Northern Vertex plans for pilot production at Moss

VANCOUVER – Northern Vertex Mining (NEE-V) wants to get into production as soon as possible and the junior just took a big step in that direction, with a preliminary economic assessment (PEA) of its Moss project in Arizona that lays out a plan to be producing gold and silver within months.

The first ounces produced at Moss would come from a pilot plant, designed to test the viability of heap leaching to recover the project’s precious metals. Lab-scale testwork to date suggests heap leaching should extract 75 to 85% of the gold and 61 to 77% of the silver from the mineralized rocks at Moss, but Northern Vertex believes only large-scale tests really outline the recoveries to be expected from a full-sized mining operation.

As such, the PEA laid out a three-stage development plan for Moss. In phase I, a contractor would be hired to mine 90,000 tonnes of rock from the Moss deposit at a rate of roughly 1,000 tonnes per day (tpd), including both high and low-grade mineralization. The material would be processed using a pilot-scale heap leach facility and the operation would run for 15 months.

If all goes well in phase I, Northern Vertex would proceed to phase II, which involves building a 5,000-tpd open pit mine. Over five years the operation would mine and process 6.1 million tonnes of material grading 1.07 grams gold per tonne and 11.14 grams silver per tonne, from a pit bearing a strip ratio of 1.6 to 1.

The PEA estimates it would only cost US$26.6 million to build out phases I and II. That investment would create an operation producing 29,000 oz. gold and 222,000 oz. silver annually.

Based on this plan and using a gold price of US$1,500 per oz., a silver price of US$30 per oz., and a 5% discount rate, the Moss project carries a pretax net present value (NPV) of US$107.8 million. The operation would be expected to generate a 118% pretax internal rate of return (IRR), which would enable Northern Vertex to repay its capital investment in 15 months.

Reducing the gold price to US$1,300 per oz. and the silver price to US$26 per oz. cuts the NPV to $82 million. The IRR remains very healthy at 88%.

Phase III is conceptual. If mining and processing in phases I and II go well, and if exploration efforts succeed in defining new resources, Northern Vertex would either extend the mine’s lifespan or expand the operation, or both.

Moss is already home to more resource tonnes than are incorporated in the mine plan. Resources at the site total 22.8 million measured and indicated tonnes grading 0.74 gram gold and 8.03 grams silver, plus 4 million inferred tonnes averaging 0.57 gram gold and 6.65 grams silver. The pilot plant and five-year mining operation would churn through less than half of those tonnes; the rest are generally located beneath and west of the planned pit.

Northern Vertex does not own Moss. Rather, the company can earn a 70% stake in Moss from Patriot Gold (PGOL-O) by spending $8 million on the property and preparing a feasibility study. To date Northern Vertex has spent $5.6 million.

The company has enough money on hand to fulfill its spending commitment. As of the end of 2012, Northern Vertex had cash and equivalents totaling $9.6 million.

The sale of a 51% stake in the Lemhi Gold Trust just added US$4.75 million to Northern Vertex’s coffers; another US$2.9 million worth of cash payments will be transferred to the company over the coming quarters.

Northern Vertex’s share price gained a penny on news of the Moss project PEA to close at $1.01. The company has a 52-week share price range of 75¢ to $1.50 and has 53 million shares outstanding.