McEwen bolsters Black Fox with new resource

The mill at McEwen's Black Fox gold complex in northern Ontario. Credit: McEwen Mining.The mill at McEwen's Black Fox gold complex in northern Ontario. Credit: McEwen Mining.

McEwen Mining (TSX: MUX; NYSE: MUX) has tabled a maiden resource for its Stock East gold deposit and an updated resource for its Froome gold deposit to go with numerous positive results from its ongoing $15-million exploration campaign at its Black Fox complex in Timmins, Ontario.

The company has drilled 80,000 metres so far at Black Fox in 2018 of a planned 100,000 metres by year-end.

“Very little exploration has gone on in a regional sense at Black Fox,” Black Fox exploration manager Ken Tylee says during a presentation at McEwen’s September Investor and Analyst day. “Most camps in eastern Canada have a very short strike length but are very deep. Compared to other historic camps like Kirkland Lake, we’re really just scratching the surface at Black Fox.”

Stock East’s first resource outlines 1.38 million inferred tonnes grading 2.54 grams gold per tonne for 114,000 oz. gold across an open-pit and underground mine. It classifies 73,000 oz. gold as underground.

The Stock East property covers 6.5 km of the Destor-Porcupine fault. The Stock East deposit is 700 metres east of the historic underground Stock mine and part of the same 2 km mineralized trend. According to the company, the mine produced 137,000 oz. gold at 5.5 grams gold.

McEwen initially drilled the property in February 2018, but began a follow-up program in June that is still ongoing. Highlights from the current program include 9.6 metres from 336 metres downhole at 5.76 grams gold, as well as 14 metres from 238 metres downhole grading 0.81 gram gold.

The company is also drilling the Stock mine and a third target called the Gap zone. It has drilled four holes to test mineralization beneath historic mine workings that extend as much as 700 metres below surface. It has drilled another 11 holes 400 metres east of the mine in the Gap zone. Both the mine and the Gap zone have received little past drilling.

Highlights from the Stock mine and Gap zone include 22.15 grams gold over 1.4 metres from 333 metres downhole and 0.78 gram gold over 26 metres from 125 metres downhole.

Less than 30 km east of Stock lies the Black Fox deposits: Froome, containing 941,000 indicated tonnes at 5.26 grams gold for 159,000 oz. gold; Grey Fox, containing 2.1 million indicated tonnes at 6.64 grams gold for 465,000 oz. gold; and Black Fox, containing 2.2 million indicated tonnes grading 7.9 grams gold for 576,000 oz. gold.

As Black Fox business manager Chris Price puts it, “there’s a huge opportunity at Black Fox for simply converting indicated resources to reserves.”

The fourth deposit, Tamarack, is a bit of a special case. It’s the only Black Fox deposit that also contains base metals, with a resource of 778,000 indicated tonnes grading 1.83 grams gold, 26 grams silver, 1.08% lead and 3.29% zinc for 127,000 oz. gold equivalent.

Workers underground at the Black Fox mine. Credit: McEwen Mining.

Workers underground at the Black Fox mine. Credit: McEwen Mining.

Tylee says although the project was discovered in 2004, “previous operators didn’t have the metallurgical confidence to deal with this.

“Metallurgical results are starting to come in now, and it really shows it’s amenable to extraction,” Tylee adds.    

At Froome, McEwen recently increased the indicated resource by 14%. The deposit now contains 1.1 million indicated tonnes grading 5.09 grams gold for 181,000 oz. gold.

The company continues drilling at Froome, both on the down-plunge extension of the deposit as well as a potential mineralized footwall. At the Froome Footwall, McEwen cut 53.93 grams gold over 8 metres from 113 metres downhole, including 322.86 grams gold over 1.3 metres.

The company says this intercept may extend the strike length of a second gold-mineralization belt that runs parallel to the main Froome deposit, 350 metres east.

At its Grey Fox project, the company drilled another 3,000 metres in the 147 Hanging Wall target. The company traced a known mineralized structure from another orientation to prove continuity. The structure extends over 140 metres’ strike length and to 125 metres below surface.

The company also added its deepest high-grade intercept to date at Black Fox when it tested the down-plunge extension of the project’s Deep Central Zone. The company cut 35.08 grams gold over 1.6 metres from 561 metres downhole, including 55.1 grams gold over 1 metre.

The company is not drilling at Black Fox, but says it will resume in mid-September.

On the other side of the complex, 45 km west of the mill, sit four other gold projects in the Timmins Camp: Buffalo-Ankerite, Paymaster, Davidson Tisdale, and, most notably, Fuller, which the company aims to mine in 2021.

Fuller operated from 1986 to 1989, before it shut down due to financial issues. As a result, the site has a ramp and 5 km of underground development into existing stopes that extend 650 feet below surface.

“I consider Fuller to be a real gift to McEwen,” McEwen director of mine planning Nigel Fung says. “It’s essentially ready to be mined as soon as it’s permitted and de-watered.

“We’ll have a PEA later this year at Fuller. That will lead to a prefeasibility study with a bulk sample, with the aim of justifying production at Fuller in the next 36 months.”

The company plans to bring Grey Fox into production in 2022 and Stock in 2023, with Tamarack producing in 2020 and 2021.

“We want to bring four to five mines online to feed the central mill,” Price says.

The company produced 14,055 equivalent oz. gold at the Black Fox complex in 2018’s second quarter, in-line with its full year production guidance of 48,000 equivalent oz. gold. It produced 47,258 equivalent oz. gold across all of its projects in 2018’s second quarter, which is nearly 14,000 equivalent oz. gold higher than in the second quarter of 2017.

Sandstorm Gold Royalties (TSX: SSL; NYSE-AM: SAND) has a gold stream on the complex that covers the Black Fox deposit, Froome, the gold component of Tamarack and another target called Pike River. The stream entitles Sandstorm to as much as 8% of the project’s production at US$524 per oz. gold.

“Grey Fox is not covered, nor is most of the property, and in my opinion that’s where we should be spending more of our time exploring,” executive chairman Rob McEwen says.

The company forecasts US$650 per gold equivalent oz. cash costs at Black Fox for 2018. Cash costs for the first half of 2018 were US$724 per gold equivalent ounce.

Shares of McEwen are valued at $2.65 with a 52-week range of $2.33 to $3.46. The company has an $889-million market capitalization.

Its Gold Bar gold mine in Nevada is under construction, while a new preliminary economic assessment called Project Fenix could add 12 years to its Mexican operations.

“We’re finding multiple new areas of gold that suggest we’re going to have longer lives and higher grades,” McEwen says.


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