A new study for Hycroft Mining’s (Nasdaq: HYMC) namesake gold-silver project in Nevada gives it a base case value of $4.3 billion and a half-century mine life, placing it in the top tier of undeveloped precious metals sites in Nevada.
The post-tax base case net present value (discounted by 5%) assumes prices of $3,600 per oz. gold and $48 per oz. silver for the past-producing project, and includes initial costs of $2.4 billion, according to the S-K 1300 report released this week. The report estimates a post-tax internal rate of return of 16.9% and a payback period of 4.7 years. Hycroft is about 230 km northeast of Reno.
“The project delivers strong economics and significant leverage to rising gold and silver prices, reinforcing Hycroft’s position as one of the sector’s most compelling large-scale development opportunities, located in a Tier 1 jurisdiction,” CEO Diane Garrett said in a release.
High cost mine
While the report’s economics underscore Hycroft’s scale, the study also highlights the challenges in the mine’s $2.4 billion price tag, pointing to the need to raise significant cash before it can be developed.
Eric Sprott holds about a 33% interest in Hycroft.
Hycroft shares gained more than 3% to $33.20 apiece on Thursday in New York, valuing the company at $3 billion. The stock has traded in a 12-month range of $2.93 to $58.73.
358M oz of production
The mine could produce 10.4 million oz. of gold and 347.5 million oz. silver over its life through a milling operation utilizing conventional pressure oxidation and heap leach processing. The mine is currently permitted for both and already has extensive infrastructure on site, including three-stage crushing facilities, leach pad capacity, and two Merrill Crowe plants with a refinery.
The plant is designed to process 57,100 tonnes of mineralized material per day, at an all-in sustaining cost of $2,147 per oz. of gold equivalent, the technical summary shows.
Production boost
The mine plan is based on a current resource estimate of 1.5 billion measured and indicated tonnes grading 0.33 gram gold per tonne and 11.42 grams silver for 16.4 million contained oz. gold and 562.6 million oz. silver. Inferred resources total 517 million tonnes at 0.3 gram gold and 7.9 grams silver for 5 million oz. gold and 132.8 million oz. silver.
The company sees further production upside from upgrading the inferred resources that were excluded from the mine plan. It also plans to further advance the Brimstone and Vortex discoveries, with a view of combining an underground mine option alongside the open pit to bring forward high-grade ounces earlier in the mine’s life.
“By advancing the high-grade Brimstone and Vortex silver systems, we see a clear path to further improving project economics and unlocking additional value,” Garrett said.
In addition, new oxide targets have been identified for potential heap leaching early in the plan, and the processing of stockpiled low-grade mill feed material is also being considered, Hycroft said. Currently, the mineral resource estimate covers just less than 15% of the 259-plus-sq.-km land position in Nevada, it added.
Hycroft produced more than 1.5 million oz. gold since mining began there in the 1980s. Operations were suspended in 2021.
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