Golden Dawn Minerals (TSXV: GOM) has updated the resource estimate for its optioned 30 sq. km J&L polymetallic project, 35 km north of Revelstoke, British Columbia.
The project has 5.2 million measured and indicated tonnes grading 4.59 grams gold per tonne for 761,000 oz. gold and 55.6 grams silver per tonne for 9.2 million oz. silver, plus 2.04% lead and 4.57% zinc. It also has 4.8 million inferred tonnes grading 4.53 grams gold for 672,000 oz. gold and 60.6 grams silver for 9.4 million oz. silver, 1.84% lead and 2.55% zinc.
Golden Dawn optioned the J&L project from Huakan International Mining, a state-owned Chinese company, in December 2017.
Huakan also sold Golden Dawn its Greenwood precious metals project in September 2016 after an option agreement in April 2016. The Greenwood project consists of the Greenwood mill, the Golden Crown project and the past-producing Lexington mine. According to a 2017 preliminary economic assessment (PEA), the Lexington mine has 372,000 tonnes grading 6.47 grams gold and 1.05% copper for 96,300 equivalent oz. gold.
Golden Dawn president and CEO Wolf Wiese says negotiations over the J&L project were drawn out but ended with a deal that works for both parties.
“Culturally there’s a big difference,” Wiese tells The Northern Miner during a telephone interview. “They’ve put about $70 million into this thing and of course they wanted all of their money back right now. So we had to make them understand that if you want this project to work you have to give us the time and opportunity to de-risk the project.”
According to the option agreement, Golden Dawn had to give Huakan a million shares and author a new PEA on the J&L project. Wiese says the PEA should be ready by June.
“We want to do a very thorough job on that,” Wiese says. “We have a lot of metallurgical issues with this property. Right now we’ve got refractory ore, which is a red light to begin with, so that needs to be dealt with immediately.”
The J&L resource is defined across multiple zones. The Yellowjacket zone contains mostly zinc, lead and silver and a small amount of gold in “clean, non-refractory ore,” while the main zone has high gold values. However, Wiese says the Main zone ore is refractory and needs special treatment. Challenges include a high arsenic content and the fact that the ore is locked up in pyrite.
“In the old days they used to cook it,” Wiese says. “But that doesn’t happen anymore. So we’ll have to go through pressure leaching or bio leaching.”
Wiese expects the final metallurgical work will cost up to $75,000. To finish the PEA, he says Golden Dawn will have to spend a quarter of a million dollars plus compile all the data it has on the property. Golden Dawn inherited a J&L database. In total, 40,900 metres have been drilled on the property across 311 holes.
After the PEA, Golden Dawn will look to perform “extensive underground drilling” as it works toward a prefeasibility study. If it completes the study within two years, pays Huakan $8 million in cash and issues 15 million shares it will earn a 51% in the J&L project. Golden Dawn will then have the second option to buy a 100% interest in the property for $30 million. If it does not exercise its option, its interest will fall to 40%.
Golden Dawn intends to have the Lexington mine back in production by the time it completes the J&L PEA. Lexington will start at 200 tonnes per day but Golden Dawn aims to have it at full production of 400 tonnes per day by 2019. It hopes to leverage revenue from Lexington against costs at the J&L project.
The J&L project came with infrastructure built by Huakan. The assets include a rail siding and load-out facility for the Canadian Pacific Railway in Revelstoke, a fully functional 40-person camp, two portals that access 3.1 km of underground mine workings, and used underground mining equipment.
Huakan acquired the property in 2010, but ceased working on it in 2014, citing poor market conditions.
“We have a realistic outlook on the entire project and we believe we can raise the funds for it, provided we demonstrate the viability,” Wiese says.
Shares of Golden Dawn are valued at 27¢ apiece with a 52-week range of 23¢ to 42¢.
The company has a $34-million market capitalization.