New Found Gold starts commercial output at Hammerdown mine

New Found Gold (TSX: NFGC; NYSE-American: NFGC) has achieved commercial production at its Hammerdown mine in central Newfoundland after meeting three benchmarks on a sustained basis over about two months. Shares rose.

The milestone, reached on Aug. 19 after 60 consecutive days saw New Found book throughput of about 748 tonnes per day (tpd), gold recovery of 87.7% and average feed grade of 2.92 grams gold per tonne at its Pine Cove mill, about 95 km northeast of Hammerdown.

“Today’s news is positive and shows the renewed operating focus under the management team led by Keith Boyle, and gives a positive readthrough towards future construction, production, optimization and expansion of the Queensway project,” National Bank of Canada Capital Markets Analyst Rabi Nizami said in a note on Wednesday.

“The next catalyst we will look for is the publishing of an updated mineral resource estimate and preliminary economic assessment (PEA) on Queensway in the coming weeks,” Nizami said, adding that he expects to see tighter infill drilling to support a higher-confidence short-term mine plan.

‘Major milestone’

Reaching production on schedule is major milestone for the company and the next step towards New Found becoming Canada’s next mid-tier gold producer, CEO Keith Boyle said in a release.

“With commercial production underway at Hammerdown, we will continue to focus on delivering solid gold production, while advancing our flagship Queensway gold project to production.”

Hammerdown’s move into commercial production adds momentum to Newfoundland’s emergence as a gold-producing jurisdiction, less than a year after Equinox Gold’s (TSX, NYSE-A: EQX) larger Valentine mine reached the same milestone. New Found’s main Queensway project is located near Gander.

Shares of the company gained more than 5% to $1.73 apiece on Wednesday morning in Toronto, valuing New Found at about $929.5 million (US$669 million). The stock has traded in a 12-month range of $1.34 to $3.59.

9,140 oz this year

Hammerdown, located 340 km northwest west of St. John’s, produced a total of 9,140 oz. of gold in the first eight months of this year, including 1,989 oz. of gold in August.

The mine could produce 251,287 oz. gold over a 13-year life at all-in sustaining costs of US$2,429 per oz., according to the PEA released in February. Discounted at 5%, Hammerdown has a post-tax net present value of $199.2 million, assuming a long-term gold price of US$3,475 per ounce.

The construction of a crusher and sorter at Hammerdown, targeted for completion in the fourth quarter, is expected to reduce crushing costs and raise the grade of ore sent to Pine Cove, New Found said.

The company also plans to convert and expand Pine Cove from the current 700 tpd flotation-leach-Merrill-Crowe circuit to a 1,400 tpd gravity-carbon-in-leach circuit. That conversion is expected to be finished by the fourth quarter of 2027.

New Found acquired Hammerdown through its $292-million purchase of Maritime Resources just over one year ago.