Anaconda sheds old study at Pine Cove (April 28, 2005)

An additional 943 metres worth of drilling earlier this year has allowed Anaconda Gold (ANX-V) to revise its feasibility study for the Pine Cove gold project, 6 km northeast of Baie Verte, Nfld.

The 12-hole drill program was designed to test several mineralized lenses for depth extensions, and to convert inferred resources in the optimized open pit to probable reserves.

Diluted probable reserves at Pine Cove are now pegged at 2.3 million tonnes grading 2.76 grams gold per tonne. The estimate is based on a cutoff grade of 0.95 gram gold, US$400 per oz. of gold, and a mining recovery rate of 97%.

The new study replaces a feasibility study completed last year that inadvertently included inferred resources in an economic cash flow model, something prohibited under National Instrument 43-101 standards.

The revised economic analysis, based on mineral reserves only, put the project’s net present value (at a 5% discount) at $7 million, down from the previous figure of US$7.6 million. Life-of mine cash costs have also increased by US$6 per oz. to US$289 per oz.; cash costs in the first year are expected to average US$217 per oz., down from the previously projected US$238 per oz.

On the plus side, the operation’s internal rate of return has increased to 25.1% from 23.9%, the estimated life-of-mine production is slightly better at 183,497 oz., and the mine life has increased to 6.7 years from 6 years.

In the end, the pre-production capital cost remains unchanged at $11.4 million.

Anaconda intends to begin mine construction later this year, pending governmental approvals and the completion of project financing.

Excluded from the revised study are 66,700 tonnes of inferred resources (currently classified as waste) grading 2.43 grams gold. An economic assessment of the potential impact of these resources suggests total production would climb to 188,434 oz., the IRR would come in at 26.3%, and the cash cost would slip to US$286. The net present value would ring in at just shy of $8 million.

Anaconda also says that potential to expand the reserves and mine life exists in the Romeo and Juliet zone, which hosts a high-grade quartz vein. Further drilling is required there.

Anaconda has earned a 30% interest in the 28-sq.-km project from New Island Resources (NIS-V). Anaconda can double its stake to 60% by arranging project financing and bringing the property to commercial production. Barrick Gold (ABX-T) retains a 7.5% net profit interest on the property. Also under the option deal, Anaconda is entitled to all project cash flow until its recoups its capital expenditures.