Extorre Gold Mines (TSE:XG)(AMEX:XG) Monday unveiled a preliminary economic assessment (PEA) for its Cerro Moro gold-silver project in Santa Cruz province, Argentina, putting gold yield at 248,036 ounces per annum in the first five years.
Monday morning, shares were up four percent at $6.22.
Projected precious metal production over the nine year life of the
project is 848,000 ounces of gold and 47.2 million ounces of silver for
gold equivalent production of 1.79 million ounces.
Gold contributes approximately 48 percent of the projected revenue
stream, with silver contributing 52 percent, the company said.
A number of different production scenarios were considered for the
PEA, ranging from 1,000 tonnes per day (tpd) to 1,500 tpd. Production
scenarios of 1,150 tpd and 1,300 tpd were selected as being the most
potentially viable throughput rates with respect to maintaining a
consistent gold-silver stream from the current mineral resource.
The economic modelling used a base case metal price assumption of US$1,320 per ounce for gold and US$26 per ounce for silver.
The 1,300 tpd throughput scenario is the preferred alternative due to
higher metal production in the early years, the company said. Further
studies will continue to evaluate mining and scheduling options to
enhance project economics.
Extorre said that exploration drilling will continue with the
objective of discovering further high-grade mineralization to replace
lower-grade material later in the production profile. Results from
current drilling will be released as they are received, Extorre said.
The PEA contemplates using a combination of open pit and underground
mining methods, and is based on the November 2011 mineral resource
estimate prepared by Cube Consulting.
Extorre said that average production for the first five years at a
1,300 tpd throughput is seen at 248,036 gold equivalent ounces per year,
comprising gold production of 123,017 ounces per year plus silver
production of 6.251 million ounces per year.
In this scenario, the mine has a 24-month payback period and pretax
internal rate of return of 63 percent and a pretax net present value, at
a five percent discount, of $737.4 million.
In the 1,150 tpd throughput scenario, avarage five-year production is
seen at 216,876 gold equivalent ounces per year, comprising gold
production of 109,985 ounces per year plus silver production of 5.344
million ounces per year.
With this throughput, payback is seen in 22 months with a pretax
internal rate of return of 66 percent and a pretax net present value, at
a five percent discount, of $723 million.
In the first five years, Extorre said that average mine site cash
costs are seen at $303 per ounce gold at 1,300 tpd, and $304 per ounce
gold at 1,150 tpd.
Initial capital expenditures for the 1,300 tpd and 1,150 tpd
scenarios are estimated at $284 million and $257 million, including
refundable VAT, respectively.
Operating costs for open pit mining increased to $2.46 per tonne and
$2.39 per tonne for the 1,300 tpd and 1,150 tpd scenarios, respectively,
in response to increased fuel, local labour costs and the effect of
inflation on other costs, the company said.
Average mine site cash costs during the first five years of
commercial production are projected to be $304 per gold equivalent ounce
and $313 per gold equivalent ounce for the 1,300 tpd and 1,150 tpd
throughput rates, respectively.
Over the mine's projected nine-year life, average life of mine
production at 1,300 tpd was pegged at 199,359 gold equivalent ounces per
year, comprising gold production of 94,270 ounces per year plus silver
production of 5.254 million ounces per year.
At a throughput of 1,150 tpd, life-of-mine gold equivalent production
was seen at 182,650 ounces per year during the years of active mining,
comprising gold production of 86,888 ounces per year plus silver
production of 4.788 million ounces per year.
Extorre's principal assets comprise C$37 million in cash and the Cerro Moro, Puntudo, and Falcon projects in Argentina.
Detailed engineering and development planning continue at Cerro Moro
and an updated environmental impact assessment is expected to be lodged
with mining authorities in the next few months.
The November 2011 resource estimate for Cerro Morro gives indicated
resources of 1.35 million ounces gold equivalent, comprising 2.42
million tonnes (Mt) at 7.4 grams per tonne (g/t) gold and 498 g/t
silver, for a gold equivalent grade of 17.4 g/t.
In the inferred category, the new estimate consists of 1.05 million
ounces gold equivalent, comprising 4.74 Mt at 3.5 g/t gold and 172 g/t
silver for a gold equivalent grade of 6.9 g/t gold.