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Thursday, 7 March 2013
Spanish Mountain Gold assessing a "number of options" to enhance shareholder value, to start infill drilling program
Spanish Mountain Gold (CVE:SPA) provided investors Thursday with an update on its gold project in British Columbia and the strategic review process announced in January, saying the company has been investigating a number of options with advisor Rothschild that could "potentially enhance" shareholder value.
The company said it is now working to refine an infill drilling program on its major property to reclassify some of the inferred resource into the measured and indicated category.
Currently, the property holds 3.18 million ounces of gold in the measured and indicated category, and 3.6 million ounces in the inferred category, both at a cut off grade of 0.20 grams per tonne (g/t).
Any increase of measured and indicated ounces will be included in any future economic studies for the project, Spanish Mountain noted.
The Canadian junior explorer late last year announced the results of a preliminary economic assessment (PEA) for the project it has been drilling since 2005, with the report estimating a pre-tax net present value of US$454 million and an internal rate of return (IRR) of 15%.
The Spanish Mountain gold project in BC is projected to have a 15 year mine life, producing an average of 197,000 ounces of gold per year for the first 14 years, with total life-of-mine production of 2.8 million ounces of the yellow metal and one million ounces of silver.
Initial capital costs were pegged at US$755.9 million, including contingency.
The company said it is now reviewing "multiple scenarios" and trade-off studies to improve overall economics.
It added that its latest resource estimate is based on core drilling results, for which the report showed "a negative bias". After some analysis, the company said that it seems the existing diamond drill grade estimates are "potentially understated by a material amount".
Spanish Mountain is therefore currently evaluating additional reverse circulation drilling requirements to confirm the expected grades during the initial phase of the project, as defined by the preliminary economic report.
On the drilling front, the company is also working to reinterpret current data for an area that lies two kilometres west of the project's main zone. It says it is "encouraged that work thus far has confirmed significant additional exploration potential for the Phoenix Zone area".
Further drilling to the northwest of the most recent Phoenix holes is being evaluated as well to establish whether there is continuity between the areas drilled to date, the company said, which span a strike length of just over 2.5 kilometres.
With regards to permitting and community relations for the project, discussions are ongoing with First Nations and local communities, with this set to be a primary focus for Spanish Mountain Gold this year.
It is anticipated that community open house meetings as required during the environmental assessment process will be organized later in 2013.
Management also recently met with several federal and provincial government officials in Ottawa, Ontario and Victoria, BC, respectively to provide an overview of proposed development of the project.