First Mining tables positive PEA at Springpole

A preliminary economic assessment (PEA) of First Mining Finance’s (TSX: FF) wholly owned Springpole gold-silver project, 110 km northeast of Red Lake, Ont., has yielded positive results, the company said on Sept. 21.

SRK Consulting prepared the study. It indicates the project may have economic viability, with a 36,000-tonne-per-day processing plant operating over a 12-year life. To get into production would cost First Mining an initial US$586 million in capital expenditures followed by US$117 million in sustaining capital for a total of US$703 million, plus closure and reclamation costs estimated at US$20 million. The payback period would be 3.5 years. 

The company says the project has “excellent margins,” with low anticipated cash costs of US$619 per equivalent oz. gold and an average annual payable production of 322,000 equivalent oz. gold over the life-of-mine.

Keith Neumeyer, chairman of First Mining Finance

The study says Springpole could annually produce 296,500 payable oz. gold and 1.6 million payable oz. silver. The study calculates the after-tax net present value using a 5% discount rate at US$792 million, with a 32% after-tax internal rate of return.

Springpole has a resource of 139 million indicated tonnes grading 1.04 grams gold per tonne and 5.4 grams silver per tonne, or 4.67 million contained oz. gold and 24.19 million contained oz. silver. It also has 11.4 million inferred tonnes grading 0.63 gram gold and 3.1 grams silver, or 0.23 million contained oz. gold and 1.12 million contained oz. silver. The assumed metal prices for the resources are US$1,400 per oz. gold and US$15 per oz. silver. 

“The main goal going forward is permitting,” First Mining’s chairman Keith Neumeyer said from the sidelines of the Denver Gold Forum during a phone interview with The Northern Miner. “With the current 5 million oz., it will be one of the largest gold mines in Canada. It’s not like we need more than 5 million ounces.”

The total cost of material processed is an estimated US$5.30 per tonne, including US$1.60 per tonne of material mined at a 2.1-to-1 strip ratio.

“It’s been drilled a lot,” Neumeyer said of the deposit. “If you look at the numbers, the inferred number is tiny. Most of the resource is already in a high enough category to assume it’s mineable. But there is some exploration upside that is of interest to us, so we’re thinking about a winter program.”

Samples from First Mining Finance’s Springpole gold project in Ontario. Credit: First Mining Finance.

The mine would be a truck-and-shovel operation with a single pit, followed by milling, carbon-in-pulp leaching and doré poured on-site. The study estimates equipment will cost US$193 million.

Next, First Mining aims to complete an environmental assessment in the first quarter of 2018.

“The shorter-term strategy is de-risking the asset, because it needs a road, it needs a power line, it needs the permits to advance the project,” Neumeyer said. “So we’re going to be submitting documents to the provincial government over the next six to 12 months to start the permit process.”

The property covers more than 320 sq. km of the Birch-Uchi greenstone belt. First Mining would have to clear 23,000 sq. metres for a transmission line as well as build a 39 km unpaved road to develop the site. 

First Mining would also have to drain 6.1% of the surface water from Springpole Lake. The study estimates 21.7 million cubic metres of water would have to be removed from the area by building three dikes up to five metres high and a combined 510 metres long. Drainage can concur with mill construction.

First Mining acquired the Springpole property from Gold Canyon Resources in November 2015 in a three-way merger that included PC Gold.

“They did a heck of a good job developing and defining the asset, and we knew there was significant upside still remaining,” Neumeyer said.

First Mining shares closed at 63¢ on Sept. 22, one day after the announcement — but had risen to 68¢ at press time on Sept. 27. The firm’s market capitalization is $375 million.