Radisson sees 74% IRR for O’Brien at spot gold price

Radisson Mining Resources (TSX-V: RDS, US-OTC: RMRDF) says a preliminary economic assessment for the former O’Brien gold mine in Quebec’s Abitibi region outlines a high-value project – as long as a beneficial milling arrangement be reached. The stock surged.

Based on a 5% discount rate and an average gold price of $2,550 per oz., O’Brien would have an after-tax net present value of C$532 million ($389 million), an internal rate of return of 48% and a two-year payback, Radisson said Wednesday. Were gold to average $3,300 an oz., close to current spot market levels, the after-tax NPV would climb to $871 million with an IRR of 74% and a one-year payback.

O’Brien – Radisson’s chief focus – is located near the Trans-Canada Highway, about halfway between the towns of Rouyn-Noranda and Val-d’Or. It sits in the Cadillac mining camp, which boasts three active mines and combined gold production, resources and reserves of 45 million ounces.

Radisson’s PEA doesn’t factor in any recent drilling results, relying instead on 2023 resource data. The company’s current drilling program, which is fully funded, is projected to cover up to 60,000 metres this year and next. Early successes mean that the resource may eventually be increased, CEO Matt Manson said Wednesday. 

“This is a project that’s growing, and this is a snapshot study, but the snapshot is pretty good,” Manson said during an online presentation. “The next time we put out a resource – this is a forward-looking statement, so all cautionary language applies – it’s probably going to be bigger.”

Radisson jumped 9.1% to C42¢ a share Wednesday afternoon in Toronto, giving the company a market value of about C$162 million. The stock has traded between 16¢ and 44.5¢ in the past year.

Resource

Indicated resources at O’Brien are estimated at 2.2 million tonnes grading 8.2 grams gold per tonne for 580,000 oz. of contained metal, Radisson said in 2023. Inferred resources are estimated at 6.67 million tonnes grading 4.4 grams gold for 930,000 oz. in contained metal.

O’Brien is projected to be an underground mine with minimal surface facilities. It produced 1.2 million tonnes grading 15.25 grams gold for a total of 587,121 oz. gold between 1926 and 1957, according to a 2019 technical report.

“The strategy is to develop O’Brien with offsite processing of our mined material and offsite tailings management,” Manson said. “If you’re developing a mine and you’re not building a dedicated mill and you’re not building a dedicated tailings facility, you’re getting a lot of value with a relatively low initial capital cost.”

New infrastructure

Initial capital costs for the project would C$175 million, while life-of-mine sustaining capital is estimated at C$173 million. Cash costs would average $861 an oz., with all-in sustaining costs estimated at $1,059 an ounce.

Radisson is not planning to use the former mine’s old infrastructure, Manson said. Instead, the company will develop new infrastructure – such as twin ramps – on the Eastern side of the property to maximize mining efficiency, he said.

If the project does go ahead, construction would require about 15 months, Manson said.

Radisson envisages an 11-year mine life with 740,000 oz. mined and 647,000 oz. recovered at an average recovery rate of 87%. Annual production between years two and eight would be 70,000 oz., generating average annual after-tax free cash flow of C$97 million.

Toll milling

A key assumption is off-site toll milling, which reduces capital costs, development risk and minimizes the project’s footprint. A milling assessment completed this year demonstrated the potential viability of processing O’Brien mined material at the neighbouring Doyon gold mill, which is part of Iamgold’s (TSX: IMG; NYSE: IAG) Westwood mine complex. Doyon is located 21 km west of O’Brien.

Now that the PEA has been completed, Radisson is planning to conduct environmental studies, complete additional engineering work, consult with local communities and hold talks with potential processing partners, Manson said in Wednesday’s release. He didn’t elaborate.