Queenstake tables study for Magistral

A feasibility study of the Magistral gold project in Mexico’s Sinaloa state indicates that the low-grade resource could be economically viable.

“The potential of the project to demonstrate a robust rate of return has been realized,” says Christopher Davie, president of Queenstake Resources (QRL-T), which owns and operates the mine. “The project should attract financing on competitive terms and we look forward to building the project over the coming year.”

The study, conducted jointly by Kappes Cassiday & Associates of Reno, Nev., and Pincock Allen & Holt of Denver, Colo., calls for an open-pit, heap-leach operation, which would treat 6.1 million tonnes grading 1.86 grams gold per tonne.

Four pits would be mined: San Rafael; Samaniego Hill; Sagrado Corazon; and Lupita. Also, historic tailings in the Samaniego area would be retreated.

The study suggests that over a mine life of seven years, Magistral would be capable of producing 268,500 oz. gold at a recovery rate of 72.9%. Life-of-mine capital costs are pegged at US$17.1 million.

Assuming a gold price of US$300 per oz, the project would yield an internal rate-of-return of about 17.7% and a net present value of US$10.5 million. Both figures are after-tax, with no discount rate.

Despite a break-even gold price of US$249 per oz., the company is confident Magistral will be a profitable, low-cost operation.

Queenstake estimates that startup could occur within a year of the commencement of engineering work.

The meat of the resource lies in the San Rafael and Samaniego Hill zones. San Rafael hosts a proven and probable reserve of 1.3 million tonnes grading 2.25 grams gold, equivalent to 92,900 contained ounces, whereas Samaniego Hill hosts 3.1 million tonnes grading 1.93 grams, equivalent to 193,800 oz. The Sagrado Corazon-Lupita zone contains a lower-grade 1.6 million tonnes averaging 1.38 grams, or 55,700 oz.

In addition, tailings from historic mining operations are estimated to host some 11,600 oz. in 166,000 tonnes averaging 2.17 grams. Stripping ratios vary from 7.3-to-1 at Samaniego Hill to 1.4-to-1 at Sagrado Corazon.

The Magistral project comprises 18.2 sq. km, 140-km southeast of the capital city of Culiacan. The project is accessible from the nearby village of Mocorito, along 22 km of gravel road leading through El Valle and Lo de Gabriel.

Repadre Capital (RPD-T) holds a sliding-scale net smelter return royalty in the Magistral project. The royalty rate is 1% on the first 30,000 oz. of gold produced, increasing to 3.5% on the next 350,000 oz. and 1% thereafter.