A preliminary economic assessment (PEA) of Eastmain Resources’ (TSX: ER) Eau Claire deposit in Quebec outlines a stable operating profile of 86,100 oz. gold a year over the first 10 full years of production at attractive costs.
President and CEO Claude Lemasson says that Eau Claire — 350 km north of Chibougamau, and 50 km from Goldcorp’s (TSX: G; NYSE: GG) Éléonore gold mine — will be the next gold mine in the James Bay region of Quebec.
“We don’t see anybody else ahead of us, and with the PEA, we’re on track towards development,” says Lemasson, who joined Eastmain as a director in November 2015, and became president and CEO in April 2016.
“We’re quite pleased with the outcome of all the work we’ve done — including all the boring infill drilling!” he says. “At the end of the day, it certainly has given us great value.”
The PEA envisions that Eau Claire will be mined as an open-pit for the first three years, and from underground for 10 years, for a total of 12 years of production. (Underground mining starting in year two).
Life-of-mine cash costs will average $632 per oz. gold (US$486 per oz. gold) and all-in sustaining costs will average $746 per oz. gold (US$574 per oz. gold).
Pre-production capex is estimated to run to $175 million, with sustaining capital costs over the mine life at $108 million.
Initial capex can be repaid in just over three years, and the project’s after-tax, net present value at a 5% discount rate comes to $260 million. The post-tax internal rate of return is 27%.
The study uses a US$1,250 per oz. gold price.
About 71% of the 2018 updated resource was incorporated into the mine plan — 6.4 million tonnes at a diluted grade of 4.9 grams gold, for 1 million oz. gold (199,000 oz. from pit production and 802,000 oz. from underground).
Eau Claire has 4.29 million measured and indicated tonnes grading 6.18 grams gold per tonne for 853,000 contained oz. gold. Inferred resources add 2.38 million tonnes grading 6.53 grams gold for 500,000 contained oz. gold.
The study outlines a conventional, truck-and-shovel, open-pit operation from the main pit and the smaller West pit, followed by ramp access and captive long-hole, open stoping underground.
The plan is to extract the resource in the top 100 metres using open-pit mining. While this pit produces, the company will build an underground portal outside the pit and extend an underground ramp below the proposed crown pillar.
Mineralized material would go through a 1,500-tonne-per-day processing plant using conventional crushing, grinding, cyanidation and carbon-in-pulp processes. (Although the company isn’t ruling out toll milling.)
Mineralization at the structurally controlled gold deposit occurs in sheeted, en-echelon, quartz-tourmaline veins, and subordinate mineralization occurs as disseminated in the host rock, as well as criss-crossing, high-grade schist veins.
The major quartz-tourmaline and high-grade schist vein sets found so far at the 450 West and 850 West zones form a crescent-shaped, mineralized body — 1.8 km long by more than 100 metres wide — that has been traced to a 900-metre depth.
Lemasson says the project’s resources could be expanded in three areas: at the Eau Claire deposit between vertical depths of 600 metres and 840 metres, and below, as the deposit is still open at depth; within a 5 km radius of the deposit; and elsewhere on the 200 sq. km property. (Eau Claire takes up only 1 sq. km of land in the southwestern corner of the Clearwater property.)
The next steps will include more engineering studies and optimizing open-pit and underground designs, as well as environmental and geotechnical studies.
In addition, the company is studying whether it should explore underground via a ramp, in combination with an underground bulk-sampling program. This decision will be made next year, Lemasson says.
Eastmain also plans more exploration at its two other projects in the James Bay region: the past-producing Eastmain mine and its joint venture with Goldcorp and Azimut Exploration (TSXV: AZM) on Éléonore South, 5 km south of the Éléonore mine, and next to the southeastern border of the Éléonore property.
Assay results from the early 2018 drill program of 5,100 metres at the Éléonore South joint venture are expected in the next two or three weeks.
Eastmain owns 36.7% of the joint venture, with Goldcorp holding 36.7% and Azimut, 26.6%.
Eastmain updated the resource for the Eastmain mine project in January. The project now has 236,500 indicated oz. gold (899,000 tonnes grading 8.19 grams gold) and 139,300 inferred oz. gold (579,000 tonnes at 7.48 grams gold).
Eastmain’s shares have traded in a 16¢ to 42¢ range over the last year and at press time were trading at 26¢. The company has 199 million shares outstanding for a $51.8-million market capitalization.
Laurentian Bank Securities’ mining analyst Barry Allan has a $1.15 target price on the stock.
“Updating the share price of a peer group of comparable companies indicates Eastmain Resources is not getting credit for the quality of the Eau Claire deposit,” he writes in a research note after news of the PEA. “This valuation gap reflects a failure by the street to understand the geological character of the Eau Claire deposit. However, as the recent PEA results illustrate, the economic potential of developing a mine is very real.”