When mining financier Willie McLucas first visited Orex Exploration’s (TSXV: OX) Goldboro project in Nova Scotia in August 2013, he was excited by what he saw: One of Canada’s earliest gold mines that could become a producer once again in the short-term if the company got it right, and a property that offered exploration upside that could be funded from internally generated revenues. It didn’t take him long to jump aboard as president and CEO.
“I used to be chairman of Perseverance Corp., an ASX-listed company acquired by Northgate (since sold on), which owned the Fosterville mine, 22 km from Bendigo, home to the largest saddle reef system in the world,” he tells The Northern Miner. “The Bendigo mine in the 1890s produced something incredible — like 23 million oz. gold. There was no way with the scale of the acreage available to Orex that Goldboro was ever going to be that size, but it had potential at depth, and there appeared to be no doubt that it was a saddle reef system.”
In April McLucas and his Orex team completed a preliminary economic assessment of Goldboro, 175 km east of Halifax, and the results, he says, justify his initial optimism. “I am pleased that what I got excited about in [late 2013] is now supported by facts rather than just my enthusiasm,” he says.
MineTech International completed the PEA after reviewing the project’s past-producing Boston Richardson mine and its East and West Goldbrook deposits, concluding that an 11-year underground operation could be developed with a US$500 per oz. production cash cost.
The study envisions initial output of 21,000 oz. gold a year after mill recovery and a net smelter return royalty (NSR), which would rise to over 30,000 oz. per year (after mill recovery and NSR) after expanding in year three from 350 tonnes per day to 500 tonnes per day. Peak production in years seven and eight would total 40,000 oz. gold per year.
Using a US$1,200 per oz. gold price and a 5% discount rate, MineTech calculates Goldboro would have an after-tax net present value of US$98 million, and a 52% after-tax internal rate of return.
The PEA forecasts that the capex required for pre-production — plus first-year capital — would be US$24.3 million, including a 20% contingency, with another US$3.7 million in working capital needed. The planned expansion to 500 tonnes per day in year three would cost US$8.8 million. Sustaining capital over the mine’s life would be US$13.4 million, or US$2.2 million a year, starting in year four.
Mining would use an existing portal and developed areas and, as a result, only minor development work would be needed to access production in the first two years of mine life.
“Initial workings will be through the ramp at Boston Richardson and will need to be deepened during year two, and we will also begin development at East Goldbrook, with production coming from two sources,” McLucas says.
The board will search for a debt-funding package to minimize dilution to shareholders. “I’ve already been speaking to people in London who are providers of mine finance — which is my background — who are interested in debt-financing the project,” McLucas says. “With a company capitalized at $4.5 million we didn’t want to dilute equity. We will have to slightly, but we don’t want to drain away $25 million in new equity. We want to raise as much as possible by way of debt.”
At press time the company was trading at 3¢ per share with a 52-week range of 1¢ and 3¢. The company has 164 million shares outstanding.
MineTech’s PEA is based on a measured resource of 149,000 tonnes grading 5.8 grams gold per tonne for 27,900 contained oz. gold, and an indicated resource of 1.44 million tonnes at 7.8 grams gold for 358,700 contained oz. gold using a 3-gram-gold cut-off grade. Inferred resources add 1.54 million tonnes at 6.95 grams gold for 343,400 contained oz. gold.
Orex’s Goldboro claims are centered on the past-producing Boston Richardson mine. Since acquiring the property in 1988, Orex and various partners have completed 389 surface and underground drill holes totalling 66,300 metres.
Orex has also established new underground workings and associated ramp access to near-surface mineralized zones; rehabilitated the historic Boston Richardson shaft; and completed several resource estimates, gold-grade distribution studies and a metallurgical program.
Metallurgical test work has shown that 70% of the gold at Goldboro can be recovered using simple gravity separation, and a flotation concentrate could recover another 20–30%. The plan is to treat concentrate on-site and produce doré bars.
According to a 2013 technical report on the project, government records show that the Boston Richardson mine was the largest historic gold producer of the district, and is reported to have started production in 1893 at 13.03 grams gold per tonne. Before the mine was shut down in 1910, it had produced 54,871 oz. gold.
Different companies worked on the property over 55 years, but no significant programs were recorded.
I’d be googling Willie McLucas pretty hard before I invested any money with him. He’s got a very checkered background over the past three decades. You can read for a few hours concerning some of his failed escapades if you are interested in doing any diligence herein. Buyer beware.