Gold Resource Corp. in Denver has released the results of a SK1300 compliant Technical Report Summary for an Initial Assessment, which comprises an updated Mineral Resource Estimate and a financial analysis for the company’s Back Forty Project located in Menominee County in the Upper Peninsula of Michigan.
The project, which spans 1,000 acres, consists of two open pit mines, an underground mine, a nominal 2,500 metric tons per day (tpd) processing plant, and the supporting infrastructures.
The results suggest a moderate capital investment and a 9-year mine life during which 504 koz of gold, 6,150 koz of silver, 61.6 Mlbs of copper, and 778 Mlbs of zinc would be produced, according to the company.
A 21-month construction period would be followed by open pit mining in the Pinwheel Pit, followed by the Main Pit, for the first three years. Development for the underground mine would start in the second year from inside the Main Pit to support the processing plant starting in the fourth year.
The project faces some opposition both in Michigan and neighboring Wisconsin. It is located in Lake Township, 15 miles west of Stephenson, in the south central section of the U.P.
“We are very happy with the results of the study,” says Allen Palmiere, CEO of Gold Resource. “It confirms our belief that the Back Forty Project represents an opportunity to create substantial value for our shareholders.
“This study is the result of very strong technical work and represents a compete revision to the mine plan, process flow, project footprint, and the elimination of any wetlands impact. It has been designed to minimize the environmental impact by reducing the footprint and adopting dry-stack tailings management, thus eliminating the need for a tailings dam. We are very pleased with the results and are looking forward to advancing the project.”
The Initial Assessment integrates the work done by InnovExplo Inc., Foth Infrastructure & Environment, and GRC since the 2020 NI43-101 Preliminary Economic Assessment to improve the project while at the same time reducing its environmental impact.
A 21-month construction period would be followed by open pit mining in the Pinwheel Pit, followed by the Main Pit, for the first three years. Development for the underground mine would start in the second year from inside the Main Pit to support the processing plant starting in the fourth year.
STUDY HIGHLIGHTS:
- $214.4 million after-tax net present value at a 6% discount rate (“NPV6”) (pre-tax $291.5 million) at a base case metal prices of $1,800 per ounce (“/oz”) for gold, $23.30/oz for silver, $3.90 per pound (“/lb”) for copper, and $1.25/lb for zinc;
- 25.7 percent after-tax internal rate of return (“IRR”);
- $25.8 million average annual after-tax free cash flow (“FCF”);
- $361.2 million cumulative after-tax life-of-mine (“LOM”) FCF;
- 56,000 ounces (“oz”) of gold, 683,300 oz of silver, 6.8 Mlbs of copper, and 86.4 Mlbs of zinc LOM average annual production
- 504 koz of gold, 6,150 koz of silver, 61.6 Mlbs of copper and 778 Mlbs of zinc LOM total cumulative metal production;
- 2.37 grams per tonne (“g/t”) gold, 26.2 g/t silver, 0.39 percent copper, and 4.29 percent zinc for $210 per tonne (“$/t”) net smelter return (“NSR”) average LOM diluted head grade;
- Average overall LOM recovery rates 77.8% for gold, 86.8% for silver, 86.4 percent for copper, and 95.7 percent for zinc;
- 84.81 $/t milled LOM total unit operating costs;
- $325.1 million initial capital expenditures (including $28.9 million in contingency costs);
- $102.8 million sustaining capital expenditures (including $8.7 million in contingency costs).
ECONOMIC ANALYSIS
The company used a base case where material from the inferred resource category was included in the mine plan, and an alternative case without, to highlight the sensitivity of the Project to the resource categories, the high proportion of indicated material and the possible upside of the actual case. The base case has 2.5 percent of the mill feed from the Inferred category. The metal price assumptions are based on the median of the consensus prices from analysts collected by GRC. These prices are $1,800/oz Au, $23.30/oz Ag, $3.90/lb. Cu, and $1.25/lb Zn. Based on these assumptions, the Project generates an after-tax NPV6 of $214 million and an after-tax IRR of 25.7% on an unlevered basis when Inferred resources are included in the mine plan. The case without Inferred resources shows an after-tax NPV6 of $194 million and an after-tax IRR of 24.5 percent under the same assumptions. The economics of the Project are most sensitive to gold and zinc prices, followed by operating costs and capital costs.
