The following is an excerpt from this month’s Northern Miner by Salma Tarikh. Click here to read the entire article.
“Ana Paula will be profitable, Newstrike’s Whittall says”
Newstrike Capital (TSXV: NES; US-OTC: NWSKF) president and CEO Richard Whittall is certain the upcoming preliminary economic assessment (PEA) on the company’s 2.25 million oz. Ana Paula gold project will prove it’s a “great cash-generating project.”
“What we are going to come out with is something I think — with other things being equal — is what the industry is looking for, which is a high-margin, well-average grade deposit. It’s low strip and that has all the requisite infrastructure developed,” Whittall said in a late July interview.
Located in southern Mexico’s Guerrero state, Ana Paula hosts a measured and indicated in-pit resource of 2.2 million oz. gold and 9.7 million oz. silver from 43 million tonnes grading 1.59 grams gold and 7 grams silver per tonne. Inferred resources add another 50,000 oz. gold and 1.1 million oz. silver from 1.8 million tonnes of 0.78 gram gold and 18.7 grams silver.
Newstrike bought a 100% interest in Ana Paula from Goldcorp (TSX: G; NYSE: GG) in 2010, and three years later published the project’s maiden resource, based on 130 drill holes. The estimate uses a 0.45-gram gold-equivalent cut-off grade and metal prices of US$1,450 per oz. gold and US$28 per oz. silver.
Industrial Alliance analyst Killian Charles notes that within the pit shell, Ana Paula contains a smaller but higher-grade resource. “The high-grade package nearly doubles the grade to 2.99 grams per tonne, while still offering a decently sized foundation [1.6 million oz.] for an eventual mine.”
Since the first resource estimate, Newstrike has punched another 100 holes — or 46,000 metres — into the project, bringing the total to 230 holes. It intends to publish an updated resource with the PEA in a few weeks, which will be the first step in demonstrating the project’s economics.
The PEA will look at Ana Paula’s near-surface, high-grade breccia zone feeding an initial 5,000-tonne-per-day mill over an eight- to 10-year life, using base-case metal prices of US$1,300 per oz. gold and US$20 per oz. silver, Whittall says.
He forecasts the proposed mine could generate 120,000 to 130,000 oz. gold a year, at estimated cash costs of below US$500 per oz.
The project, anticipated to cost at least US$220 million to build, should have an average grade of 2.5 grams and gold recoveries of between 73% and 75%, Whittall notes. “Our payback should be well under three years,” he adds.
However, these numbers are conceptual, until backed by the PEA.
“We know this is a high-grade, high-margin, relatively low capex project — and simple. And simple always translates into lower costs.”
After the study, the company plans to jump straight into prefeasibility, expected out in a year, and Ana Paula doesn’t need a lot of work to get there.
“The beautiful thing about the Ana Paula project is its simplicity. It literally is just a big open pit … So it really doesn’t need a tremendous amount of advanced engineering to get to the next stage,” Whittall explains.
The company is already working to improve the project’s metallurgy. Mineralization at the project is related to a low-sulphidation epithermal system formed within a steeply plunging breccia unit. The gold occurs in sulphides — namely arsenopyrite and pyrite. Despite some of the gold being trapped in the arsenopyrite, Newstrike has been getting 73% recoveries, Whittall says, adding that recent work shows it could improve recoveries by a few percentage points.
Asked about financing risks, Whittall said he’s certain Newstrike could move the project to the prefeasibility stage and eventually to development.
“What makes projects financeable is: ‘Can they make money?’” Whittall says. “Ana Paula will be a great cash-generating project that makes a great deal of money [at US$1,300 gold].”