Falco eyes high-tech mining at Horne 5 in Rouyn-Noranda

VANCOUVER — Falco Resources (TSXV: FPC; US-OTC: FPRGF) says new mining technology and methods could boost efficiency at its large Horne 5 gold-silver-copper-zinc deposit in Rouyn-Noranda, Quebec. The $905-million operation would be one of the largest underground gold operations in North America, and the company aims to start production within four years.

In May, Falco released a preliminary economic assessment (PEA) on Horne 5 that outlines an operation that would use remote control equipment to move 15,000 tonnes of material per day to a flotation-thickening facility divided between three circuits to recover copper, zinc and pyrite concentrates.

The deposit is located 600 metres to 2,300 metres below surface.

“The main thing we’re pushing right now is a high level of automation. We’ll use a lot of trucks underground that are remotely controlled from surface, and that will materially boost our efficiency,” president and CEO Luc Lessard said during a presentation in September.

A diagram of Falco Resources’ proposed 15,000 tonnes per day processing facility at its Horne 5 gold project in Rouyn-Noranda, Que. Credit: Falco Resources.

“That will allow us to really push the tonnage, and within 15 to 30 minutes of blasting you can start mucking. It will all be a state of the art, high-tech mine. This has really emerged regionally as a new form of mining that takes advantage of modern processes. It’s a big low-grade deposit and it’s going to be a lot like what we did with Canadian Malartic, except it will obviously be underground,” he added.

A Horne 5 operation 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 mine plan targets 63.8 million tonnes of volcanogenic massive sulphide material with an average diluted grade of 1.6 grams gold per tonne, 15.5 grams silver per tonne, 0.2% copper and 0.9% zinc. The average gold-equivalent grade is 2.6 grams per tonne for 4.8 million contained equivalent ounces.

On Sept. 6, Glencore (LSE: GLEN) confirmed it would not exercise a back-in right on the property that it negotiated during the initial sale to Falco in 2011. The multinational miner still retains a 2% net smelter return royalty on all metal produced from Horne 5.

Glencore operates the Horne smelter in the same industrial complex, which takes in both copper concentrates and precious metal-bearing recyclable materials to produce a 99.1% copper anode.

Lessard said Falco would produce a “clean concentrate” that could likely be processed at the facility.

A drill rig at Falco Resources’ Horne 5 polymetallic deposit in Rouyn-Noranda, Que. Credit: Falco Resources.

“We’ll now be able to aggressively drive this project forward, and we believe it’s one of the next big mines in Canada,” Lessard said, noting there should be a resource update within two months, and then Falco will complete a feasibility study and an environmental assessment.

“We have strong support from the Quebec government. They have been part of mine builds and are active in supplying capital,” he said. “That relationship carries over to permitting, which is really straightforward, and we aim to be in full commercial production by mid-2020.”

Horne 5 carries a hefty capital expense, and Falco hopes to leverage its relationship with Osisko Gold Royalties (TSX: OR; NYSE: OR) and the Quebec government to shoulder the burden. In May the company arranged a $1-million loan with Osisko that included an 18-month clause to negotiate a silver and/or gold stream for part of the development capital. Lessard said the deal could provide up to $150 million in capital.

“Following that, we do expect support from the government-sponsored funds,” he said.

The company also invested in a 10,000-metre drilling program to test an area between the western edge of the Horne 5 deposit and the Horne Creek fault, which it hopes can provide more ore early in the mine’s life to delay costs required to access deeper material. Positive results from hole 16-17A reportedly confirmed grade and thickness in the western area, including 12.4 metres at 5.14 grams gold equivalent.

“The most recent results were collared on the target we’re using to extend the mine life over the first phase of operations. If we can find more tonnage on that western side, we’ll be able to delay the deepening of the shaft,” Lessard said.

Falco has traded in a 52-week range of 20¢ to $1.39, and closed at $1.31 per share at press time. The company has 114 million shares outstanding for a $144-million market capitalization. Osisko Royalties holds a 16% equity stake.