Artemis Gold Inc. [ARTG-TSXV ARGTF-OTC] said Wednesday March 31 that it has signed a binding memorandum of understanding with an engineering firm that is proposing to build a processing facility at its Blackwater Gold Project in central British Columbia for a guaranteed maximum price of $236 million.
The MOU outlines the terms under which Ausenco Engineering will undertake further detailed engineering, which will form the basis of a final fixed engineering, procurement and construction contract (EPC) price that will not exceed $236 million, Artemis said in a press release.
A fixed price EPC contract on the processing facility and associated infrastructure represents by far the largest single component of the capital cost of Blackwater at approximately 40% of the prefeasibility study estimate.
The Blackwater Gold Project is a planned open pit gold and silver mine that is expected to begin life with a nominal milling rate of 15,000 tonnes/day or 5.5 million tonnes/year.
Artemis bought the Blackwater Project from New Gold Inc. [NGD-TSX, NYSE American] in August, 2020.
The agreement with New Gold involved an initial payment of $140 million, 7.4 million common shares at $2.70 per share, and $50 million cash payment on the first anniversary of the closing of the deal. In connection with the deal, New Gold pledged to acquire 8% of the refined gold production. However, once 279,908 ounces has been delivered to New Gold, the gold stream will reduce to 4%.
New Gold will make payments for the purchased gold equal to 35% of the U.S. dollar value of the quoted gold price two days before delivery. At a 0.20 g/t gold equivalent (AuEq) cut-off, Blackwater is estimated to host a measured and indicated resource of 12.4 million AuEq ounces.
When it released the results of a pre-feasibility study in August, 2020, Artemis said the study was based on a revised approach that would involve developing the project in three stages. It said this would involve targeting a higher-grade zone of near surface mineralization in the southern half of the open pit in the first seven years, supporting a shorter payback period and higher IRR. It said this approach would reduce the initial capital expenditures to $592 million.
Artemis has said its methodology and approach to development includes starting at a throughput rate of 5.5 million tonnes per year, and ramping up to the original planned capacity of 20 million tonnes via two subsequent expansion stages.