***updated as of 10:50am ET with quotes from CEO, and latest share price data***
Clifton Star Resources (CVE:CFO) has unveiled the results of a highly-anticipated preliminary economic assessment (PEA) on its Duparquet project in Quebec, outlining a low-cost gold operation with an internal rate of return (IRR) of 19.5% and the potential to increase resources further.
Shares in the junior gold company opened at 87 cents Tuesday, with its stock up over 15% in the last month as traders eagerly awaited the news today. Its stock recently moved up almost 6% to 92 cents as of late morning.
The NI 43-101 compliant study, prepared by InnovExplo, showed a pre-tax net present value of $382 million using a 5% discount rate and a base case gold price of US$1,472 an ounce, with an IRR of 19.5% and a payback period of 4.2 years.
Using current gold prices of US$1,700 an ounce, however, the pre-tax net present value jumps to $621 million using the same discount rate, with an IRR of 27.6% and a shorter payback period of 2.95 years.
"First and foremost, the NI 43-101 PEA study shows the project is robust and that there are still many ways to improve it," CEO Michel Bouchard tells Proactive Investors.
"Either through metallurgy or through expansion drilling, there is still a lot of upside. The study puts a real base value on the project and its potential and is a very important step for the company going forward."
Indeed, Bouchard adds that the results, the sum of nearly 9 months of work by different engineering firms, were what management expected, as they "knew the project was solid."
The report outlined an open pit mining operation producing a nominal 8,000 tonnes per day, with an average stripping ratio of 5.52 and a 16-year life. For the the entire life of the mine, yearly production of 104,400 gold ounces was predicted, with average production of 144,800 ounces in the first five years.
Pre-production capital costs were estimated at $370 million, and sustaining costs were pegged at $144 million, excluding $22.6 million in closure costs. Average operating costs were projected at US$726 per ounce of gold.
A new NI 43-101 resource estimate was also prepared for the PEA report, resulting in a boost in resources as new drill holes were added. Total measured and indicated resources increased 40% from the prior report last July, to 46.09 million tonnes grading 1.62 grams per tonne (g/t) gold for 2.4 million contained ounces.
Meanwhile, overall inferred resources stand at 32.15 million tonnes at a grade of 1.43 g/t, for 1.48 million ounces.
The latest estimate included a total of 35 new 2012 drill holes, as well as 8 existing holes that were extended to depth, a series of 47 re-sampled holes, and 35 pre-2008 holes that were also used for the July estimate last year. The database included results up until the cut-off date of last September.
Clifton noted that InnovExplo said "excellent potential" exists to further increase the resources of the mineralized zones toward the east and at depth by more drilling.
Last month, the company released drill results from another 14 holes that were not used in the latest resource estimate, which it said continued to get "signficant" assay results from both holes within the limits of the current pit shell, and exploration holes outside of the pit shell. Notable results included 36.0 metres grading 2.08 g/t gold, including 18.9 metres at 3.51 g/t gold.
The company said today that due to the project being so close to the town of Duparquet, just to the south of the property, a mining plan was chosen that does not include moving any houses, town or provincial infrastructures.
"The mine scenario would therefore be more socially acceptable, but has the effect of leaving in-situ parts of the deposit. These untouched portions may be recovered eventually," Clifton Star said in its statement Tuesday, adding that permitting and construction of the mine is expected to take roughly three years.
Due to the gold mineralization at the property being refractory, the junior gold explorer said that the choice of an oxidation method before the cyanidation of a flotation concentrate became necessary to improve and optimize the level of gold recovery.
Metallurgical test work, it said, has shown the use of the pressure oxidation circuit prior to leaching improves projected overall gold recoveries to 93.9% for the mineralized material and 83.9% for tailings.
In terms of next steps, Bouchard says the company will be undertaking more metallurgical testing to improve on the process and will look at the possibility of producing a saleable concentrate.
Indeed, the company said the concentrate could be sold to smelters, eliminating the pressure oxidation part of the milling and potentially significantly reducing the capex and operating costs, and increasing the IRR.
Clifton will also be drilling, with the project still open to resource expansion and upgrade in terms of quality. The Duparquet project is comprised of the Beattie, Donchester, Central Duparquet and Dumico properties.
InnovExplo has recommended that the project be advanced to the next phase, Clifton said, which will require additional definition drilling prior to the pre-feasibility study.
Negotiations with Hyrdo-Quebec should also be started, the consultant said, to advance the work for the installation of a power line. The company is aiming to do this work and more so as to deliver a pre-feasibility report for Duparquet by the first quarter of next year.
Late last year, the Quebec-based company closed a private placement financing with Industrial Alliance Securities, raising $3.45 million for exploration expenses at the project.
With $8 million in cash at the end of December, and another $2 million still owed to the company in the form of a mining tax credit from the government, the junior gold explorer has sufficient resources to move ahead with its project plans.
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