Gold explorer Atac Resources (TSXV: ATC) has wrapped up the first economic study of its Rackla gold project in the Yukon — a positive preliminary economic assessment of the oxide portion of the project’s Tiger zone.
Such a mine at Tiger would be modest, with a mine life of four years producing a total of 221,560 oz. gold, or 55,400 oz. a year,
However, using a gold price of US$1,250 per oz., the study shows that the small operation could deliver a pre-tax net present value (NPV) of $33.7 million after taxes, and an internal rate of return (IRR) of 21.5% after taxes. The figures are calculated using a 5% discount rate.
Pre-production capital costs are estimated at $92 million, while all-in sustaining production costs are projected at $626 per oz. gold, excluding general and administrative costs.
At US$1,100 per oz. gold, Tiger’s after-tax NPV would drop by more than half to $12.6 million and its IRR to 11.2%. However, at US$1,500 gold, the project’s post-tax NPV would rise to $68 million and the IRR to 37.2%.
Tiger is a limestone-hosted replacement-style gold deposit, and was Atac’s first discovery at Rackla in 2007.
Since then, the company has discovered larger-scale, Carlin-type gold deposits 100 km east of Tiger, along the 50 km long Nadaleen trend at Osiris, Conrad and other zones.
The preliminary economic assessment outlines a conventional open-pit mine with single-stage, low-intensity crushing followed by size classification with a scrubber that would separate fine material from coarse material.
The operation would combine heap-leach and carbon-in-leach (CIL) recovery, with 42% of the material sent to the heap leach and the rest — finer material representing 58% of the total amount — sent to the CIL plant.
Overall gold recoveries would average 89.8% (87.8% from heap leaching and 91% from CIL treatment).
Although it would take one year of pre-stripping to get to the ore — the life-of-mine strip ratio is estimated at 5.6 to 1 — the highly weathered, sandy mineralized material would not require blasting, and could be mined using a hydraulic excavator.
Mining and stockpiling would take place year-round, but the plant would operate from May to September (158 days per year), processing 3,300 tonnes per day.
Over the mine’s life, the plant would treat 2 million tonnes of oxide material grading 3.72 grams gold per tonne.
In a press release, Atac CEO Graham Downs notes that “although we remain focused on the Carlin-type gold targets 100 km to the east, we are pleased with the results of the comprehensive Tiger deposit PEA. It gives the company a clear understanding of the potential viability and value of our first Rackla gold project discovery, and highlights the advantages of a rare high-grade, at-surface, oxide gold deposit that is located in one of the most favourable mining jurisdictions in the world.”
Downs adds that the economics of the project could be improved through infill drilling at Tiger and more exploration drilling at six untested oxide targets nearby.
David Sadowski, a mining analyst at Raymond James, wrote in a client note that although the outlined operation would be small, its economics are robust. The study, he says, “paves the way toward medium-term production, which should further underline the viability of the district.”
Sadowski has a $2 target price for Atac and rates it as “outperform”. He recommends that investors add to their positions ahead of exploration results from the Nadaleen trend before the fourth quarter.
Drill results from the Sunrise zone and trenching and drilling results from the Anubis zone at Nadaleen are expected soon.
Sadowski notes that the PEA considers only part of a resource outlined in November 2011. The resource itself is likely understated due to poor recovery in shallow sections of the deposit, he argues, and follow-up auger drilling is expected to add ounces.
Using a cut-off grade of 1.6 grams gold per tonne, the 2011 resource estimate outlined indicated oxide resources total 2.5 million tonnes grading 4.25 grams gold per tonne for 337,500 oz. Inferred resources add 180,000 tonnes at 3 grams gold for 17,400 oz.
The deposit also contains a smaller amount of gold-bearing sulphide material.
Rackla is 55 km northeast of Keno City in the Yukon. It is currently a fly-in project, but the study anticipates access via a proposed 51.6 km winter road that would use 24.6 km of the permitted Wind River trail.
Atac shares saw a mild lift on the PEA news, rising 5¢, or 4.3%, to $1.22 on low volume of 120,000.
It has traded in a range of 52¢ to $1.73 in the past 52 weeks, and has 115.2 million shares outstanding.