Alaska-focused developer Trilogy Metals (TSX: TMQ; NYSE-AM: TMQ) has released an updated feasibility study for its Arctic copper-zinc-lead-silver-gold project in the Ambler mining district, outlining slightly weaker economics amid an inflationary backdrop.
Trilogy, which has a 50% stake in Ambler Metals, a joint venture with South32 Ltd. (LSE: S32; ASX: S32; JSE: S32), outlined a 10,000-tonne-per-day conventional open pit mine and mill operation for a minimum mine life of 13 years.
It was forced to update the 2020 Arctic feasibility study in compliance with regulatory requirements.
Annual metal production falls slightly in comparison to the 2020 feasibility study to 148.7 million lb. copper, 172.6 million lb. zinc, 25.8 million lb. lead, 32,539 oz. gold and 2.8 million oz. silver.
The capital outlay has jumped 40% to US$1.7 billion, up from $1.2 billion previously, with the new study doubling the mine closure and reclamation budget to US$428.4 million, among other line-item increases.
Under the new mine plan, the all-in cost net of byproduct credits jumped 64% to US$1.61 per lb. copper from US98¢ previously.
A drill rig at Trilogy’s Arctic property in western Alaska. Credit: Trilogy Metals.
All things considered, the project economics held up reasonably well. The after-tax net present value (at an 8% discount) fell marginally to US$1.1 billion from US$1.13 billion previously, with the internal rate of return dropping to 22.8% from 27.1%.
A probable reserve base of 46.7 million tonnes grading 2.11% copper, 2.9% zinc, 0.56% lead, 0.42 gram gold per tonne and 31.8 grams silver underpins the feasibility study.
BMO Capital Markets said the cost increase was not wholly unexpected. “Albeit the updated cost profile coming in a bit above our estimates, in our view, the economics of the Arctic project still stand up well,” wrote mining analyst Rene Cartier in a note to clients. “In our view, the operating cost profile of the Arctic project, despite the inflation, still remains attractive.”
Ambler Metals has budgeted US$9.2 million to advance the Upper Kobuk mineral projects (including the nearby Bornite copper project) and US$1 million for the Ambler Access Project, which is caught in legal limbo.
Trilogy expects the U.S. Bureau of Land Management to issue a draft supplemental environmental impact statement for the road by June and a final statement by December.
Ambler Metals is well-funded with US$80.8 million of cash. For the rest of the year, the focus is on advancing engineering efforts and resource estimation at Arctic as well as preparations for submitting the mine permits.
Trilogy’s equity last traded up 1.3% at 80¢ apiece, having tested 68¢ and $1.97 over the past 12 months. It has a market cap of $117 million.
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