Hycroft hits bonanza gold grades at Nevada mine

Hycroft Mining (Nasdaq: HYMC) drilled the highest gold grades yet at its Nevada mine, extending a high-grade zone it’s assessing for underground production.

Hole H26D-6175A cut 19.6 metres grading 30.49 grams gold per tonne and 1,726.72 grams silver from 416.5 metres at Vortex, the company reported on Tuesday. The mine lies about 210 km northeast of Carson City, the state capital.

“The combination of higher grades and longer intercepts suggests we may be getting close to a potential source of the Vortex system,” Executive Chair and CEO Diane Garrett said in the release.

Underground mining could bring richer material into production ahead of a much larger open-pit development, though Hycroft hasn’t established its economics. BMO Capital Markets analyst Brian Quast identified the underground option as potential upside in a Sept. 28 note that estimated a $3.4-billion (C$4.8 billion) construction cost for the broader milling project.

Hycroft’s New York-listed shares dropped 7.2% to $16.30 Wednesday afternoon, after touching $6.48 and $58.73 over the past 12 months. The company has a market capitalization of $1.5 billion.

Narrow core

The latest result includes 1.7 metres grading 347.07 grams gold and 9,526.36 grams silver from 433.2 metres. Hycroft observed visible gold in the core but didn’t report the interval’s true width.

The hole extends high-grade mineralization west and south of previous intercepts. Follow-up drilling is underway, the company said.

Vortex and the neighbouring Brimstone system underpin Hycroft’s underground studies. Their high-grade domains contain measured and indicated resources of 18.1 million tonnes grading 154.71 grams silver and 0.512 gram gold per tonne, for 90.2 million oz. silver and 299,000 oz. gold, according to the January resource estimate.

Hycroft has hired engineering consultancy Respec to develop a conceptual underground mine plan and assess a ramp that could provide drilling access and potentially serve a future mine. Hatch is evaluating processing options, supported by metallurgical testing at Golden, Colo.-based Hazen Research, the company said last month.

The underground concept is to process material into a concentrate for potential sale to third parties. Metal recoveries and concentrate sale options remain under review, according to Hycroft’s September presentation.

Capital demands

Quast removed the speculative designation from his market perform rating and introduced a $24 share-price target in September, citing increased confidence in a restart. His assessment predates the latest drill results.

A decision on restarting heap leaching, which uses a chemical solution to recover metal from stacked material, could be made by year-end, BMO says. Quast estimates $10 million in refurbishment spending in the first half next year and first production in the third quarter.

Hycroft hasn’t committed to that timetable. It continues to assess the restart while testing material suitable for the existing leach facilities, the company said.

For the larger milling project, Quast is modelling construction beginning in 2029 and first production in 2031. He forecasts annual output averaging about 200,000 oz. gold and 6.7 million oz. silver over a 51-year mine life.

His financing model assumes about $2.7 billion in senior secured debt and $1.2 billion in equity. Hycroft held $221 million in cash and no debt at June 30.