CAPITAL COSTS
The total initial capital cost for the construction of the Back Forty Project is estimated at $325.1 million. The sustaining capital, which includes the capital required to bring the underground mine into production starting in 2028, is estimated at $102.8 million. In both cases, contingencies and indirect costs are included in the estimations.
OPERATING COSTS
The operating costs estimate includes mining, both open pit and underground, ore processing, concentrate shipping, tailings management, water treatment, and general and administration expenses. The average operating costs over the 9-year mine life is estimated to be $84.81/t. The open pit mining operating costs are estimated at $6.04/t mined while the underground mining costs are estimated at $38.04/t mined.
MINING
The mine plan consists of a combined open pit and underground mining operation at an average 2,600 tpd. Open pit mining will take place from Year 1 to Year 4. Underground development will be initiated in Year 2 and underground production mining will continue to Year 10.
Open pit mining will occur in two distinct areas, the Pinwheel pit and the Main pit. The Pinwheel pit will be mined first and contains material with a higher grade in gold and copper than the average resource. This pit will be mined for 18 months. The Main pit will be started at the end of year 1 to complement the production of the Pinwheel pit. Waste material from the Main pit will be used to backfill the Pinwheel pit once its resources are exhausted.
The development of the underground mine will start at the end of Year 2 with a portal located inside the Main pit. Production from the underground mine will start replacing the open pit one in Year 4. Mining underground is accomplished mostly from long hole open stoping with stopes averaging 24,000 t.
PROCESSING
The processing facility will be used to process at a nominal rate of 2,500 tpd of mineralized material and up to 2,800 based on feed material characteristics over the LOM. The flowsheet consists of a three-stage crushing followed by ball mill to a target P80 size of 50 microns. The facility will have two flotation circuits to recover copper and zinc. The copper and zinc circuits will see their respective concentrate filtered to reduce residual moisture content to approximately 10 percent. Both concentrates will be loaded for shipment to smelters.
Zinc flotation tailings will be leached and dewatered using a press filter. Solids will be washed and dewatered to 15 percent humidity in the press filter before being sent to dry stack. Filtrate from the press filter will be processed through reverse osmosis membrane for salt rejection and through the SART circuit. Cyanide species from the solution will be converted to NaCN. Precious metals are recovered from solution in zinc precipitation circuit. Precious metal barren solution will be recirculated to leaching and recycled cyanide will be re-introduced. Cyanide destruction will be performed on excess dilute solution from the press filter not processed by SART and released to the collecting pond.
Paste backfill will be installed later during the life of mine when the underground mine will be in operation.
The proposed process will recover zinc and copper concentrates, as well as gold and silver in the form of doré bars. SART process will also generate copper and zinc concentrate. The copper concentrate flotation will have an estimated average of 14 percent copper content as well as payable gold and silver; the zinc concentrate flotation will have an estimated average of 51 percent zinc content.
INFRASTRUCTURES
The Back Forty Project is situated in a location with close proximity to existing infrastructure. There are road networks on either side of the property and a high voltage electrical transmission corridor near the main access county road, providing grid power. Water is collected from different areas within the property at the Contact Water Basin and either re-distributed for use within the facility or treated for discharge.
The project site can be largely divided into five main areas:
- Access from County Road 356 leading to security gates for site entry.
- Facility Storage Areas: Waste Rock Management Facility (“WRMF”), Two Overburden Management Facilities (“OMF”), Ore Storage Facility (“OSF”) and Tailings Management Facility (“TMF”), as well as the associated water collection ponds.
- Central area where the crushing, mill, administration, electrical substation, shop and ancillary facilities are located.
- Contact Water Basin (“CWB”) and Waste Water Treatment Plant (“WWTP”).
- The open pit area is comprised of the two open pits, the underground portal located inside the Main pit and the underground ventilation infrastructures to the southwest of the open pit. To the east of the open pit there is an area designated for ore stockpiling, and adjacent to this is the overburden stockpile
Gold Resource is a gold and silver producer with its operations centered on the Don David Gold Mine in Oaxaca, Mexico, and its Back Forty gold-copper development project in Michigan.
The company’s focus is to unlock the significant exploration upside of its mine and surrounding large land package to the benefit of its existing infrastructure.
For more information, visit goldresourcecorp.com.
To read a DBusiness feature about the project, visit here.
