VANCOUVER — On April 7 producer Eldorado Gold (TSX: ELD; NYSE: EGO) unveiled an updated prefeasibility study (PFS) on its 80%-owned Certej gold–silver project in the Apuseni Mountains in western Romania. And though Eldorado acknowledges the asset “generates limited cash flow on a stand-alone basis,” the company says it sees Certej as a platform that will help it capitalize on more resource opportunities in Eastern Europe.
Eldorado picked up Certej via its $2.5-billion acquisition of European Goldfields in early 2012. The property hosts an intermediate sulphidation epithermal gold deposit, with disseminated ore in sedimentary units and at the contacts of intrusive rocks, hydrothermal breccias, stockworks and distal veins.
Since the acquisition Eldorado has boosted measured and indicated resources at Certej by 76% by infilling targets in the main deposit and defining the lateral extent of the mineralized system.
Based on 55,700 metres of drilling over the past two years, Certej hosts 111 million measured and indicated tonnes grading 1.35 grams gold per tonne and 9 grams silver per tonne for 4.8 million contained oz. gold and 31.8 million oz. silver. Inferred resources tack on 29 million tonnes of 1.08 grams gold and 6 grams silver.
Certej’s open-pit model assumes a US$1,250 per oz. gold price and US$16.50 per oz. silver price, with proven and probable reserves pegged at 50 million tonnes grading 1.63 grams gold and 11 grams silver for 2.5 million contained oz. gold and 16.2 million contained oz. silver.
Eldorado intends to use an elevated mill feed cut-off grade during the mining phase, followed by treating stockpiled lower-grade ore later in the mine life.
A mine at Certej would carry a US$539-million upfront price tag, with sustaining costs pegged at US$241 million. The mine would crank out 135,000 oz. gold and 800,000 oz. silver, with cash costs estimated at US$606 per oz. gold. Recoveries are modelled at 87.4% gold and 80% silver.
Eldorado has reviewed alternatives for dealing with the refractory nature of Certej’s ore, including the previously proposed Albion process used in European Goldfield’s PFS. Albion includes ultra-fine grinding and oxidative leaching at atmospheric pressure.
The company opted to go with a pressure-oxidation process, with the oxidized solids subsequently treated with limestone and lime at elevated temperatures to facilitate silver recovery, before conventional precious-metal recovery by carbon-in-leach cyanidation, carbon stripping and electrowinning.
Assuming US$1,300 per oz. gold price and US$22 per oz. silver price, Certej would carry a US$175-million pre-tax net present value and 10% internal rate of return. Eldorado’s discount rate assumption was unavailable at press time.
The company says there are opportunities to improve project economics. Certej lies 14 km away from Romania’s national power grid, and limestone is available by quarrying within 13 km.
“Located in a mineral-rich area of the world with a strong history and understanding of mining, the company believes it can take advantage of opportunities to exploit other resources in the region and use [the project] as a platform on which to develop further business within Romania and eastern Europe,” Eldorado noted in the release.
Over the past two years Eldorado has hit permitting milestones at Certej, but awaits its deforestation and construction approvals ahead of the environmental permit for its production phase.
BMO Capital Markets analyst David Haughton — who has an “outperform” rating on Eldorado’s stock — decreased his target price by 50¢ to $9 per share after the company’s announcement. Haughton noted on April 8 that “the slow pace of permit approval in advance of project construction presents a key risk,” and speculated Certej would not hit initial production until 2018.
Shares of Eldorado were up 10¢ after the news en route to a $6.58 close at press time. The company has traded within a 52-week window of $5.73 and $10.08, and reported US$623 million in cash and access to an undrawn US$375-million credit facility at the end of 2013.
Eldorado expects to produce between 730,000 and 800,000 oz. gold this year at cash costs ranging from US$550 to US$590 per oz.
The company has 716 million shares outstanding for a $4.7-billion market capitalization.
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