Galantas Gold receives permits to build underground mine

Up until two years ago, Galantas Gold (TSXV: GAL) was producing a flotation concentrate containing gold, silver and lead from its small open-pit gold mine in northern Ireland, 150 km west of Belfast and 32 km from Dalradian Resources’ (TSX: DNA) high-grade Curraghinalt gold deposit.

The concentrate Galantas Gold produced was shipped under a life-of-mine offtake agreement to Glencore Xstrata’s Belle Dunne smelter in New Brunswick. The facility in eastern Canada is a lead smelter with a gold circuit.

But Galantas Gold’s game plan has always been to build an underground mine after exhausting the open pit, and after a three-year permitting effort, it will do just that.

“It will be the first underground gold mine in Ireland,” Roland Phelps, the company’s president and CEO, says in an interview from his office in Omagh.

“Our strategy was to drill off enough resource to get cracking and build a small mill to generate a bit of cash, and then use that cash to build a larger mill, and do some more drilling,” Phelps explains. “The future of the mine has always been underground, with the deposit’s (70-degree) steeply dipping veins that are open at depth. That’s where most of the orebody is located.”

Phelps estimates building an underground mine will take two years and cost US$16 million. The reason it is so inexpensive, he says, is because the company already owns the land, has a dry tailings facility and a plant that processes 18 to 20 tonnes per hour.

The mining executive, who holds degrees in mining engineering and geology, says he is reviewing a number of financing proposals, and these could include lease financing. “We’ve had experience with lease finance and have been successful, and we paid those off to the letter,” he says. “So I’m hopeful lease finance will form a considerable part of the total debt burden.”

The mine plan envisions mining the two main veins in the deposit — Joshua and Kearney — but Phelps says the company has identified 14 veins on the property that it intends to explore.

The Joshua and Kearney veins have a measured and indicated resource of 730,824 tonnes, grading 7.16 grams gold per tonne for 168,284 contained oz. gold. Inferred resources add another 1.2 million tonnes averaging 7.61 grams gold for 293,918 contained oz. gold.

Measured and indicated resources discovered so far on the property stand at 818,233 tonnes averaging 6.86 grams gold for 179,986 contained oz. gold, with inferred estimated at 1.4 million tonnes at 7.71 grams for 341,123 contained oz. gold.

According to Phelps, at £750 per oz. gold (US$1,174 per oz.), the pre-tax operating surplus after capital expenditure generates a 72% pre-tax internal rate of return at an 8% discount rate, and a $26.6-million net present value, based on just 36% of the combined resources of the Joshua and Kearney veins.

“It’s a small fish, but it’s a tasty one,” he says.

Once the financing is in place, Phelps says it could take six months before Galantas reaches development ore.

“That development ore will go straight into the existing mill, so that should give us early cash flow,” he says. “Midway through the second year, we should commercially produce 30,000 oz. gold annually over five years, but we’ve allowed for 15 years of tailings, so that tells you what we think of the potential for finding more resources.”

He says Northern Ireland is a great place to do mining, with excellent transportation and engineering infrastructure, an educated workforce and regulations on mineral ownership. “It has interesting mineral prospects, and once you have identified them, you have a clear route to getting your permits,” he says. “It’s like any other part of Western Europe — permitting can be tortuous and time-consuming, but if you do the right studies and go through the right hoops, you can get your consent.”

On that note, Phelps says Omagh will be Ireland’s first underground gold mine, but not its last.

“Within the next five years there probably will be two or three other underground gold mines,” he says. “And there are lots of other opportunities in Northern Ireland for additional deposits.”