Sabina finds deeper gold at Back River in Nunavut

Drilling during Sabina Gold & Silver’s (TSX: SBB) second-quarter exploration program has extended mineralization 300 metres down-plunge of the Back River gold project’s existing resources in southwestern Nunavut.

Drill hole 17GSE513 stepped out 300 metres down-plunge of the existing resource structure at the project’s Llama deposit and intersected 48 metres of altered and mineralized iron formation that included a 6.52-gram gold intercept over 8.3 metres from 619 metres deep. Another hole, 17GSE512, cut 6.30 grams gold over 2.7 metres from 604 metres deep.

“Results bode well for future resource growth,” Andrew Kaip of BMO Capital Markets said in a research note. “The Back River project represents an attractive feasibility study stage project at advanced permitting in a safe jurisdiction, and with a large reserve base containing above-average grade.”

The Llama deposit remains open and hosts 3.6 million tonnes grading 6.50 grams gold for 743,000 measured and indicated oz. gold and 295,000 tonnes grading 6.77 grams gold for 64,000 inferred oz. gold.

Sabina says that Llama, which has been intersected to 550 metres deep, is analogous to other gold-bearing iron formation deposits around the world, including Goldcorp’s Musselwhite gold complex in Ontario, where mining continues along structures that are well in excess of 1,000 metres and remain open.

Sabina is also certain that Back River’s Umwelt Vault zone is analogous to other iron formation deposits. As part of the spring exploration campaign, drill results released in May included an intersection in hole 17GSE511B of 16.86 grams gold over 13.5 metres from 734 metres. The strongly mineralized zone was intersected at 675 metres deep and open east and down-dip.

Bruce McLeod, Sabina’s president and CEO, said in prepared remarks that there is potential at the Umwelt Vault zone “to grow a high-grade portion of the deposit with grades that are two to three times our resource average.”

The Umwelt deposit hosts 9.05 million tonnes grading 6.90 grams gold for 2.03 million measured and indicated oz. gold, as well as 1.91 million tonnes of 11.01 grams gold for 676,000 inferred oz. gold.

Parts of these resources are included in the current feasibility study for open-pit and underground development.

The second-quarter drilling program consisted of five holes totalling 2,700 metres.

The company plans to examine these targets in a follow-up program that consists of at least 4,000 metres of drilling, along with geologic mapping, and till and rock sampling.

A feasibility study in September 2015 on the fully owned project envisioned a mining operation producing 200,000 oz. gold a year for 11 years, with a $415-million initial capital expense payback in just under three years. At a US$1,150 per oz. gold price, and a 0.80 U.S.-Canadian dollar exchange rate, the study forecast a potential 24.2% after-tax internal rate of return.

Sabina is undergoing an environmental assessment at Back River, and final public hearings with the Nunavut Impact Review Board (NIRB) were held from May 31 to June 3.

BMO’s Kaip expects the NIRB will issue its findings by the end of July.

The company acquired the project in late 2009, and advanced the project after discovering gold deposits in banded-iron formation during 2010 and 2011.

The project is 75 km southwest of the Bathurst Inlet and 520 km northeast of Yellowknife in the Northwest Territories.

Back River is also 50 km southeast of Glencore’s (LON: GLEN) Hackett River silver-zinc project, where it holds a silver royalty. Sabina’s royalty is 22.5% of the first 190 million oz. silver produced and 12.5% of all silver produced thereafter.

BMO’s Kaip has a $2.40-per-share target price on Sabina shares.

At press time, Sabina was trading at $1.80 per share in a 52-week range of 84¢ (December 2016) to $2 (May 2017).