Corvus bumps up economics at North Bullfrog

An optimized preliminary economic assessment (PEA) for Corvus Gold’s (KOR-T) North Bullfrog open-pit gold-silver project in southern Nevada has outlined a slightly larger project with substantially better returns.  

Average annual production at the 70 sq. km project has increased to 76,500 oz. gold and 30,000 oz. silver over an 11-year mine life, up from an average of 74,800 oz. gold over 10 years estimated in a December 2012 PEA, which didn’t take into account silver recovery.

As a result, economics at Corvus’ proposed open-pit heap-leach operation have improved. Applying a US$1,300 gold price and 5% discount rate, North Bullfrog’s pre-tax and pre-royalty net present value (NPV) has increased to US$146.8 million and its internal rate of return (IRR) to 23.1%, up from last year’s US$62 million NPV and 13% IRR, using the same gold price and discount rate. The payback period has shrunk to 4.7 years from 7.1 years.

But the better returns are dampened by higher start-up costs of US$101.2 million, which is up 6% from US$95.2 million previously, notes Salman Partners analyst Ash Guglani, adding that the junior trimmed sustaining capital estimates by 15%, or nearly US$20 million to US$108.8 million.

Corvus also reduced total operating costs by 5%, or US$32 per oz. gold to US$778, largely by cutting administration costs per recovered gold ounce to US$73 from US$106 previously, Guglani says, who doesn’t formally cover the company.  

The optimized study, released on June 4, is based on a resource update at North Bullfrog’s Jolly Jane deposit. But the company points out that the estimate still needs to be updated to include its 2012–2013 stepout exploration results, particularly from the high-grade gold-silver Yellow Jacket zone.

While the project boasts a handful of promising gold targets, it has four deposits with defined resources: Mayflower, Sierra Blanca, Jolly Jane and Connection. Oxidized indicated resources stand at 36.7 million tonnes grading 0.261 gram gold and 0.38 gram silver per tonne for 307,860 oz. gold and 443,230 oz. silver. This compares to last year’s 27 million indicated tonnes at 0.284 gram gold and 0.384 gram silver for 246,810 oz. gold and 344,100 oz. silver.

Inferred oxidized resources include 220.6 million tonnes at 0.182 gram gold and 0.812 gram silver for 1.29 million oz. gold and 5.76 million oz. silver, which is down from 234 million tonnes at 0.184 gram gold and 0.784 gram silver for 1.39 million oz. gold and 5.9 million oz. silver previously.  

The Vancouver-based firm plans to publish another resource update and PEA in late 2013, following the 20,000-metre program that kicked off in May.

A day after releasing the optimized study, Corvus announced metallurgical results from the Yellow Jacket zone showing that 96-hour bottle roll tests returned average gold and silver recoveries of 86% and 77% on material averaging 3 grams gold and 29 grams silver.

Corvus’ wholly owned project sits 8 km north of the historic Bullfrog gold mine, which was previously operated by Barrick Gold (ABX-T, ABX-N) and sits 10 km north of Beatty, Nev.

At press time Corvus shares traded for 57¢ apiece, with 65 million shares outstanding.