Richmont Mines (TSX: RIC; NYSE: RIC) has found a high-grade gold zone at its Island Gold mine near Wawa, Ont., as part of its 2017 exploration and delineation drill program on the 77 sq. km property.
Richmont has over 100,000 metres of drilling planned this year from surface and underground to infill Island Gold’s current resource of 995,700 oz. gold (3 million tonnes of 10.18 grams gold), as well as expand resources both laterally and at depth, Haywood Securities analyst Kerry Smith writes.
Drilling in Island Gold’s eastern lateral extension hit high-grade mineralization 800 metres east of the main deposit. The discovery hole returned 20.6 grams gold over 11.3 metres of estimated true width.
“This new area is located only 500 metres east and below the new resource blocks, which indicates that the structure could continue at depth,” Richmont’s CEO Renaud Adams states.
The miner found two resource blocks last year in the eastern lateral extension, 300 metres east of Island Gold’s preliminary economic assessment (PEA) expansion area. Both blocks are relatively shallow and near mine infrastructure, with the largest of the two hosting 95,000 oz. (290,000 inferred tonnes at 10.35 grams gold).
As a result, Richmont is following up on the area as part of its 2017 drill efforts, where it intends to extend and infill resource blocks. It has completed 8,200 metres of the planned 37,000 metres of exploration drilling in the eastern lateral area. Drilling here continues from the 340-metre-level exploration drift. Richmont notes it has one drill turning, and will add another on the 620-metre level once it completes the 300-metre extension of the exploration drift later this year.
“This is the first exploration update this year and Island is developing into what we expect is a more than 3 million oz. deposit over time,” Smith says. “Grades continue to improve with depth and the system is showing no signs of petering out.”
Richmont is also continuing its deep directional exploration program to build on its 2016 success, where it found a resource block of 230,000 oz. (760,000 inferred tonnes of 9.53 grams gold) in the eastern down-plunge extension, between the 1,050- and 1,300-metre levels.
It has 16,000 metres of deep directional drilling and 20,000 metres of underground drilling planned for 2017 to expand the resource block. Most of the underground drilling will occur from the 860-metre level exploration drift.
Results from this year’s deep drilling have been encouraging. One hole returned 3.8 metres of 24.5 grams gold, while another intersected 2.24 metres of 4.6 grams gold in the east, which indicates that the mineralization remains open. Richmont has completed over 5,000 metres (10 holes) in this area and has three active surface directional drills.
The company has 30,000 metres of delineation drilling planned within the expansion PEA area, mainly in a fourth mining horizon between the 860- and 1,000-metre levels.
Last November, Richmont said it was working on a PEA study to expand Island’s processing rate from 900 tonnes per day to 1,100 tonnes per day starting in 2018. The study, slated for completion by mid-year, will include resources only between the 450- and 1,000-metre levels.
Richmont has completed 6,900 metres (40 holes) of the planned delineation drilling and has two drills turning in the area.
It says drilling shows the potential to add reserves at a higher grade, mainly by converting the high-grade inferred resources in the fourth horizon. Some recent drill results — not included within the December 2016 resource and reserve update — are 96.47 grams gold of 5.1 metres and 53.64 grams gold of 6.5 metres.
Desjardins analyst Michael Parkin says he is the “most excited” by the results from the expansion PEA area, which could increase Island Gold’s reserve grade. As of December 2016, the mine had reserves of 752,200 oz. (2.55 million tonnes at 9.17 grams gold).
Based on that reserve grade and 900-tonne-per-day processing rate, Island has an eight-year mine life, Richmont’s senior vice-president of investor relations Anne Day says.
“Recall that Richmont was able to increase reserves 34% and the average grade 11%, and add 450,000 oz. of new inferred resources from the 2016 program at a discovery cost of less than US$35 per oz.,” Parkin says. “We estimate the company will spend a similar amount on drilling programs in 2017.”
The company has budgeted $14 million to $16 million for 2017 drilling at Island, Day notes. It expects to start a second-phase regional drill program later this year, where drilling will continue to test the potential extension of mineralization below the Kremzar mine, as well as other high-priority gold targets on the property.
On March 31, Richmont gained 14¢ to close at $9.43 per share, within a 52-week trading range of $7.13 to $15.01. It ended 2016 with $75 million in cash.