Positive economics for Gold Canyon’s Springpole

VANCOUVER — For US$438 million, Gold Canyon Resources (GCU-V) could transform its Springpole project in northern Ontario into profitable gold-silver mine, according to a new preliminary economic assessment (PEA).

The study investigated the economics of a conventional open-pit mining and milling operation at Springpole, which is located 110 km northeast of Red Lake. Gold Canyon’s CEO Troy Fierro says that the PEA “confirms our view the Springpole is a straightforward project, whereby large deposits with exceptional continuity and consistency allow for the application of proven, cost-effective mining and milling methods,” and that “the company looks forward to completing additional milestones, as we advance the project towards a production decision.”

The PEA determined that, for an initial investment of US$438 million, Gold Canyon could start mining and processing the gold and silver hosted in Springpole’s alkaline intrusive deposits. The pit would see three stages of development, beginning with a starter pit, which offers higher-than-average gold grades.

Three loaders, 13 haul trucks and three blast-hole drills would pull 50,000 tonnes per day of the material, 20,000 tonnes of which would be sent to the mill and the rest to the waste-rock facility. Ore sent to the mill would be ground and milled to 70 microns before undergoing gravity and carbon-in-pulp recovery, which is expected to produce average recoveries of 80% for gold and 85% for silver.

Springpole is home to 128 million indicated tonnes grading 1.07 grams gold per tonne and 5.7 grams silver per tonne, plus 25.7 million inferred tonnes averaging 0.83 gram gold and 3.2 grams silver. For the PEA these resources were constrained within an economic pit, which contained 72.4 million tonnes grading 1.25 grams gold and 6.31 grams silver.

That in-pit resource could feed the planned operation for 11 years, during which time the mine would produce 217,000 oz. gold and 1.2 million oz. silver annually. Each ounce of gold equivalent would bear a cash cost of US$636. The all-in cost to produce an ounce of gold equivalent, including initial and sustaining costs, would be US$860.

Using a gold price of US$1,300 per oz., a silver price of US$25 per oz. and a 5% discount rate, Springpole carries a net present value of US$579 million. The project is expected to generate a 25.4% pre-tax internal rate of return, which Gold Canyon could use to repay its capital costs in 1.7 years.

The PEA outlines several opportunities to improve economics at Springpole. First, metallurgical test work indicates that a finer grind could boost gold recoveries to 90%, which Gold Canyon plans to investigate in a trade-off study. Second, the resource could support a larger pit, especially if the throughput is increased. The pit could also have steeper walls to reduce the 1.7-to-1 strip ratio. Finally, there are other geophysical targets around the current resource that could be investigated.

Various companies have been exploring for gold at Springpole since the 1920s, but the project is not yet road accessible. In the winter Gold Canyon reaches the site via an 85 km ice road. Otherwise access is by float plane. The nearest road is 17 km away, and Gold Canyon has applied for permission to build a road by mid-year. Power is also nearby.

The market was nonplussed at Springpole’s PEA: Gold Canyon’s share price lost 3¢ on the news to close at 47¢. The company has a 52-week share price range of 43¢ to $2.09, and has 136 million shares outstanding.