In an April 9 research note, Mackie Research Capital Corp. analyst Stuart McDougall reported that Fiore Gold Ltd. (F:TSX.V; FIOGF:OTCQB) released a preliminary economic assessment (PEA) showing robust economics for its Gold Rock satellite gold project in Nevada.
McDougall reviewed the specifics of the PEA. The report outlined 362,750 ounces of production over 6.5 years, or an annual average of about 55,800 ounces. This is more than twice the current rate of production from Fiore's Pan heap-leach mine.
As far as costs, which could improve, McDougall indicated, the average life-of-mine cash cost for Gold Rock is projected to be US$903 per ounce and the all-in sustaining cost is forecast to be US$1,008 per ounce.
Initial capex is estimated to be about US$65 million and sustaining capex, US$7 million. Add in reclamation costs, and the total life-of-mine capex comes to US$88 million.
As for project returns, McDougall highlighted, the PEA demonstrated an after-tax net present value (NPV) of US$33 million and an internal rate of return (IRR) of about 18%, assuming a gold price of US$1,400 per ounce. At $1,600 per ounce, the amounts increase to roughly US$77 million and 33%, respectively.
"Even at our own gold price projection of US$1,500 per ounce, the after-tax NPV came in at about US$55 million, over four times our valuation on an in situ basis, providing considerable upside as management advances the project towards a construction decision," commented McDougall.
The PEA also noted opportunities for upside, McDougall pointed out. They include using lower stripping ratios with less conservative slope angles. For example, a three-degree drop would eliminate almost one-third of the waste, resulting in ample savings. Cost savings could also occur with the use of in-pit crushing and conveying, or larger haul trucks, for waste.
Finally, upside lies in the potential for resource expansion. To date, Fiore has only tested three of the known 16 kilometers of "favorable coincident structural and altered trend" at Gold Rock.
To begin construction there, Fiore only needs to get the required state permits.
Mackie Research has a Buy rating and a CA$1.10 per share target price on Fiore Gold, the stock of which is trading today at around CA$0.61 per share.
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Disclosures from Mackie Research, Fiore Gold Ltd., Update, April 9, 2020
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