St Andrew forgoes feasibility at Holloway-Holt

St Andrew Goldfields’ (SAS-T, SASXF-o) goal of re-igniting mining at the former Holt and Holloway mines just east of Matheson, in northern Ontario, is getting ever closer.

With a fresh technical report in hand, St Andrew says a feasibility study isn’t needed and that it’s ready to push ahead with development once financing is secured.

How a lack of a feasibility study will play out with the banks that St Andrew intends to turn to for debt financing remains to be seen, but Scott Wilson Roscoe Postle Associates, which wrote the technical report, has backed St Andrew’s position.

“The preparation of a full feasibility study is not considered to be necessary based on the level of information available and the fact that the project involves the restart of existing mines where all of the facilities have been maintained and where diamond drilling and mine development over the course of the current shutdown has advanced the level of geological knowledge and increased the amount of development in place for the exploitation of mineral reserves,” Scott Wilson RPA wrote in its report.

The Holloway-Holt project draws its hyphenated name from the two historical mines the project encompasses, on opposite sides of Highway 101, east of Timmins and just west of the border with Quebec.

The Holt part of the name comes from the past-producing Holt-Mc- Dermott mine that churned out 1.37 million oz. gold from 1988-2004.

Holloway, which sits just 1 km away from Holt, went into production in 1996 and by 2005, had turned out roughly 900,000 oz.

St Andrew acquired the project in 2006 from Newmont Mining (NMC-T, NEM-n) for $40 million in cash and a 1% net smelter return royalty to be paid to Newmont.

The technical report estimates undiscounted cash flows of $118 million using a gold price of US$775 per oz. over the 6.5-year life of the operation. The study put the internal rate of return at a whopping 92% and preproduction capital payback at 2.3 years. The net present value, at $89.7 million, was calculated with a low discount rate of 5%.

St Andrew says it will cost roughly $23 million to get the mine into production. The operation is slated to turn out 88,000 oz. per year with total production costs of US$594 per oz.

Measured and indicated resources at the project — inclusive of reserves — stand at 4.2 million tonnes grading 6.8 grams gold per tonne for 919,000 oz. Within that, proven and probable reserves are pegged at 3.4 million tonnes grading 5.7 grams gold for 629,000 oz.

St Andrew has all the required permits in place, and being a recently producing mine site, the infrastructure is in good condition, it says.

Such infrastructure includes underground access near each of the mining areas, an operational 3,000-tonne-per-day mill, surface facilities and a tailings management facility.

To whip its balance sheet into the best possible shape so that debt financing will be easier to attain, St Andrew converted $42 million worth of its debt into equity, and plans to pay down its trades payable liability with the $20 million it is set to receive from the sale of its stock mill to Apollo Gold (APG-T, AGT-x).

It says it is still reviewing just how much funds it will be seeking. If and when the financing is put in place, St Andrew says it will take six months to achieve commercial production.

The company currently has roughly 311 million shares outstanding, and its shares have traded between 23 and 83 over the last year.