VANCOUVER — Falco Resources (TSXV: FPC; US-OTC: FPRGF) hopes to have the historic Horne gold complex in Quebec back in production by 2020. On May 9, the company released a preliminary economic assessment (PEA) on the Horne 5 deposit, which models a bulk-tonnage underground mine that would require $905 million in initial capital expenses.
The study contemplates a 15,000-tonne-per-day surface facility that would crank out 236,000 oz. gold annually at all-in sustaining costs of US$427 per oz., net of by-product credits. The US$1,250 per oz. base case features a U$667-million, after-tax net present value at a 5% discount rate, and a 16% internal rate of return.
The proposed 15,000 tonnes per day processing facility at Horne 5. Credit: Falco Resources.
Horne 5 is located in an industrial park within the city limits of Rouyn-Noranda, and development would focus on the former Quemont mine site. The company plans to build a semi-autogenous and ball-milling crushing facility that would divide flotation and thickening into three circuits to recover copper, zinc and pyrite concentrates.
“As a mine builder I’d say the best place in the world to do the job is probably in the Abitibi and in Rouyn-Noranda,” president and CEO Luc Lessard said during a conference call.
Horne 5 sits below the former producing Horne mine, which was operated by Noranda from 1926 to 1976. Credit: Falco Resources.
“We have many experienced miners and construction staff in this area, and that goes for major equipment and suppliers as well. We plan to do the same exercise our team has done before, where we drive the bus and are in place to support the engineering firms.”
The PEA proposes a 12-year mine life targeting 64 million tonnes of volcanic-massive sulphide (VMS) material, with an average diluted grade of 2.6 grams gold equivalent per tonne for 4.8 million contained oz. gold.
Payable life-of-mine gold recovery is expected to average 87%, while by-product metallurgical recoveries would average 74% for copper, 67% for zinc and 75% for silver.
Falco has analyzed copper and zinc concentrates, and concluded they are “free of deleterious elements, and expected to be readily marketable to both smelters and traders.”
The three-phase mine plan using the historic Quemont 2 shaft. Credit: Falco Resources.
Horne 5 hosts 58.3 million indicated tonnes grading 1.82 grams gold per tonne, 15.60 grams silver per tonne, 0.2% copper and 1% zinc, or 2.86 equivalent grams gold for 5.36 million equivalent oz. gold. Inferred resources total 12.7 million tonnes averaging 2.10 grams gold, 26.26 grams silver, 0.2% copper and 0.6% zinc, or 3.08 equivalent grams gold for 1.25 million equivalent oz. gold.
“The project does work at lower gold prices if we’re looking at the current market environment,” chief financial officer Vincent Metcalfe noted. “The Young-Davidson operation in Ontario is probably the most comparable mine to the Horne project due to a similar grade and depth profile. The major benefit at Horne is the higher density of the material compared to other deposits, and that’s a function of the VMS geology. The vertical nature of the orebody also limits dilution.”
A drill rig at the Horne 5 deposit in Rouyn-Nouranda. Credit: Falco Resources
Falco remains optimistic on exploration upside near the Horne 5 resource. On April 26, the company mobilized two drill rigs to the site to complete a 20,000-metre drill program. The first target will be the Horne 5 Western Extension, which Lessard said could add “between 5 and 10 million tonnes of ore.”
Meanwhile, the company will also follow up with 10,000 metres at the Quemont extension, where mineralization is hosted within massive, very fine-grained lava flows of dacitic to rhyolitic composition. Historic work reportedly shows that the major structural control consists of fractures within a “westerly plunging anticline.”
Lessard said that during confirmation drilling, the company saw more potential in the Quemont western plunge, and is looking to start a drilling program from underground after dewatering. He added that Falco would have the drill rigs active for the next four to five months.
With Horne’s infrastructure advantages, most capital expenses are earmarked for underground mining and processing facilities, which account for $598 million.
Lessard and his team built the Canadian Malartic gold mine alongside chairman Sean Roosen, who is also the current CEO at Falco’s largest shareholder, Osisko Gold Royalties (TSX: OR).
Metcalfe noted that Falco would continue its relationship with the Quebec government.
“We have the same people doing the same jobs that we did back when we delivered the Canadian Malartic economic studies in 2007 and 2008,” Roosen said. “What they’ve outlined is a realistic plan that has pragmatic numbers and mining methodologies. It’s a project that we believe has great support in the community and from the provincial government. The biggest challenge will clearly be the [development capital], but we believe we’re well-suited to manage that.”
Falco has traded in a 52-week range of 20¢ to 61¢, and closed at 56¢ per share at press time. The company has 111 million shares outstanding for a $63-million market capitalization, and reported cash and equivalents of $3.9 million to end 2015.
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