Orefinders Resources Inc. [ORX-TSXV, OTC-ORFD] on Monday released a positive preliminary economic assessment (PEA) for a proposed open pit operation at its Mirado Gold Mine near Kirkland Lake, Ontario.
Orefinders shares rallied on the news, rising 15.4% or $0.02 to 15 cents in morning trading, Monday.
According to the PEA, the proposed South Zone Open Pit will deliver a 158% after tax internal rate of return and payback on capital invested within seven months. The Mirado gold project is located 35 km southeast of Kirkland Lake, in northeastern Ontario. The entire property covers 2,460 hectares. However, Orefinders is contemplating production from an area encompassing only 5% of the project.
“The initial production expenditure is estimated at $2.4 million to achieve first production from the open pit,” the company said in a press release.
The company is planning to use cash flow generated from production in the South Zone open pit to develop what it sees as the true upside potential of the broader Mirado Project as well as other assets in its portfolio.
The mine life of the proposed South Zone Open Pit is expected to be three years after approximately six months of open pit pre-stripping.
The life of mine cash operating cost is forecast at US$941 per ounce of gold, with a projected all-in sustaining cost over that period of US$969 an ounce.
By comparison, gold was trading at US $1,338.90 on the spot market, January 15, 2018.
Those forecasts are based on the current mineral resource estimate of 559,000 tonnes at an average grade of 2.61 grams per tonne gold (46,900 ounces) in the indicated category, plus an inferred resource of 382,000 tonnes at an average grade of 2.66 grams gold (32,700 ounces), based on a cut off of 1.0 grams per tonne.
The Mirado gold project is situated within the Abitibi Gold District, which has historically produced more than 150 million ounces of gold over the past century. Historic production from the Kirkland Lake camp amounts to 25 million ounces.
The decision to proceed with the PEA was approved after the company extracted a 25,000-tonne bulk sample in early 2017 from stockpiles remaining from the Mirado Mine operations of the late 1980s. The company completed the on-site crushing and logistics and toll processing of the resource, material that provided concrete data which was utilized in the PEA.
The company said it feels the open pit project, as contemplated by the PEA, is a fairly low risk option given all of the work, including drilling by previous operators, which has been completed on the property.