Treasury boasts Goliath’s positive economics

Treasury Metals (TML-T) has a potential gold mine on its hands. According to a preliminary economic assessment, Goliath, the company’s flagship gold project in northwestern Ontario, can even at this relatively early stage, supply a modest return on investment.

Using a US$850-per-oz. gold price and 5% discount rate, the aftertax net present value for the project came in at $23 million and the internal rate of return was 15%. The payback period was estimated at four years.

“This initial analysis of the Thunder Lake gold deposit, which only contemplates about 50% of the current contained ounces, already demonstrates its economic potential and provides us with the parameters necessary to develop the project and increase its economic profile,” Scott Jobin-Bevans, Treasury’s president and chief executive, said in a statement.

The study was done by A.C.A. Howe International Limited and considers surface and underground mines with a standalone milling complex at the site, which sits 20 km east of Dryden, Ont.

A future mine could produce an average of 48,000 oz. gold per year and 390,000 oz. gold over 8.5 years at a production rate of 1,500 tonnes per day.

The study says it would cost Treasury $38 million to build the mine, with life-of-mine capex climbing to $59 million.

With the positive results, Treasury says it will move towards feasibility. The company says it has already begun infill drilling to upgrade inferred resources to indicated resources. It will look to expand the surface and underground resources along strike to the west and northeast of the deposit, where it has seen excellent historical high-grade intercepts.

“We will also continue to target the potential high-grade underground resources below 800 metres depth where our recent drilling has shown excellent potential,” Jobin- Bevans said.

Surface and underground indicated resources for the project stand at 3.4 million tonnes grading 2.5 grams gold per tonne for 270,000 oz. while inferred resources total 10.6 million tonnes of 2.7 grams gold for 930,000 oz. gold.

Those numbers were calculated using a cutoff grade of 0.5 gram gold for surface resources, which are defined as less than 100 metres deep, and 2 grams gold for underground resources.

So far, the estimate doesn’t include results from the 10,000 metres of drilling done this year.

In Toronto on July 14 — the day the study results were released — the company’s shares were off a penny to 34¢ on 32,000 shares traded. They had, however, climbed 6¢ the day previous, closing at 35¢.