Auriga looks to put Maverick back in the saddle

Auriga Gold (AIA-V) is looking to bring new life back to the Maverick Gold project 65-km northeast of Flin Flon, Manitoba.

To do it, the company is looking at a new way of mining the site’s Puffy Lake deposit, which was shuttered back in 1989 due to an array of underground mining problems.

Before it even delved into the economics of a new mining method, Auriga had to confirm the project’s gold potential, and it did that back in August of this year with a maiden resource estimate which showed high-grades and good tonnage in the inferred category for the underground portion of the deposit.

With the mineralization confirmed, Auriga set out to test its plan, which aims at avoiding falling into the previous difficulties with underground mining at the site. To do so, it considered getting started by mining lower cost, near surface tonnage via five open pits, which would generate near term cash flows while the company fine-tunes the existing mill on site.

The PEA considers a test mine that would be in production for 17 months. Because the project would be considered a test mine, much of the revenues generatad from gold sales will be used against any capital investment. The situation means that the project would not likely be subjected to the same tax regime of other mines, and led to the company using pre-tax cash flows in its financial model.

Such a beneficial tax situation helped generate an NPV of $20.8 million using an 8% discount rate, while the IRR comes in at very high 197% — not to shabby for a project that isn’t even considering commercial production. 

The company used a US$1,400 per oz. gold price, and while at first blush that number may seem aggressive, Auriga’s president and chief executive Richard Sutcliffe points out that the number is actually below the 12-month trailing average gold prices, and that it is justifiable given that the project is expected to be in production in 12 months time, and that it will only operate for 17 months.

The other significant advantage that the test mine has going for it is a very low Capex. Since Maverick still has the mill on site from the past producing mine all Auriga has to do is refurbish it,  and that venture only brings the Capex to $15.6 million ¬- a bargain basement price for a gold mine in today’s market.

The study also estimated sustaining capital costs of $4.6 million in the first year of operation with production cash costs estimated at roughly US$660 per oz. of gold.

On the permitting front, Sutcliffe explains that while the project came with permits thanks to it past production, the switch to open pit mining in the test phase will require some new permits. He says that government officials have assured him that the 12 month time frame is realistic. 

The project currently has open pit indicated resources of 242,000 tonnes grading 4.16 grams gold for 32,000 oz. and inferred resources of 78,000 tonnes grading 3.81 for 10,000 oz. Those high grades are mitigated, however, by high strip ratios, which range between 9.3:1 to 16.1:1 over the five pits.

The plan is to mill roughly 530,000 tonnes of ore from five open pits, processed at a rate of 1,000 tonnes per day. That pace should get the company roughly 70,000 oz. of gold over the first year and a half of operation.

Once the open pit resources are mined, a processt that will better Auriga’s understanding of both the rock structure and its metallurgy, the real fun will begin. 

That is because Puffy Lake’s mineral wealth expands at greater depths, and will be tapped into via underground mining once the open pit mining is done. 

Underground indicated resources currently stand at 702,000 tonnes grading 6.29 grams gold for 142,000 oz. of gold and inferred resources of 3.018 million tonnes grading 5.65 grams gold for 548,000 oz. of gold.

The deposit remains open down dip and on strike, and is being subjected to an ongoing drill program.