Infill drilling in the southwestern part of the Marathon deposit in Newfoundland continues to return high-grade gold intercepts, Marathon Gold (TSX: MOZ) reports.
The company recently completed its 41,000-metre step-out and infill drill program for 2018, and assays include 5.36 grams gold over 11 metres from 26 metres below surface in hole MA-18-330; 3.63 grams gold over 10 metres from 134 metres downhole in MA-18-323; and 18.40 grams gold over 6 metres from 99 metres downhole in MA-18-334.
Marathon says its 2018 drill program has been successful in upgrading inferred resources to the measured and indicated categories and discovering new zones of high-grade gold for further drilling within the pit shells.
Next year drilling will focus primarily on expanding open-pit resources at the Marathon deposit and the Sprite Zone and infill drilling to reduce the amount of inferred resources in the pit shells.
“Our job ahead is now to convert the important blocks of inferred in the pits into measured and indicated and that’s what we’ll focus on next year because we can’t use inferred in a preliminary feasibility study and our plan is to get the preliminary feasibility study out at around the end of the third quarter in 2019,” Phillip Walford, Marathon’s president and CEO, tells The Northern Miner.
Currently Marathon’s Valentine Lake gold camp has four known, near-surface, mainly pit-constrained deposits with measured and indicated resources of 45.15 million tonnes grading 1.85 grams gold per tonne for 2.69 million ounces of contained gold and another 26.86 million inferred tonnes grading 1.77 grams gold per tonne for 1.53 million ounces of gold.
The lion’s share of resources are in the Marathon and Leprachaun deposits, which also contain resources below their pit shells, and both are open to depth and on strike. Gold mineralization has been traced down over 350 metres vertically at Leprechaun and almost a kilometer at Marathon.
The four deposits found to date occur over a 20-km system of gold-bearing veins, and the company notes that there has been little detailed exploration on its 24,000-hectare property.
In a revised preliminary economic assessment released at the end of October, Marathon incorporated 20,000 metres of additional drilling the company completed since the first PEA was released in May. The updated PEA also benefited from the addition of 9,000 metallic screen assays, which were used to better measure the coarse gold that is common on the property.
The latest mine development plan excludes the Sprite deposit, which requires additional exploration drilling to increase its resource.
The new study outlined a mine life of 12.2 years, up from the previous PEA’s 10.2 years, with average annual production of 225,100 ounces of gold a year, up from the earlier study’s 188,500 ounces of gold a year.
Recovered ounces grew to 2.72 million ounces from 1.90 million ounces.
Average cash costs over the life of mine increased to US$603 per oz. from US$557 per oz., while all-in sustaining costs rose to US$666 per oz. from US$595 per oz.
Despite the cost increases, the project’s after-tax internal rate of return rose to 30% from 25% and its after-tax net present value at a 5% discount rate increased to US$493 million from US$367 million.
Initial capex fell from US$380 million to US$355 million and the after-tax payback period dropped from 2.8 years to 2.5 years.
Both studies used a gold price of US$1,250 per oz. and envisioned developing the Valentine Lake gold camp by open-pit mining, with gold recovery a combination of a milling circuit and heap leaching. Gravity and flotation circuits would be used to leach the concentrate and tails. Initial production is estimated to start in 2022.
“We’re getting a really respectable profile and we’re throwing off more gold,” Walford says of the latest PEA. “This is the largest gold project in Newfoundland and Labrador, it’s also the largest gold resource in Atlantic Canada, and when I looked at the different resources for pure gold projects in Canada and the U.S., we’re right up there as far as open-pits go, we’re in the top ten.”
Walford also says the Marathon deposit has the potential to develop an underground mine but for now management believes it’s more cost-effective to find open-pit resources at US$10 per ounce than more costly underground resources.
“Who else in this industry is finding gold at US$10 per oz,” he asks. “We’ve only drilled under 250,000 metres and we have four million ounces of gold—I don’t think there are too many people who can say that with that much drilling. We worked it out for fun and for every metre we drill we find 19 ounces of resource. How can you beat that?”
Walford notes that he hasn’t really pushed the project but now has no qualms about singing its praises.
“We haven’t been too good on promoting ourselves because we really wanted to make sure that when the time is right to shout about it, we’ve got something to shout about, and I think we’ve got something to shout about now.”
“I have no problem telling people now that it’s a great project in a great province that’s been very helpful to us,” he continues. “They recognize the importance of the project to the island. The attitude is very positive, and unlike some other provinces I’ve worked in, it’s very refreshing. They want us there, they understand the economic benefits of mining and they understand too that they’re going to benefit, that the province is going to benefit as well.”
Walford also points out that the project benefits from good infrastructure.
“We can drive to it, power is not too far away, and there’s a workforce that wants to stay on the island and work for us,” he says.
“This is the kind of deposit like Borden Lake or Kaminak—this is the kind of scale it is,” he says. “We’re just under the radar, people don’t get it, and that’s what we have to work on—getting the idea out that this is a major project with good economics and lots of upside still.”
Marathon Gold’s shares currently trade at $0.69 within a 52-week range of $0.65 and $1.28.
The company has about 160 million common shares outstanding for a market cap of $113 million.
At the end of September, Marathon had about $5 million in the bank.