Orefinders plans to cash in on historic Mirado stockpiles

VANCOUVER — Orefinders Resources (TSXV: ORX; US-OTC: ORFDF) has found a way to finance potential development and exploration at its past-producing Mirado gold project, 35 km southeast of Kirkland Lake in northeastern Ontario. In July the company closed a deal with gold miner Iamgold (TSX: IMG) to process Mirado’s historic stockpiles at Iamgold’s Westwood mill, 40 km east of Rouyn-Noranda, Quebec.

The historic stockpiles are material that was blasted and mined from the Mirado open pit in the 1980s. Orefinders has defined stockpile material totalling 20,742 tonnes grading 4.41 grams gold per tonne for nearly 3,000 contained ounces.

Stockpile sampling at the Mirado site 35 km due southeast of Kirkland Lake in northeastern Ontario. Credit: Orefinders Resources.

The company will deliver at least 25,000 tonnes to Westwood, and is upgrading roads at Mirado to allow 40-tonne truck access. Iamgold has agreed to mill the shipment in a non-blended, continuous batch and pour a doré bar to sell to its contracted refinery. Metallurgical testing indicates 92.3% gold recoveries for the stockpiled material.

“The past six months we’ve focused on the stockpiles, and our ability to generate cash flow. That’s an important part of our strategy, but we’re also thinking about the big picture,” president and CEO Stephen Stewart said during an interview.

The Westwood facility is located on the Doyon property roughly 40 km east of Rouyn-Noranda, and 80 kilometres west of Val d’Or, in southwestern Quebec.

“This is a means to an end, because it allows us to bring some non-dilutive cash into the company, which in turn could put the open pit back into production. The big picture, however, is the exploration upside. There are no shortages of opportunities in terms of possible targets on the property.”

The toll-milling plan would also help Orefinders clean up the historic mine site, and on Aug. 30, Ontario’s Ministry of Northern Development and Mines approved a closure plan that would mobilize equipment to the site in early September. The company expects it will take four weeks to truck the stockpile material to Westwood, while milling would require another two weeks.

Orefinders intends to reinvest the proceeds from its initial toll-milling deal to evaluate the restart of operations and Mirado’s open pit, and start exploration on the property. In 2013 the company released a global resource on the project that includes the stockpiled material, which totals 10.6 million tonnes of 1.29 grams gold for 442,000 contained ounces.

The resource combines 12,000 metres of diamond drilling from 2013, and 19,600 metres of historic data from the 1980s.

“There are four or five mills in the area, and given the grades, we could ship it economically. The stockpile is a good proxy for the economic viability of this plan,” Stewart said.

“You have to like a short-term scenario that involves regional toll milling, but Mirado has potential beyond that of a small-scale operation. There’s a lot of smoke from historic work, and the property has been starving for investment over the past few years, due to market conditions,” he added.

Mirado’s gold mineralization mostly occurs in two zones: the Main zone, which has highly silicified fragmental rock, with pyrite and subordinate chalcopyrite and sphalerite; and the North zone, which is associated with sulphide, quartz and quartz carbonate veinlets parallel to the shear zone foliation.

The past-producing open pit on the Mirado property. Credit: Orefinders Resources.

Orefinders intends to focus its exploration on the MZ zone, which is located within a few metres of Mirado’s conceptual open pit. Trenching at the target returned 4.8 metres of true width grading 21.8 grams gold. Mapping around trench 13-02 indicates “similar flat-lying stratigraphy, with alteration characteristics associated with high-grade gold mineralization.”

Stewart said that “the story has a couple of different aspects. It’s a question of priority, and in this market, the cost of capital remains expensive — so we have to be careful where we spend money.

“We’ll likely focus on the development angle in terms of a preliminary economic assessment on the toll-milling angle. The stockpile program will allow us to finish the economic study over the short-term, and move ahead with a drill program on the MZ zone to expand the open pit.”

Orefinders opted to finance its stockpile project via debt to limit equity dilution. On Aug. 29, the company announced loan and royalty agreements totalling $500,000. The royalty arrangement with Excalibur Resources is capped at $105,000, payable out of Orefinders’ profits from processing the stockpiles. The arrangement also gives Excalibur the right to buy a 1% net smelter return royalty on Mirado for $2 million, within 90 days of commercial production.

Disseminated gold mineralization associated with pyrite at Mirado. Credit: Orefinders Resources.

Meanwhile, the $450,000 loan from Inflection Capital is due one year after closing and carries a $180,000 financing cost.

“I could raise equity for the project under current conditions, but the cost of capital is a bit high,” Stewart said. “If you’re an established name you can probably get something done, but most of us face difficulties. We chose to recently go with a debt deal because I hate to dilute at these prices, and we feel stories like ours are still overlooked.”

Orefinder shares have a 52-week trading  range of 1¢ to 8¢ per share, and closed at 6¢ at press time. The Toronto-based firm has 54 million shares outstanding for a $3.3-million market capitalization.