VANCOUVER — Banks Island Gold (BOZ-V) has set out the financial potential of the Red Mountain project in northern British Columbia that it recently optioned into.
The base case scenario for project sets out an 1,800-tonne-per-day underground mine with a 4.3-year mine life. Over the life of mine the company could expect to produce roughly 474,000 oz. gold and 1.2 million oz. silver at a cost of $459 per gold equivalent oz. from a ‘minable resource’ of 2.4 million tonnes grading 7.4 grams gold per tonne and 22 grams silver per tonne. The diluted minable resource is based on the established mineral resources and calculated for the PEA.
Based on $1,360 per oz. gold, the financials work out to a pretax net present value of $155 million using an 8% discount, an internal rate of return of 43% and payback on initial capital in 1.2 years. Operating cash flow comes in at $449 million, with income of $276 million after capital and property costs.
Banks Island first signed on to earn 100% of the Red Mountain project from Seabridge Gold (SEA-T, SA-N) in March, and made the first payment of $450,000 on June 15. To complete its earn-in, Banks Island has to make another $450,000 payment this year, a $1.5 million payment by August 2013, and a $9.5 million payment before February 2015.
Red Mountain follows a similar pattern to Banks Island’s other main asset, the Yellow Giant gold-silver property on Banks Island near Prince Rupert that the company secured from Imperial Metals (III-T). Both properties host potential mines that are too short-lived or small-scale for Imperial or Seabridge to bother with, but which Banks Island could turn into quick money makers.
The Red Mountain project is already fairly advanced with about $40 million spent on it to date, including on 127,300 metres of drilling, 2,000 metres of underground development, and advanced metallurgical, engineering, and environmental studies. The project also benefits from being only 30 km from the port of Stewart, 17 km from the BC Hydro line to Stewart, and having road access in place, though the road will require significant upgrading.
As to the Yellow Giant property, last November the company outlined a potential 205-tonne-per-day, two year operation at the project that, again using $1,360 per oz. gold, would have a NPV of $26.4 million and an IRR of 414% thanks to its modest $9.1 million in initial and sustaining capital costs.
Banks Island continues to explore and expand the potential of Yellow Giant, recently hitting 3.7 metres grading 135 grams gold and 2.5 metres grading 23.4 grams gold at the Discovery zone, and 6.4 metres grading 41 grams gold, 126 grams silver, 1.4% copper, 0.4% lead, and 1.9% zinc and 4 metres grading 39.1 grams gold, 113 grams silver, 1% copper, 1.8% lead, 7.1% zinc at the Bob zone.
The company is still earning into the Yellow Giant property, while Imperial’s subsidiary Selkirk Metals holds a 2% net smelter return royalty plus a 51% back-in right, and Advanced Primary Minerals holds a 1.5% NSR royalty on the property.
Since listing last October, Banks Island’s stock price has climbed from around 30¢ to a high of 81¢ in late April with 21.5 million shares outstanding. On news of the latest PEA the company’s share price climbed 6¢ or 8.6% to 76¢ with 131,000 shares traded.
Seabridge controls roughly 15.4% of the company after Banks Island issued it 4 million shares as part of the Red Mountain earn-in, and Imperial owns 3% from the earn-in to Yellow Giant. Officers and directors of Banks Island hold 31% of issued shares.