is also a past-producing property, with some existing infrastructure allowing for immediate access, in a low-risk jurisdiction with a clear permitting process and a geological database to give the project a head start.”

Sclodnick also points out that management at Integra Resources is made up primarily of former executives of Integra Gold.

“Management sees the potential to develop a low grade, near surface, heap leach project with a higher grade component to be milled; however, there are numerous development options for the project,” Sclodnick writes. “With certain infrastructure in place, an already disturbed brownfield site and over 3.8 million ounces of gold-equivalent in an inferred resource, management can begin to de-risk and advance the project by upgrading the resource, conducting a PEA and PFS studies and beginning the permitting pathway.”

The mining analyst further notes that both the DeLamar and Florida Mountain areas are open along strike and at depth, “and the company could explore the potential of developing a high-grade resource at depth, and have also had exploration success laterally.”