Newhawk’s Sulphurets not economic at current metal prices

A recently completed feasibility study has determined that the Sulphurets project is not economically feasible at current metal prices. The project is in the rugged Golden Triangle area north of Stewart, B.C., and is owned 60% by Newhawk Gold Mines (TSE) and 40% by Granduc Mines (TSE). The feasibility was conducted in conjunction with Fluor Daniel Wright Engineers by Corona (TSE), Newhawk’s major shareholder with over 42% of the company’s issued capital.

The study is the second done on the property. Earlier this year, Cominco Engineering Services completed a feasibility on the property, the details of which were not made public.

The recent feasibility, based on a 350-ton-per-day operation, estimated capital costs at $42.7 million including $3 million in working capital and a 15% contingency.

Direct operating costs were estimated at $145 per ton, or $265 per oz. of gold equivalent. At 350 tons per day, the mine would produce about 67,500 oz. of gold equivalent per year. Gold equivalent calculations were based on US$400 per oz. gold, US$5 per oz. silver, gold recoveries of 89% and silver recoveries of 85%.

Based on a gold price of US$400 per oz. and a silver price of US$5 per oz., the pretax discounted cash flow rate of return would be about 7%. No allowance was made for financing or exploration costs, however, and no payback was given. At US$450 per oz. gold, the pretax discounted cash flow rate of return would rise to about 20% with a 28-month payback.

The feasibility was limited to the West zone which has a diluted minable reserve of 550,000 tons grading 0.42 oz. gold and 18.0 oz. silver per ton.

Donald McLeod, president of Newhawk, said the project was most sensitive to price and tonnage. Having just received the study from Corona, he did not know what threshold price and tonnage levels would be required to justify a production decision.

Newhawk has a large investment in the Sulphurets project, having capitalized a cumulative total of over $35 million on the property.