VANCOUVER — The way forward continues to come into focus for junior explorer Clifton Star Resources (CFO-V) at its multi-million ounce Duparquet gold property in northwestern Quebec — 50 km by road to the north of the mining town of Rouyn-Noranda. The company passed a major milestone on Jan. 15 when it released a preliminary economic assessment (PEA) on the project that models an 8,000 tonne-per-day open-pit operation.
As part of its PEA work Clifton punched 35 new drill holes to incorporate an updated resource estimate into the project's economic study. As a result Duparquet's measured-and-indicated resources have jumped roughly 40% to 46 million tonnes grading 1.62 grams gold per tonne for 2.4 million contained oz., while inferred resources offer the potential for further expansion with 32 million tonnes averaging 1.43 grams gold for 1.5 million contained oz.
Clifton's mine plan includes an open-pit operation with average throughput pegged at 2.7 million tonnes per year, which will be supplemented by 4.1 million tonnes of tailings at the historic Beattie underground site that carry an average grade of 0.94 gram gold. At an average recovery rate of 93.2% the operation would produce 104,400 oz. of gold per year over a 16-year life with cash costs clocking in at US$726 per oz.
Pre-production capital costs are pegged at US$370 million, with sustaining costs at US$144 million and closure costs sitting at US$22.6 million.
Clifton focused on in-pit resources totalling 23 million measured-and-indicated tonnes at an average grade of 1.56 grams gold, as well as inferred resources of 14.5 million tonnes grading 1.1 grams gold. Assuming dilution at 10% and mining recovery at 90.9% the operation would produce roughly 1.67 million oz. of gold over its life. The company estimates an average stripping ratio of roughly 5.52 with operating costs sitting at US$29.38 per tonne.
Since the project lies adjacent to the township of Duparquet, Clifton opted for a mine plan that would not require the relocation of homes or municipal infrastructure. As a result the company was forced to abandon certain portions of its deposit.
According to Clifton's financial analysis the Duparquet project would pay itself back within roughly 4 years and carry a US$382 million pre-tax net present value (NPV) with a 19.5% internal rate of return (IRR) at a 5% discount rate and a US$1,472 per oz. gold price. At a US$1,700 per oz. gold price the pre-tax NPV jumps to US$621 million with a 27.6% IRR and a 3 year pay-back period.
Due to the fact all of Duparquet's gold mineralization is associated with disseminated sulphides — mostly pyrite and lesser arsenopyrite — an oxidation method prior to cyanidation of a flotation concentrate is necessary to optimize recovery levels. Following roughly six months of further metallurgical testing Clifton selected conventional pressure oxidation via an autoclave.
Clifton continues to remain optimistic about its chances for further resource expansion at Duparquet. In early December the company released results from 14 holes punched during its 2012 program that missed the resource cut-off and were thus not included in the PEA. Of note are exploration holes in the North Zone, including Hole BD12-18 that cut 36 metres averaging 2.08 grams gold and Hole BD12-30 that cut 26.4 metres averaging 1.52 grams gold.
Next steps for the company include further in-fill drilling in anticipation of a feasibility study, as well as negotiations with Hydro-Quebec to advance towards the installation of a power line. Clifton will also focus on further metallurgical testing in a bid to produce a saleable concentrate from the mine.
Clifton's PEA recommends a US$8 million program in 2013 that will cover feasibility-stage work including community relations and environmental permitting. The company appears to be in good shape financially with US$8 million in cash to start the year, and a relatively tight equity structure that includes 38 million shares outstanding.
Clifton enjoyed a 7% rally on the back of its PEA release, jumping 6¢ to close at 93¢ per share at the time of writing. The company maintains a $35 million press-time market capitalization.
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