Viva Gold (TSXV: VAU) has announced results from a preliminary economic assessment (PEA) of the company’s wholly-owned Tonopah gold project, located 30 km northeast of the town of Tonopah in the Ralston Valley of Nevada.
The PEA estimates an open-pit heap leach operation with a mine life of six years, averaging 38,000 oz. gold per year, with annual production in the second and third years of 48,000 ounces. In total, Tonopah would produce 226,000 ounces over the life of the mine at all-in sustaining costs (AISCs) of US$1,075 per ounce.
At a base case gold price of US$1,400 per oz., the PEA forecasts an after-tax net present value of US$36.3 million at a discount rate of 5%, an internal rate of return of 22% and a 2.9-year payback.
“The key takeaway from the PEA is that we’re looking at a project that has merit and that justifies the continued investment,” James Hesketh, the company’s president and CEO, said in an interview. “The study shows that Tonopah has significant value for us and has the potential to generate cash flow that exceeds our current market value.”
Initial capital costs for the project are projected to be low at US$58 million, Hesketh said.
The early-stage exploration project is situated on a land package of about 35 sq. km on the northeast side of the San Antonio Mountains in the Walker Lane structural trend of west-central Nevada.
Gold at the project occurs as high-grade mineralization associated with high-angle structures and lower-grade mineralization is associated with an argillite-volcanic contact zone.
“The project has a strong resource that contains both high- and low-grade populations of mineralization,” said Hesketh. “So, we have several distinct high-grade cores at near-surface that give us high-value material to access very early in the life of the mine.”
The project contains total measured and indicated resources of 12.83 million tonnes grading 0.79 gram gold per tonne for 326,000 ounces. Inferred resources add another 8.4 million tonnes grading 0.67 gram gold per tonne for 181,000 contained oz. gold.
The mineral resource estimate used a cut-off grade of 0.20 gram gold per tonne argillite and 0.25 gram gold per tonne for volcanic-hosted mineralization.
Hesketh noted that because around two-thirds of the resource estimate falls into the measured and indicated category, “the project is already well-drilled and so presents a lower implementation risk.”
Tonopah also benefits from excellent logistics, with paved road access, nearby power, water and mining-support infrastructure, including Komatsu and Caterpillar dealers and supply depots in Las Vegas and Cat and Komatsu parts depots and mining-specific machine shops in Round Mountain, located 50 km north of the project, Hesketh said.
The company now plans to undertake 3,000 to 4,000 metres of infill and step-out drilling at the project.
“We will continue to value-add to the project, with the infill and step-out drilling programs looking to convert inferred mineralization to measured and indicated status,” Hesketh said. “They will also help to plug gaps in our geological model by converting waste to mineralization.”
This, he added, will serve two purposes: “The first is to move the project closer to feasibility level, and the second is to reduce the strip ratio within the pit.”
The company also plans to undertake metallurgical test work to further optimize and improve gold recoveries. Current recovery rates are 83% in the argillite mineralization and 58% in the volcanic mineralization. The tests will be conducted in parallel to the drilling programs.
At press time in Toronto, Viva Gold was trading at 28¢ per share within a 52-week trading range of 14¢ and 35¢.
The company has 24 million common shares outstanding for a $7.42-million market capitalization.