Mega Precious Metals’ (MGP-V) president and chief executive James Rogers has lofty plans for the company’s Monument Bay gold project in Manitoba, which was previously drilled by past operators as a potential high-grade underground mine.
Now Mega — the project’s fifth owner since its discoverer Noranda — is working to establish a viable open-pit and underground scenario at Monument Bay, located 570 km northeast of Winnipeg.
“The vision there is basically getting in the order of 4 million oz. in the current footprint, above 500 metres [depth], and looking to have at least two million of those in open pit. And the reason for that is it could support a production rate of greater than 200,000 oz. per year,” Rogers explains in a phone interview.
While the projections are based on the company being able to grow the current pit resource to 2 million oz. gold, Rogers says he believes it’s possible given the room for expansion in the pit, as well as the district.
“Having come from a mining background, our approach is to see what we think we have and reserve engineer it — making it happen.”
Rogers served as the chief mine geologist at the Dickenson mine (1980–1994), now part of Goldcorp’s (G-T, GG-N) Red Lake Gold Mines. He then worked as the chief geologist at Eskay Creek (1994–2003) and Campbell Red Lake (2003–2005) before becoming Goldcorp’s exploration manager at Red Lake Gold Mines (2005–2008).
Part of the process at Monument Bay will be completing a scoping study, which Mega hopes to finish during the first half of next year.
Before it does that, it will need to build up Monument’s current resource. It has a 20,000-metre drill program underway at the deposit.
Elaborating on the current program, Rogers says the drills will “focus on extending and filling in on the higher-grade chutes in the orebody to pull the pit deeper and populate more of the block model with grade.” He adds that the current block model requires three holes that are close enough to assign a grade to each block within the resource shell.
Another 5,000 metres is slated this year to test three of the 30 new targets identified in last year’s campaign.
The 2012 drill program was originally 50,000 metres, before the company trimmed its exploration budget.
The current program is expected to run until October at a US$9-million cost.
Once that’s done, Mega will update the resource estimate and incorporate all the drilling and other sampling done on the deposit, including the results of this year’s planned infill program.
Rogers anticipates the resource update, which is due early next year, to add more than 1.3 million oz. gold to the project’s existing resource.
Total resources at Monument Bay stand at 12.9 million tonnes grading 2.50 grams gold for 1.04 million oz. gold in measured and indicated, with half of that being in the pit. It has another 14.2 million tonnes at 3.78 grams for 1.7 million oz. inferred, with the majority underground.
While building the resource is a priority, Rogers says finding more deposits and proving that Monument is a multiple-deposit gold system and camp would be the “real key to success.”
“The reality is that if there are multiple pits in the district, the sky is kind of the limit,” Rogers says.
“I really believe the district is a camp,” he adds, explaining the company identified over 30 new targets on the 256-sq.-km property as part of last year’s 27,000-metre program.
“And when we look at the geophysics and geochemistry, there are anomalies all over the property. And a lot of those anomalies and structures are high angles to the shear zone, which is where the orebody is, and from my experience in Red Lake that is where the high-grade zones are. So, I really believe we have a deposit we can make into a mine. But the best is yet to come.”
Monument is expected to come online in 2017 and run for at least a decade.
To reach the start date, the company will need to keep closing equity financings to carry out its exploration plans during 2012–2015, and fund the equity portion of building a mine at Monument Bay, which should kick off in 2015, writes NCP Northland analyst Dan Hrushewsky in a research report dated March 27.
In the latest private placement in March, Mega raised $12.3 million by offering 5.2 million units at 61¢ per unit and 12 million flow-through units at 76¢ apiece.
Rogers says he hopes to do the next financing at a higher share price, preferably when Mega is trading around $1. The stock has recently traded near its 52-week low of 34¢, closing April 18 at 40¢. It hit a 93¢ high last August.
Apart from the common hurdles many juniors like Mega face raising funds, Rogers concedes that accessing the project is a “slight challenge,” because it doesn’t have roads.
The property is usually reached by chartered ski or float-equipped aircraft from a few places, with Red Sucker Lake, some 52 km away, being the nearest community.
Charter and commercial flights are also available from Winnipeg to Red Sucker Lake, Island Lake or Gods Lake Narrows.
To improve accessibility, Mega recently finished putting in a 1,525-metre airstrip on the ice at Twin Lakes to service its 40-person camp.
But Rogers is quick to highlight the benefit of the project being “somewhat isolated.”
“I am optimistic about our entire project because its location has kept it from being explored, and it is well located within an Archean basin that seems to have all of the key [structural and geochemical] elements to be a major, multi-deposit gold camp,” he says.
He goes on to add the company’s relationships with the Red Sucker Lake First Nation and the government of Manitoba are moving forward.
The company has already signed a memorandum of understanding with Red Sucker Lake to cover certain portions of the project that are on the First Nation’s traditional lands.
The three parties have collaborated to establish a “project participation framework” to pinpoint opportunities such as employment training, business development and land-use mapping, whereby stakeholders, local communities and government could take part in Monument Bay’s development.
Sixty-five percent of the company’s workforce is comprised of Aboriginals from the immediate or nearby communities.
To fund these initiatives, the Manitoba government has financed Red Sucker Lake’s participation in a non-brokered private placement, Rogers says.
Last August, Mega announced that Red Sucker Lake would purchase 786,000 units priced at 51¢ apiece for net proceeds of $400,000, which will be used at the project for costs associated with the initiatives.
Analyst Hrushewsky says the project has the potential to become a low-cost operation given its good grades, low-cost power and metallurgy. He has a “sector outperform” rating on the stock and an 85¢ target price.
The measured and indicated resources in the project’s envisioned open-pit grade 1.69 grams gold per tonne, and average 5.06 grams gold underground.
A Manitoba Hydro power line runs within 50 km of Monument Bay, offering electric power at a tenth of the cost of conventional diesel-generated power.
Hrushewsky adds metallurgical tests to date show that 90% of the in-situ gold can be processed from a gravity circuit using a two-stage grinding process, which could cut the capital expenditure in half and trim operating costs.
Mega’s CEO plans to continue optimizing the project, and his high spirits may pay off.
“We are the fifth company in here, and five is my lucky number, so I figure that is going to make a difference. I have been told by lots of people that between five and seven on a property, it’s usually the operator that is successful with it. Our goal is to be the successful operator and to move this thing forward,” Rogers says.
“I think it will be extremely attractive to bigger companies when we prove it’s more than just a single pit — that it’s a gold camp with multiple deposits.”
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