Probe Mines’ high-grade underground resource at Borden

Probe Mines (TSXV: PRB; US-OTC: PROBF) has published the first high-grade underground resource estimate for its Borden gold project, located on the outskirts of Chapleau, west of Timmins, Ont.

Borden has a constrained underground resource of 9.3 million indicated tonnes grading 5.39 grams gold per tonne for 1.6 million oz. gold, plus another 3.03 million inferred tonnes of 4.37 grams gold for 426,000 oz., using a 2.5-gram gold cut-off grade.

“We’re really, really excited. This resource estimate was better than we’d expected, and we’ve maintained a good grade that could support the underground,” David Palmer, Probe’s president and CEO, said in an interview.

The veteran geologist-turned-executive notes the initial underground resource gives the company more confidence that there is critical mass at depth, and that Probe’s three previous resource estimates were constrained within a pit.

Probe has transferred 750,000 oz. of high-grade material from the proposed pit to the maiden underground resource for the High Grade Zone (HGZ), resulting in fewer open-pittable ounces. The current pit-constrained resource stands at 70 million indicated tonnes averaging 1.03 grams gold for 2.32 million oz. gold, plus 247,000 inferred tonnes at 0.8 gram for 6,000 oz.

The updated estimate — calculated at a US$1,300 per oz. gold price — is based on 224,000 metres and tests the deposit along a 3.7 km strike length and to a vertical 650-metre depth. It also builds on the HGZ discovery in late 2012, which changed how the company perceived the deposit.

Borden — which was thought to be bulk-tonnage and low-grade — could soon become a stand-alone underground operation.

Palmer speculates the underground mine could cost $250 million to build and support a mining rate of 2,500 to 3,500 tonnes per day, but cautions that these figures are conceptual. Once Probe recoups its costs and generates cash flow, it will look into expanding to the open pit and mining the lower-grade material. “The open pit gives the company optionality,” Palmer adds.

Raymond James analyst David Sadowski says the new resource surpassed his metal expectations but slightly missed his grade target. He notes it could provide the basis for “a robust, low-cost underground mine.”

Probe plans to complete a preliminary economic assessment (PEA) by year-end. “In addition to the PEA, we will be working on more advanced studies to facilitate the project timeline, including metallurgical, geotechnical and environmental programs, as well as community initiatives,” Yves Dessureault, Probe’s chief operating officer, said in a statement.

Probe will continue its infill drill program and regional exploration. It has allocated $12 million to drill 90,000 metres this year.

Along with unlocking the potential at the Borden deposit, which is open in all directions, the firm will explore the surrounding areas, which have been “virtually untouched . . . so we’ve got a blank canvas to work on, and from a geologist’s point of view, it’s a really nice project to have that exploration upside,” Palmer says.

The Borden project lies in an area that most geologists overlooked because it contains high-grade metamorphic rocks, or the “wrong” rock type, Palmer explains.

However, that changed after local prospectors Jack Robert and Mike Tremblay stumbled upon an outcrop with low-grade gold in the project area. “I have to admit there was potential there, but what kind of sealed the deal for us was the fact that it was only a kilometre off a highway,” Palmer recalls. “We looked at it and said, ‘OK, you’ve gotta squint to see potential, but it is going to be so inexpensive to go in and test it.’ And so we said, ‘What the heck, let’s give it a shot. Who knows what could happen?’ And from our first drill hole we’ve never looked back. We went from zero to the resource estimate that we are looking at now.”

Probe announced the Borden discovery in November 2010. “When we first looked at it, we thought it was an Archean porphyry system, much like the bulk-tonnage deposits of Osisko and Detour . . . and all of a sudden, about a year and a half ago, we took our final stepout and hit high grade, and overnight the project has evolved from a bulk-tonnage deposit — which thankfully we are not looking at these days — to a high-grade deposit, which almost evolved to meet the challenges of the market,” Palmer says.

Last year, the Ontario Prospector’s Association awarded the 2013 Ontario Prospector Award for the Borden gold discovery to Robert, Tremblay, Probe’s CEO and his exploration team.

The company describes Borden as a “structurally controlled, Archean, lode-gold deposit hosted by a ductile shear zone.”

Probe intends to fast-track the project to a feasibility study once it publishes the PEA. 

Other than the typical “growing pains” of financing new developments as a junior, Palmer says the Borden deposit would be relatively straightforward to develop.

“I must admit that as deposits go, the consistency and continuity [of mineralization]— it is really leaping over any of the hurdles that are in the way of most projects. We are really happy about the way it is advancing,” he says.

Probe has $21 million in its treasury, which could fund its remaining initiatives for the year.

Shares fell 11% to $2.45 on June 11, a day after the resource update.

Raymond James’ Sadowski has a $3.20 price target and an “outperform” rating on the stock.