Prodigy Gold almost triples projected NPV for Magino, shares jump

Prodigy Gold (CVE:PDG) Thursday unveiled an updated preliminary economic assessment (PEA) which almost tripled the net present value (NPV) of its 100 percent-owned Magino gold project in northern Ontario to $939 million, at a five percent discount rate.
A previous PEA completed in April gave a net present value of $351 million for the project, also at a five percent discount rate.
Thursday morning, shares in Prodigy rose 16 percent to $1. For the year to date, the junior explorer's stock is up 159 percent.
Prodigy Gold president and CEO, Brian J. Maher, said: "This update to the Magino mine PEA highlights a significant increase in the scope of our proposed mining operation.
"The proposed mill expansion to 20,000 tonnes per day allows Prodigy to expand the Magino gold production profile to 249,300 ounces of gold per year, establishing the project as one of the larger proposed gold mining operations in North America.
"The PEA will serve as the template for a full feasibility study, expected to be completed in 2012. The results of the PEA validate our operational model for Magino and the company looks forward to rapidly advancing the project in the coming year."
Thursday's updated, NI 43-101-compliant PEA was completed by Wardrop, A Tetra Tech Company, with contributions from Snowden Mining Industry Consultants, and demonstrates robust economics for the proposed open pit gold mining project at Magino, the Vancouver-based junior explorer said.
Magino itself contains indicated gold resources of 2,176,000 ounces grading 1.00 g/t gold (67.6 million tonnes) and 1,721,000 ounces of inferred gold resources grading 0.99 g/t gold (54.2 million tonnes) at a cut off grade of 0.35 g/t gold.
The project is located 40 kilometres northeast of Wawa, Ontario, in Finan Township, approximately 14 kilometres southeast of the town of Dubreuilville. The property comprises seven patented mining claims, four leased mining claims and 63 unpatented mining claims totaling 1,910 hectares.
Prodigy is currently evaluating the development of Magino as an open-pit mining opportunity with the potential for deeper, higher grade gold production.
Life of mine (LOM) gold production is now projected at more than 2.614 million ounces of gold, an increase of approximately 1.1 million ounces on the prior PEA, averaging 249,300 ounces a year over an 11-year mine life.
Average LOM cash operating costs are estimated to be US$461 (C$496) per ounce, the company said.
Base case internal rate of return is 36 percent, with a payback period estimated to be 1.9 years. Pre-tax cash flow from operations over the proposed LOM is estimated at $2.08 billion, with net cash projected to be $1.52 billion over the life of the mine.
Total mineable resources are seen to be 74.234 million tonnes, grading 1.15 g/t gold with a strip ratio of 2.1:1, and gold production in the first year is projected to be approximately 350,000 ounces at a mined grade of 1.57 grams per tonne (g/t) gold.
Positive news from Magino has been flowing thick and fast this year. In early August, Prodigy shares received a boost when the company encountered "encouraging" drill results. Among them, hole MA11-105 intercepted a thick zone of gold mineralization in the southwest area at 161.1 metres of 1.35 g/t gold.
Overall gold sample recoveries from 20-hole test drilling gave an average gold recovery of 92 percent.
Prodigy Gold was formed last year from the merger of Kodiak Resources and Golden Goose Exploration. The company's gold projects - including Magino - are located between the prolific Red Lake and Timmins gold camps.
The company's portfolio also includes the West Millennium, Saskatchewan uranium property and the Otish Basin uranium properties in Quebec.