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 has taken a big step in this direction with a preliminary economic assessment (PEA) of its Moss project in Arizona that lays out a plan to produce 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 test work to date suggests heap leaching should extract 75–85% of the gold and 61–77% of the silver from the mineralized rocks at Moss, but Northern Vertex says that only large-scale tests could outline recoveries from a full-sized mining operation.

As such, the PEA laid out a three-stage development plan for Moss. In phase one a contractor would be hired to mine 90,000 tonnes of rock from the Moss deposit at a rate of 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 one Northern Vertex would proceed to phase two, 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 cost US$26.6 million to build out phases one and two. This investment would create an operation producing 29,000 oz. gold and 222,000 oz. silver annually.

Based on this plan and using a US$1,500 per oz. gold price, a US$30 per oz. silver price and a 5% discount rate, the Moss project carries a pre-tax net present value (NPV) of US$107.8 million. The operation would generate a 118% pre-tax internal rate of return (IRR), which means Northern Vertex could 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 healthy at 88%.

Phase three is conceptual. If mining and processing in phases one and two go well and if exploration efforts define new resources, Northern Vertex could extend the mine’s lifespan, expand the operation, or both.

Moss is already home to more resource tonnes than the mine plan holds. 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 these tonnes. The rest are generally located beneath and west of the planned pit.

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

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

Selling 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 cent 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, with 53 million shares outstanding.