A preliminary economic assessment (PEA) of Integra Resources’ (TSXV: ITR; US-OTC: IRRZF) DeLamar project in southwestern Idaho envisions a ten-year mining operation producing an average of 124,000 gold-equivalent oz. per year.
The junior completed the study in just 24 months after acquiring the project from Kinross Gold (TSX: K; NYSE: KGC) in 2017. At the time of the sale, the project lacked a resource estimate. Today the project’s measured and indicated resources stand at 3.9 million gold-equivalent oz., with another 500,000 gold-equivalent oz. inferred.
The early-stage study outlines an open-pit heap leach operation with a 27,000 tonne-per-day heap leach facility complemented by a 2,000 tonne-per-day mill that would generate after-tax free cash flow of US$61 million annually based on low all-in sustaining costs (AISCs) of US$619 per oz. net of silver by-products or US$742 per oz. on a gold-equivalent co-product basis.
Pre-production capex of US$161 million could be paid back in just under two and a half years, according to the study, which used gold and silver prices of US$1,350 per oz. and US$16.90 per oz., respectively. At a 5% discount rate, the project’s after-tax net present value comes to US$358 million and its internal rate of return to 43%.
“The economics of DeLamar are truly exceptional,” George Salamis, the company’s president and CEO, says in an interview. “It’s pretty clear to us that we’re looking at an asset that is a company builder — whether it’s a company builder for us, Integra, or someone else — there’s a mine to be built here, obviously subject to doing feasibility and permitting work. There aren’t too many assets of this quality left, certainly not in the western United States. Deposits that are this large, this scaleable, with this much upside potential in a Tier One jurisdiction and with all this accessible infrastructure, there just aren’t many around.”
The DeLamar project, 160 km from Boise, consists of two past-producing mines, DeLamar and Florida Mountain, which shut down in 1998 due to low precious metal prices after producing 1.6 million oz. gold and 100 million oz. silver. “Those assets were shut down not because of exhausted resources in the ground, but purely because there were no margins to be made at sub-US$ 300 gold,” Salamis says. “It was nuclear winter back then, and the world saw many mines shutting down. ”
Ninety percent of the PEA was based on the project’s measured and indicated resources of 172.37 million tonnes grading 0.43 gram gold per tonne and 21 grams silver per tonne for 2.38 million oz. contained gold and 116.51 million oz. silver. Inferred resources stand at 28.27 million tonnes grading 0.38 gram gold and 13.5 grams silver for 343,000 contained oz. gold and 12.24 million oz. silver.
“This study is simply a starting point for us,” Salamis says. “This is Integra’s first PEA at DeLamar, and the fundamental numbers are excellent — the returns look great — but we really think we can add to the resources used in the model. A large portion of the DeLamar unoxidized resource was excluded from this study, and there remain substantial undrilled areas with strong upside potential for additional oxide and transitional gold-silver mineralization along the margins of the current DeLamar and Florida Mountain resources. It’s a foregone conclusion that we will be looking to include more ounces, be they heap leached or milled ounces, into future studies. We believe the option of a larger production profile at DeLamar is possible, and something we will aim to showcase in coming studies.”
Work will begin on a prefeasibility study in the next few months.
Integra plans to drill between 15,000 and 20,000 metres this year and into the first two months of 2020. The company has two drill rigs on site, one doing metallurgical sampling work for future studies and the second, exploration work.
It has outlined a series of high priority gold-silver step-out targets designed to expand the existing large oxide and transitional gold-silver resource base immediately adjacent to the current resource limits. These targets also host geochemical anomalies, positive geophysical signatures and indication of historic underground mining in the late 1800s, which have never been explored with modern drilling.
“We’re stepping out from the edges of the Florida Mountain deposit, and looking to add to that oxide and transitional resource because we think it’s the easiest, lowest hanging fruit,” Salamis says. “The current PEA has demonstrated there is a lot of heap leach potential at the project — the lowest cost form of mining and processing there is. So, in our view, one of the best ways to keep adding value is to find more oxide and transitional mineralization at both DeLamar and Florida Mountain. On the margins and on strike of these deposits, exploration drilling has been virtually non-existent, and the geophysics and geochemistry that we’ve completed indicate that there are zones that go on for 500 metres or 1000 metres beyond what’s currently been defined by drilling. In our view, this represents one of the most obvious ways to build on what has been presented in this current PEA.”
At the same time, he says, the project’s high-grade component hasn’t been explored to any extent.
“There are near-vertical structural or vein features that are extremely high grade that were mined by old-timers back in the late 1800s and early 1900s grading 30 to 60 grams gold per tonne, and those have never been explored for in a modern sense,” he says. “On occasion at both DeLamar and Florida Mountain we have hit some of these veins, and they’re truly spectacular grades, like 20 gram averages over 3 metres, but we’ve never gone after them in a concerted fashion. So not only are we going to continue looking for low-grade oxide-transitional mineralization, but we’re also going to focus on the high-grade origins of the district, and that campaign will start in about three or four weeks from now.”
The exploration program will be funded by a $12.5 million non-brokered financing the company closed last month.
Integra has drilled more than 30,000 metres at DeLamar so far — the first exploration on the property in over 25 years.
“We’re going to transition into prefeasibility and feasibility level studies later this year and into next year. We believe the key here, just like it was at Integra Gold, is to keep that balance between the important de-risking steps of upgrading studies, while concurrently highlighting the exciting exploration potential that shareholders love to see,” Salamis says. “We’re going to keep that concerted exploration effort going of between 20,000 and 30,000 metres of exploration drilling every year, to show that what we’re looking at next is going to look bigger than what we put out last. This district is so under-drilled, and it’s our goal to remedy that.”
The management team is made up of the former executive team at Integra Gold, which was sold to Eldorado Gold (TSX: ELD) in July 2017 in a deal worth C$590 million.
Earlier this month, the company strengthened its board with the addition of C.L. “Butch” Otter, who was the 32nd governor of Idaho from 2007 to 2019.
“He’s going to be pretty key to the growth of this company and unlocking the value in Idaho,” Salamis says. “This was one component we were missing at the company and board-level, the in-state familiarity with the bureaucratic landscape and permitting … Welcoming a former governor was a powerful addition for us.”
The company is debt-free and has $16 million in cash in its treasury, more than enough to take it beyond the end of this year and into next year, Salamis says. Moreover, Integra has never issued warrants. “In all of the financings we’ve done to date, we have resisted the temptation to issue warrants,” he says. “We’ve got a really loyal following of shareholders, some very large institutions from the U.K. and North America, who have been participating in all these financings and are very happy with what they’ve seen so far, so it’s been great.”
Integra has raised C$52 million in gross proceeds through three financings and 61% of its shareholders are institutions and high net worth individuals.
The company has 92 million common shares outstanding for a $124-million market capitalization.
At press time it was trading at $1.35 per share with a 52-week range of 61¢ to $1.38.