Lumina Gold (TSXV: LUM; US-OTC: LUMAF) has tabled a preliminary economic assessment (PEA) for its 63 sq. km Cangrejos gold project in Ecuador’s El Oro province, 30 km southeast of the provincial capital, Machala.
According to the PEA, the open-pit project would process 40,000 tonnes per day during its first five years and then jump to 80,000 tonnes per day for the rest of its 16-year life. Operating costs are also higher in the first five years, at US$15.24 per tonne milled, but drop to US$13.09 when averaged over the mine’s life.
Lumina president and CEO Marshall Koval says the PEA “contemplates part of the 80,000-tonne-per-day design in the initial 40,000-tonne-per-day aspect of the project.”
“So for instance, the primary crusher is going to be able to handle the whole 80,000-tonne-per-day throughput scenario,” Koval says in an interview with The Northern Miner. “When you get to the expansion you’re just adding some modular units.”
It would cost Lumina US$260 million to expand the processing plant — more than half of the overall US$406-million expansion capital. According to the study, it could build the expansion as early as in year three. The company would try to permit the whole facility before initial construction.
The project would require a US$831-million initial capital expense and US$230 million for life-of-mine sustaining capital. It has a US$876-million, after-tax net present value at a 5% discount rate and a 14.4% after-tax internal rate of return.
The company plans to use a higher cut-off grade in the project’s early years, saying it creates a better net present value. It would mine at 0.79 gram gold per tonne during the first five years before dropping to 0.67 gram gold for the other 11 years.
“As you go deeper into the mine, the cut-off grade gets lower,” Koval says. “In the early stages you’re trying to maximize economics.”
Lumina conducted a trade-off study that compared semi-autogenous grinding and ball-mill grinding to high-pressure grinding rolls and ball-mill grinding — and decided to use the former for the PEA.
However, Koval says Lumina will continue to evaluate both scenarios. The company needs at least a 600-kilogram sample to test the high-pressure, grind-and-roll mill, and would try to get it while drilling for prefeasibility-level metallurgical test work.
“The SAG you don’t need as many samples,” Koval says, “and we’ve got pretty good data there.”
Lumina pegs the project’s average annual payable production at 373,000 oz. gold and 43 million lb. copper. It contains 408 million inferred tonnes grading 0.65 gram per tonne gold, 0.11% copper, 0.6 gram silver and 25 parts per million molybdenum for 8.5 million oz. gold, 1.03 billion lb. copper, 7.8 million oz. silver and 22.5 million lb. molybdenum.
Cangrejos remains open to the north, south, west and at depth. One-third of the company’s resource is based on drilling by the property’s previous owner, Newmont Mining (NYSE: NEM), and is constrained to the Cangrejos zone.
Less than 1 km northwest of Cangrejos lies the Gran Bestia zone. Newmont only drilled five holes at Gran Bestia, and Lumina did not include the results in its resource estimate.
Cangrejos itself is bisected by the C20 property boundary. Lumina is only permitted to drill on the eastern side of the line. It has surface rights for the rest of the property, and is awaiting its remaining drill permits, which it hopes to receive this quarter.
Newmont drilled Cangrejos down to 300 metres below surface. With its current drill program Lumina went deeper, drilling to 700 metres. Beyond 300 metres, Lumina found what vice-president of corporate development and communications Scott Hicks calls a “large, high-grade zone.”
“When we go out west into the areas we haven’t drilled yet, we’ll be able to hopefully carry on that higher-grade zone and expand the resource a fair bit,” Hicks says.
The company drilled 7,200 metres of a planned 18,000 metres at what it calls the Cangrejos Main Zone in 2017. It has followed up with 5,300 metres so far in 2018. Lumina has already allocated 2,000 of the remaining metres to Gran Bestia.
“We want to get out and understand Gran Bestia because of the near-surface, higher-grade material there,” Koval says.
Highlights from Newmont’s drilling at Gran Bestia include: 0.91 gram gold and 0.16% copper over 208.5 metres from surface and 0.55 gram gold over 319 metres from surface. Mineralization at Gran Bestia remains open in all directions.
Lumina has also announced it will spin out all its assets, except Cangrejos, into Luminex Resources, which will trade on the TSX Venture Exchange, likely with the ticker symbol “LR”.
Lumina shareholders will receive one new share of Lumina and 0.15 of a Luminex share for each existing Lumina share, in a deal expected to close by the end of August.
Luminex will incorporate, among other properties, the Condor gold project, where Lumina updated a resource estimate earlier this year.
Condor sits 300 km east of Cangrejos, on trend with and south of Lundin Gold’s (TSX: LUG; US-OTC: FTMNF) Fruta del Norte and EcuaCorriente’s Mirador.
The Condor project was previously owned by Ecuador Gold and Copper, which Lumina acquired in 2016.
Condor contains 63.8 million indicated tonnes grading 0.68 gram gold, 4.5 grams silver and 0.03% copper for 1.38 million oz. gold, 9.23 million oz. silver and 43 million lb. copper. It also contains 144.5 million inferred tonnes at 0.54 gram gold, 1.7 grams silver and 0.08% copper for 2.5 million oz. gold, 7.9 million oz. silver and 260 million lb. copper. It was the first update to the resource since 2015.
“We put economic restraints on the resource for Condor,” Koval says. “So we produced a smaller indicated and inferred resource than the previous company, but we feel that we have a good resource base now.”
The company is moving towards a PEA on the project’s Santa Barbara deposit, which so far contains most of Condor’s copper resource, with 27 million indicated lb. copper and 255 million inferred lb. copper.
The company also has commitments from First Quantum Minerals (TSX: FM; US-OTC: FQVLF) and Anglo American (LON: AAL) to spend a combined US$96 million over seven years at four early-stage properties.
“We’re in the process of lining up another drill rig — drill rigs are such a sought-after commodity in Ecuador because there’s such a boom going on,” Koval says. “If everything access wise is going right and we have the ability to drill the areas and have equipment available, we’ll move as fast as we possibly can on these projects.
“We’ll go after this thing real hard.”
Shares of Lumina are trading at 77¢ with a 52-week range of 60¢ to 85¢. The company has a $207-million market capitalization, with Ross Beaty controlling 14% of shares in July 2018.