Pure Gold Mining (TSXV: PGM) is on its way to finishing a definitive feasibility study (DFS) of its Madsen gold project in Ontario’s Red Lake district.
Madsen is one of the highest-grade, undeveloped gold deposits in the world, and muck samples reported in July from the first seven rounds of blasted material averaged 18.8 grams gold per tonne.
The company has started test mining within the first of two planned stopes from the McVeigh zone and plans to extract 7,200 tonnes of mineralized material before the end of September to support a DFS, which it expects to finish in the fourth quarter of the year.
The project in the Red Lake district hosts two past-producing mines, including Madsen, which together produced 2.5 million oz. gold over 36 years. As a result, the project already has a 1,275-metre-deep shaft and head frame, 27 levels of underground workings, a portal and ramp that are open and active for exploration, and a mill and tailings facility, with an existing environmental compliance approval that allows for the operation of a 1,089-tonne-per-day milling and processing facility.
A preliminary economic assessment (PEA) last year projected 910,000 oz. gold could be produced over a 14-year mine life. Pre-production construction would take a year, with an initial capital investment of $51 million. The PEA presented a $258-million after-tax net present value at a 5% discount rate and a 47% internal rate of return, for a payback period of just under three years.
In December, the company updated Madsen’s resource estimate to 1.74 million oz. gold in 6.24 million indicated tonnes grading 8.7 grams gold and 296,000 inferred oz. gold in 1.16 million tonnes averaging 7.9 grams gold. Both resource categories used a cut-off grade of 4 grams gold.
The resource estimate incorporates two new satellite deposits: Russet South and Fork, which are close to the Madsen mill complex. In January, Pure Gold came across the Wedge satellite deposit, 3 km south of the mill.
“The discovery of Wedge is a direct result of the application of a new geologic understanding that was developed while targeting and expanding the Madsen mineral resource,” Darin Labrenz, the company’s president and CEO, told The Northern Miner via email. “Wedge is an important component of the company’s growth strategy. It is exposed at surface and has been successfully targeted to a depth of 500 vertical metres … the ability to potentially mine from satellite zones allows us greater mine flexibility, potentially higher throughput and has the potential to impact the future production profile of the Madsen mine complex.”
In May, the company said it plans to drill another 21,000 metres this year.
“Continued exploration drilling at Wedge, Fork and Russet has been successful, and is expected to provide potential expansion and project scalability opportunities at Madsen,” Labrenz said.
In August it released assays from Wedge. Drill hole 18-600 returned 32.9 grams gold over 1.7 metres from 400 metres downhole, and drill hole 18-616 cut 23.1 grams gold over 2 metres from 133 metres downhole.
Overall, the company says, drilling at Wedge has intersected mineralized zones to 500 metres’ depth and across 1,100 metres of strike. It says that the mineralization at Wedge forms part of a series of genetically and geometrically related high-grade zones that span a 5 km structural corridor from Madsen to Wedge, and Wedge forms the southward extension of the same mineral system that hosts the Fork deposit, too.
Wedge sits in the footwall of the old Starratt-Olsen mine, which was not included in the 2017 assessment.
“Earlier exploration by Pure Gold demonstrated potential for mineralization at Starratt-Olsen to persist to depth, but further work is required,” Labrenz says.
Drill results from Wedge, Russet South and Fork will be incorporated into the company’s next resource update before year-end, but will not be included in the upcoming feasibility study. (There are numerous zones that will form part of the mine plan, which historically have been referred to as the Austen, South Austin, McVeigh and 8 Zone, Labrenz says.)
The satellite deposits all outcrop and are within 1 to 3 km of the mill infrastructure. Russet South and Fork are both 1.5 km from the Madsen mill, while the Wedge zone is just south of Fork.
“Our geologic model has unequivocally linked multiple-related zones into a common mineral system,” Labrenz said. “The recognition of this important structural relationship has opened up expansive gaps along strike and down-plunge that are highly prospective for continued resource growth, supporting our goal of establishing a new multimillion-ounce mine complex at Madsen.”
The company is fully funded for the DFS, remaining mining and processing permit updates, extracting a 7,200-tonne bulk sample and 21,000 metres of exploration drilling beyond the feasibility study, Labrenz says.
Pure Gold has no debt, and as of August had working capital of $15.6 million.
The company’s shares are trading at 56¢ within a 52-week range of 46¢ to 71¢ per share. The company has 236 million shares outstanding for a $132-million market capitalization.