Westhaven Gold‘s (TSXV: WHN) Shovelnose gold project in south-central British Columbia could produce a total of 534,000 oz. gold and 2.7 million oz. silver over 9.5 years, according to a preliminary economic assessment (PEA) released on Tuesday.
The report focuses on the South zone at Shovelnose and puts preproduction capital costs at $149.6 million and total capital costs at $247 million. Sustaining capital costs are estimated at $104.9 million.
The PEA gives Shovelnose an after-tax net present value (NPV), at a 6% discount of $222 million, with an internal rate of return (IRR) of 32.3%. Using spot prices of US$1,950 gold and US$24 silver, the NPV increases to $268.4 million and after-tax IRR to 37.2%. The study used a production rate of 1,000 tonnes per day.
Life-of-mine annual payable production is estimated at 56,100 oz. gold and 284,200 oz. silver at all-in sustaining costs per oz. gold equivalent of US$752. The study estimates average production grades of 5.37 grams gold per tonne and 28.62 grams silver.
“Results from this PEA certainly underpin a significant property value with serious economic benefits and provide an excellent cornerstone from which to build upon,” said company CEO Gareth Thomas. “Westhaven’s continued focus is on exploration and expanding the gold-silver mineral inventory outside the South Zone.”
Gareth also said that with a fully funded and ongoing drill program, the company expects to increase the property’s resource base as it explores the newer discoveries and tests outside targets.
He added that the South zone boasts high grades as well as wide, steeply dipping mineralized vein domains that contribute to a robust, high-margin mining opportunity.
In a research note on Wednesday, Red Cloud Research mining analyst Taylor Combaluzier wrote that the PEA is an important milestone for the company because it puts some economics to its flagship Shovelnose project and demonstrates its value to the market.
“Westhaven is one of our top picks and we believe that the South Zone is only the beginning of what could eventually become a multi-million-ounce gold camp at Shovelnose,” he said. “We expect Westhaven to continue working towards delineating sufficient gold resources that could be of interest to larger mining companies.”
Red Cloud raised its target price for Westhaven to $1.30 from its previous target of $1.10. The shares traded at 27¢ in Toronto on Wednesday afternoon. The company has a market capitalization of $38.6 and its shares traded in a 52-week window of 25¢ and 46¢.
The PEA also supersedes the initial, pit-constrained resource estimate for the South Zone that was published last year, increases contained metal amounts and more than triples grades. The new estimate pegs indicated resources at 2.9 million tonnes grading 6.38 grams gold for 612,000 oz. and 34.1 grams silver for 3.2 million ounces.
Inferred resources come to 1.3 million tonnes grading 3.89 grams gold for 166,000 oz. and 16.9 grams silver for 725,000 ounces.
Shovelnose covers 176.2 sq. km near the southern end of the Spences Bridge Gold Belt and borders the Coquihalla Highway, 30 km south of Merritt and about 285 km east of Vancouver. Shovelnose also lies just northwest of Hudbay Minerals’ (TSX: HBM; NYSE: HBM) Copper Mountain mine, which Hudbay acquired through a merger with Copper Mountain Mining in June.
3-D visualization of the Shovelnose project:
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