Continental Gold finishes permitting Buritica

Continental Gold (TSX: CNL; US-OTC: CGOOF) shares have seen a boost since the company announced it has received the last two approvals needed to wrap up major permitting at its advanced  Buritica gold-silver project in Antioquia, Colombia.

On Nov. 30, Colombian authorities green-lighted Continental’s amendment to buy its environmental licence for a larger mining and milling operation, which was the first of the two approvals.   

The company operates a 30-tonne-per-day underground mine at its flagship Buritica project. It is now set to build a much bigger mine, as envisioned in its March 2016 feasibility study, including a processing plant with an up to 3,200-tonne daily capacity.

The study — prepared by JDS Energy and Mining and M3 Engineering & Technology — estimates the expanded underground mine at Buritica would process 2,100 tonnes per day, before ramping up to 3,000 tonnes per day in its third year.

Annual production should average 253,000 oz. gold and 466,000 oz. silver a year over the 14-year mine life, with production coming in higher during the first five years. Output over the mine life should total 3.5 million oz. gold and 6.4 million oz. silver, at 94.1% and 59.9% gold and silver recoveries.

Continental Gold’s Buritica gold-silver project in Antioquia, Colombia. Credit: Continental Gold.

The study pegs Buritica’s total costs at US$661.5 million. This includes US$389-million initial capital and US$347 million in life-of-mine sustaining costs.

Estimated total cash costs are US$411 per oz. gold, net of silver credits. All-in sustaining costs, however, are US$1,717 per ounce. This is US$544 more than the current spot gold price of US$1,173.30 per ounce.

Despite the relatively high cost, the feasibility study using metal prices of US$1,200 per oz. gold and US$15 per oz. silver calculates a 31.2% after-tax internal rate of return and US$860-million net present value at a 5% discount rate. It applied a US$2,850 exchange rate to the Colombian peso.

With the environmental approval, Continental can mine the alluvial material needed to build and produce at the operation.

Come Dec. 7, Continental reported that the Secretary of Mines of Antioquia authorized its amended mining technical work plan for Buritica’s expansion. Continental submitted this application in May 2016.

With the two approvals in hand, the company has enough permits to build the expanded mine.

According to a November presentation, Continental expects project financing in place by early 2017, with construction and development in the first half of next year. It targets initial production in 2019 or 2020.

BMO analyst Brian Quast points out that the company says its debt package is close to completion, without specifying the principal amount. He has a $6 target and an “outperform” rating on the stock.

On receiving the environmental permit, Continental shares ended Nov. 30, slightly down at $3.35 before jumping to $4.44 on Dec. 2. The stock then seesawed before ending Dec. 7 at $4.48. Over the past week, Continental shares have gained 33.7%. Year-to-date the stock is up 179%.