VANCOUVER — Atlantic Gold (TSXV: AGB) might well be a regular fixture in Nova Scotia based on new expansion plans at its Moose River Consolidated gold project.
On Jan. 29, the company released a prefeasibility study to integrate the Fifteen Mile Stream and Cochrane Hill satellite deposits with its Touquoy central processing facility. The development could increase Atlantic’s expected gold output from 85,000 oz. per year to more than 200,000 oz. per year.
The company spent US$160-million to start open-pit mining 85 km northeast of Halifax. Atlantic has spent the past four months ramping up operations at its linchpin, 5,500-tonne-per-day Touquoy facility, and reported its first month processing ore at reserve grades in December, when it produced 7,021 oz. gold.
The near-term production focuses on the Touquoy and the Beaver Dam gold deposits, which jointly host 16.45 million proven and probable tonnes grading 1.44 grams gold per tonne for 760,000 contained oz. gold.
Meanwhile, Atlantic’s outstanding mine plan could produce 87,000 oz. gold annually over an 8.5-year life at all-in sustaining costs (AISCs) of between US$540 and US$588 per oz. gold.
The study proposes a staged-expansion, $259-million investment for Fifteen Mile Stream and Cochrane Hill, which could be funded with internal cash flow and more project debt.
Atlantic would treat ore on location at both deposits before shipping concentrate to its central processing facility at Touquoy.
Atlantic’s plan would add up to 160,000 tonnes per annum of concentrate.
The company reported maiden proven and probable reserves for Fifteen Mile Stream and Cochrane Hill of 22 million tonnes averaging 1.17 grams gold for 825,000 contained oz. gold.
“The additions of the Cochrane Hill and Fifteen Mile Stream deposits into our central, integrated project results in a significant increase in annual gold production,” chairman and CEO Steven Dean said during a conference call.
“That life-of-mine production is at a lowest quartile all-in sustaining cost. You’ll hear a fairly common ‘low cost’ theme from Atlantic moving forward, which is a function of our location, gold grades, low strip ratios and easy metallurgy. That really can’t be underestimated in this industry, and it makes us stand out among our peer group,” he added.
The study assumes that Moose River’s production would ramp up to 200,000 oz. in 2022, while AISC would stay at US$555 per oz. gold.
The expansion would push the project’s mine life through to 2027, and give it a post-tax net present value of $422 million at a 5% discount rate, and a 35% internal rate of return. The company’s base case assumes a US$1,300 per oz. gold price.
Atlantic began environmental studies for the Fifteen Mile Stream and Cochrane Hill sites nine months ago. It expects to submit environmental impact statements to provincial and federal regulators in four months.
“In the later years of our current projects we’ll be turning our focus toward the incorporation of a very significant drill program that we kicked off in the fourth quarter,” Dean continued. “We started at Fifteen Mile and Cochrane Hill, and we’re very excited about what we’ve seen in the first batch of results in terms of both infill and step-out … none of the results have been included in this study. So we see upside above and beyond the economic impacts from the phase-two plan.”
The company drilled 21,000 metres at Fifteen Mile Stream in 2017 as part of its third phase, resource-expansion drill program, which also includes Cochran Hill.
Highlights reported so far include: 23 metres of 2.32 grams gold from 14 metres at the Hudson target in hole 17-216; 11 metres of 2.22 grams gold from 24 metres at the Egerton Maclean target in hole 17-276; and 9 metres of 3.15 grams gold from 93 metres’ depth in hole 17-023 at the Plenty target.
The company raised $14 million in flow-through capital at the end of 2017. It intends to invest between $8 million and $10 million in a generative exploration program that could involve 70,000 metres of drilling.
“We’re targeting the regional strike length of the anticline, which is the primary host structure to all the deposits. We see significant upsides there in terms of discovering at least one or two additional deposits,” Dean said.
BMO Capital Markets analyst Andrew Mikitchook increased his target price on Atlantic by 20¢ to $2.40 per share after the study’s release. He noted that the takeaway from the study was Atlantic’s ability to deliver production growth at low cash costs.
“We believe it likely the company’s strong production profile and low costs in a domestic and enviable jurisdiction could attract takeover interest,” Mikitchook added.
Atlantic has traded within a 52-week range of 88¢ to $1.87, and closed at $1.68 per share at press time. It has 182.3 million shares outstanding for a $306-million market capitalization, and reported liquidity of $57 million at the end of September.