Rubicon Minerals reports stellar economics for F2 Gold, $214 per tonne cash cost, 28% IRR

Rubicon Minerals (TSE:RMX) (AMEX:RBY) said Wednesday that it has received the results of a preliminary economic assessment (PEA) on its F2 Gold System, part of its Phoenix gold project in Ontario's Red Lake District, indicating a cash cost as low as US$214 per tonne of processed material.
The report, prepared by AMC Mining Consultants, estimates the F2 System will produce 180,000 ounces of gold per year in the base case scenario over a life of 12 years, with a production rate of 1,250 tonnes per day.
This, according to the study, would yield a net present value of $433 million, at a 5% discount rate, and a pre-tax 28% internal rate of return, with a payback period of 3.3 years from the start of production. These base case results were calculated using a gold price of $1,100 per ounce, the company said, and increase when using a higher, spot gold price.
Indeed, using a gold price of $1,500 per ounce, net present value, using the same discount rate, would jump to $933 million, while the pre-tax internal rate of return would climb to a whopping 48%.
"The PEA is a very good start. It indicates that the F2 Gold System is a potentially viable project capable of producing...over 200,000 ounces at its peak using conventional mining and processing techniques," said president and CEO David Adamson.
Initial capital costs were estimated at $214 million for the project, relatively modest considering the high grades of the project.
"The use of a 30% contingency on capital costs represents a reasonably conservative approach which recognizes the reality of cost escalation in the industry," added Adamson.
In addition to the strikingly encouraging financials, a significant portion of resources was also upgraded from the inferred to the indicated category, with the deposit remaining open in all directions. The company said it aims to continually upgrade resources through definition drilling.
At a cut-off grade of 5.0 grams per tonne (g/t) of gold, the preliminary report was based on an updated NI 43-101 compliant mineral resource estimate, containing an indicated resources of 1.03 million tonnes grading 14.5 g/t gold, or 477,000 ounces of gold, and an inferred resource of 4.2 million tonnes grading 17.0 g/t gold, or 2.3 million ounces of gold.
The conventional mining plan is based on a two-year pre-production phase and a producing mine life of 12 years, using 2.0 million ounces of gold, which now stands at 72% of the currently identified resources. The study noted that there may be opportunity to drive a ramp from the surface to accelerate production in the upper part of the deposit in the early years of the project, therefore changing the cash flow of the potential mine.
Results of metallurgical testing suggested that processing would be done using a straightforward combination of gravity followed by a carbon-in-leach process, with gold recoveries estimated to be around 92.5%, with potential for further optimization. The average mined gold grade would be 13.87 grams per tonne.
Rubicon, which has substantially all material permits in place required for the development and construction fo the project, is focused on the high grade Phoenix property in Red Lake, where it controls 100 square miles of exploration ground.
Earlier this week, the company agreed to option a majority position in its mineral rights held in the Long Canyon Trend of northeastern Nevada to Vancouver-based West Kirkland Mining (CVE:WKM).