Rubicon Minerals receives production closure plan approval for Phoenix project

Rubicon Minerals (TSE:RMX) (AMEX:RBY) said late Friday that the Ontario Ministry of Northern Development and Mines has approved the company's production closure plan for itsPhoenix Gold project in Red Lake, Ontario.

The approval allows Rubicon to continue its development and further construction of the mining facilities for the project.

“The approval of the Production Closure Plan is a significant milestone in the development of our Phoenix Gold Project especially considering that we made the initial discovery a little over three and one half years ago," said president and CEO, David Adamson.

"We are committed to both continuing our ongoing consultation with local Aboriginal groups whose traditional territory includes the private lands where the project is located and also building on existing agreements with these groups.

"To this end we are targeting conclusion of mutually beneficial agreements in 2012 covering the production phase of the project."

While the production closure plan approval provides for continued development and construction, the company said that three separate permit applications for amendments to existing approvals are pending.

These consist of an amendment to the permit to take water, the amendment to the air certificate and the amendment to the industrial sewage certificate. Rubicon currently expects all remaining permits to be in hand by the end of December 2012, it added.

In June, the company received the results of a preliminary economic assessment (PEA) on its F2 Gold System, part of the Phoenix project, indicating a cash cost as low as US$214 per tonne of processed material.

The report, prepared by AMC Mining Consultants, estimated 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 percent discount rate, and a pre-tax 28 percent 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 percent.

Rubicon controls over 100 square miles of exploration ground in the prolific Red Lake gold district of Ontario, which hostsGoldcorp's (TSE:G) high-grade Red Lake Mine.