Sabina Gold & Silver makes progress in Nunavut

Drill results from Sabina Gold & Silver’s (SBB-T, SGSVF-O) Back River project in southwestern Nunavut — 520 km northeast of Yellowknife, and 50 km southeast of Xstrata Zinc’s Hackett River silver-zinc project — demonstrate the high grade and continuous nature of Back River’s Umwelt deposit, the company says.

Hole 217 returned 51.93 grams gold per tonne over 16.1 metres about 100 metres down-plunge of the G2 zone — or 700 metres below surface — while hole 214 cut 18.81 grams gold over 22 metres.

In other news, drilling on the company’s underexplored Boulder property 15 km north of its Goose property at Back River has yielded encouraging results. Hole 12BRP001 returned 4.05 grams gold over 11 metres in an extensive thickness of altered and locally sulphidized iron formation. The intersection was 120 vertical metres below a 1993 historic hole that returned 3.91 grams gold over 12 metres.

Drilling on the George property has also returned significant results from the Fold Forest area, where hole 12GRL046 intersected 5.92 grams gold over 5 metres within a broader, 33-metre-wide interval of highly anomalous, gold-enriched iron formation.

Three hundred metres north of that hole, a 67-metre-wide zone of anomalously gold-enriched iron formation — including 7.37 grams gold over 2 metres and 5.79 grams gold over 1 metre — was intersected in hole 12GRL047. Sabina notes that the iron formation encountered at Fold Forest is “significantly thicker than the narrow units that are common at George, and coupled with the sulphide mineralization, stratigraphic orientation, strength of alteration and density of veining, offer good potential for a large, thick deposit to be found in the system.”

Sabina has also made some management changes, and has hired Angus Campbell as vice-president of exploration. Campbell was a member of the Spence deposit discovery team in Chile who received the Bill Dennis Award from the Prospectors and Developers Association of Canada in 1998.

Andrew Kaip of BMO Capital Markets described the impact as “potentially positive,” and wrote in a research comment that “drill results in the vicinity of the proposed pit provide the opportunity to expand resource potential,” adding that results from regional exploration “demonstrate the potential to generate new discoveries within the larger Back River project area.” He also pointed out that Campbell has a good track record in exploration “that should add depth to the SBB team.”

Kaip holds an “outperform” rating on Sabina with a target price of $4.25 per share. At press time Sabina traded at $2.82 per share within a 52-week range of $1.66 to $5.29. The junior has 173 million shares outstanding.

Back River is 75 km southwest of the tidewater at the Bathurst Inlet, and is one of Sabina’s two projects in the West Kitikmeot region of Nunavut. It is made up of seven claim blocks, but only Goose and George have hosted exploration.  The Goose property, which contains the Umwelt, Llama and Goose gold deposits — is 50 km south of the George deposits. All the deposits remain open at depth.

Sabina acquired Back River from Dundee Precious Metals (DPM-T) in 2009, and completed a preliminary economic assessment (PEA) this May demonstrating average production of 300,000 oz. a year over a 12.3-year mine life, for total production of 3.7 million oz. beginning in late 2016, or early 2017.

The PEA envisioned a concurrent open-pit and underground mining operation that would deliver material from the Llama, Umwelt, George and Goose deposits to a centralized processing facility near Umwelt that would operate at a rate of 5,000 tonnes per day.

At a base case of US$1,250 per oz. gold, the project yields a post-tax net present value of $650 million and an internal rate of return of 25% at a 5% discount rate.

The project would generate life-of-mine after-tax net cash flow of $1.1 billion on revenue of $4.6 billion, with payback in three years. Total cash costs would come in at about $542 per oz. over the life of the mine, including royalties, refining and transport.
It would require pre-production capital expenditure of $450 million and sustaining capital of $388 million. 

At the time the PEA was released, Sabina’s president and CEO Rob Pease noted that the high grade and continuity of the deposits at Back River give the company flexibility to design and build a gold mine “with attractive operating costs for a modest, upfront capital commitment.” He said that Sabina has several financing options, including the possible monetization of all or part of the silver royalty it holds on Xstrata Zinc’s Hackett River project.

Sabina expects to complete a prefeasibility study next year.


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