Alexis looks to restart Snow Lake gold mine

VANCOUVER — A preliminary assessment of the Snow Lake mine in west-central Manitoba concluded that new owner, Alexis Minerals (AMC-T), could profitably restart the underground gold operation and run it for at least six years.

Alexis acquired the New Britannia mine in its recent takeover of Garson Gold (GG-V). The mine produced almost 1.5 million oz. gold during two bouts of operation, first between 1949 and 1958 and then again from 1995 to 2004.

The mine has tapped into two ore lenses known as the Main and No. 3 zones, which each boast strike lengths of 350 metres, widths of 3 to 30 metres, and plunge extents of over 1,000 metres. The two lenses are separated by 200 metres of barren or low-grade rock. The 48-sq.-km property comes with a fully permitted, 2,150-tonne-per-day mill.

Now a preliminary assessment has found that a capital injection of $33.7 million could restart a 1,800-tonne-per-day operation able to produce at a cash cost of US$544 per oz. Resources in the Main and No. 3 zones could sustain six years of operation, producing a total of 423,000 oz. gold.

Using a gold price of US$1,063 per oz. and an exchange rate of $1.05 per US$1, the Snow Lake project generates a net present value (NPV) of $125 million, using a 7% discount rate, and would produce a 191% internal rate of return (IRR), allowing payback in less than two years. If the gold price is lowered to the three-year trailing average of US$861 per oz., the NPV falls to $51 million and the IRR to 54.9%.

Adding inferred resources from three other zones at Snow Lake, the project’s resources stand at 3.03 million measured and indicated tonnes grading 5.2 grams gold per tonne plus 2.15 million inferred tonnes at the same grade. While the other zones, known as Birch, Boundary, Kim, Bounter and Squall, were not considered in the economic assessment, Alexis plans to infill drill and upgrade all inferred resources in advance of feasibility studies.

The company is also exploring the area for new discoveries and might have already made one in its first drill hole at the project. In a 9-hole program designed to look for on-strike extensions to the mineralization at Snow Lake, Alexis hit 5.41 grams gold over 7.7 metres in its first hole. The hole was collared east of the Main and No. 3 zones and Alexis reckons the new discovery represents the potential for a third significant ore lens.

An active Snow Lake mine producing 90,000 oz. gold annually would lift Alexis’ gold production significantly, to 150,000 oz. per year. The company already has one small mine in production, the Lac Herbin mine in Quebec, which in 2009 produced 32,998 oz. gold. Alexis recently completed a $36-million refurbishment of its Aurbel mill, which is near the Lac Herbin mine, and the new facility is expected to reduce the company’s cash costs for that operation by 10%.

Alexis is dewatering the underground workings of the nearby historic Lac Pelletier mine and is also working to bring that mine back into production. A bulk sample from Lac Pelletier last year produced almost 2,000 oz. gold.

Alexis gained a penny on news of the positive preliminary assessment for Snow Lake to close at 40.5¢. The company has a 52-week trading range of 37¢-64¢ and 217 million shares outstanding, (254 million fully diluted).