The five largest development-stage gold deposits with feasibility studies in place and permitting underway are Donlin Gold, Detour Lake, Metates, Livengood and Rosia Montana.
I will take a look at each of these five deposits and the companies that are developing the deposits.
1. Novagold (NG) is a well-financed precious metals company engaged in the exploration and development of mineral properties in North America. The company's flagship asset is its 50%-owned Donlin Gold project in Alaska, one of the safest jurisdictions in the world. Barrick Gold (ABX) owns the other 50% of the Donlin Gold project. With approximately 39 million ounces of gold in the Measured and Indicated resource categories (541 million tonnes at an average grade of approximately 2.2 grams per tonne), Donlin Gold is regarded to be one of the largest, and most prospective known gold deposits in the world. According to the Updated Feasibility Study, once in production, Donlin Gold should average approximately 1.5 million ounces of gold per year for the first five years, followed by decades of more than one million ounces per year. The Donlin Gold project has substantial exploration potential beyond the designed footprint which currently covers only three kilometers of an approximately eight-kilometer strike length of the property. Permitting is underway for the Donlin Gold project, a clearly defined process expected to take 3-4 years. Novagold also owns 50% of the Galore Creek copper-gold-silver project located in northern British Columbia. According to the 2011 Pre-Feasibility Study, Galore Creek is expected to be the largest copper mine in Canada, a tier-one jurisdiction, when it is put into production. Novagold is currently evaluating opportunities to sell all or a portion of its interest in Galore Creek and would apply the proceeds toward the development of Donlin Gold. Novagold has a strong track record of forging collaborative partnerships, both with local communities and with major mining companies.
The company reported the third-quarter financial results on October 11 with the following highlights:
|Net loss||$18.8 million|
The company is focused on advancing Donlin Gold. The total project budget for 2012 is $37.2 million of which the company's 50% share is approximately $18.7 million and includes expenditures for permitting activities and community development. In the third quarter, Donlin Gold commenced permitting which is expected to take approximately 3-4 years. During this period, Donlin Gold will be working to accentuate project returns by looking at various avenues to reduce capital costs by sharing upfront cost with third party operators and further optimize project design and layout. As the anticipated operating margins of the project are already robust, the emphasis on reducing up-front capital costs could potentially have a significant impact on project returns. When the permitting process nears completion, the owners of Donlin Gold will be in an optimal position to make further decisions on the project. Novagold has a strong balance sheet to support its share of activities through permitting and a production decision.
At the Galore Creek project, GCMC has an approved 2012 budget of approximately $35.4million, of which the company's 50% share is approximately $17.7million, to fund the 2012 exploration and geotechnical in-fill drilling for the enhanced engineering plan, in addition to site care and maintenance costs. This year's program included approximately 20,000 meters of exploration drilling and 5,000 meters of geotechnical drilling program. More recently, Galore Creek completed the 2012 drilling program and looks forward to releasing results in the coming months. The Galore Creek project remains on budget this year, although future expenditures are contingent on the timing and success of its divestment process.
At Rock Creek, Novagold had a 2012 budget of approximately $30.0 million for completion of closure activities at Rock Creek and an additional $7.0 million for site care and maintenance. In the third quarter ended August 31, 2012, Novagold continued with the completion of the phase one reclamation activities ahead of transferring Rock Creek to BSNC, which is expected to be complete by year-end. The company anticipates that the previously released 2012 closure costs will be reduced by approximately $14.0 million, which is the minimum amount that is anticipated to be retained in the reclamation bond for final closure activities.
The stock has met its bearish $4 price target from the Point and Figure chart. Donlin Gold is one of the largest undeveloped open-pit gold known deposits in the world. When in production, it is expected, as stated in the Updated Feasibility Study, to produce approximately 1,500,000 ounces of gold per year in the first five full years of production and average more than 1,000,000 ounces of gold per year over a 27 year mine life. Donlin Gold is one of only seven of the world's gold mines producing or which have the potential to produce in excess of a million gold ounces per year. Donlin Gold production decision is expected in 3-4 years. I believe the stock could be a good pick from the current level.
2. Detour Gold Corporation (DRGDF.PK) is a Canadian gold exploration and development company with a highly experienced management and technical team. The company's primary focus is the successful development of its flagship Detour Lake project, located in northeastern Ontario. With more than 92% of the mine site construction already completed, Detour Lake is on schedule and on budget to produce gold in January 2013.
The company reported the second-quarter financial results on August 9 with the following highlights:
|Net loss||$12.1 million|
The Detour Lake project will remain the focus of development and exploration efforts throughout 2012 and into early 2013. The mine is expected to commence producing gold in the first quarter of 2013 and attain commercial production prior to December 31, 2013.
As at June 30, 2012 the project had approximately $481 million left to fund the completion of the $1.45 billion budget and cash resources of $575 million which is sufficient to fund the remaining construction estimated cost. The surplus funds will be used to fund general corporate expenditures and working capital, exploration, interest on the convertible notes and payments on sustaining capital received in 2012 but required for 2013.
Near-term goals for 2012 include substantial completion of the mine, mill facility and related infrastructure as well as the commencement of commissioning of the key mill components. Focus remains on ramping up the prestripping of overburden and waste rock, allowing access to ore. To ensure a supply of feedstock, the target for 2012 is to stockpile up to three million tonnes of ore prior to the commencement of operations.
The company will also continue its exploration efforts on its large claim block through 2012, with focus being on the 100% owned Block A property where the company intends to proceed to a feasibility study.
The Lower Detour Lake structure will be examined to assess the potential for higher-grade mineralization.
Corporate activities will focus on completing the $100 million secured credit facility and $50 million secured letters of credit facility before the end of this calendar year to provide the company with financial flexibility during the ramp up of the mining operations.
The stock has a $43.5 price target from the Point and Figure chart. The gold production is expected to start in January 2013. For 2013 the gold production is expected to be between 350,000 and 400,000 ounces. The average annual gold production is expected to be 657,000 ounces with a 21.5 year mine life. The average cash costs are expected to be $749 per ounce. I believe the stock could reach the $43.5 price target during the next 12-24 months.
3. Chesapeake Gold Corp. (CHPGF.PK) is focused on the exploration and development of precious metals projects in North America. Chesapeake's major project is its 100% owned Metates gold deposit located in Durango state, Mexico. Metates is one of the largest undeveloped gold and silver projects in the world.
Independent Mining Consultants of Tucson, Arizona reported an updated NI 43-101 measured and indicated resource estimate of 19 million ounces of gold, 519 million ounces of silver and 4.2 billion pounds of zinc plus an inferred resource of 818,000 ounces gold, 21 million ounces silver and 130 million lbs of zinc. On a gold equivalent basis (gold-silver), Metates contains 27.9 million ounces of gold in measured and indicated material along with 1.2 million ounces in the inferred category.
M3 Engineering & Technology of Tucson, Arizona completed a positive Preliminary Economic Assessment [PEA] of Metates at $900 per ounce gold, $18 per ounce silver and $1.00 per lb zinc. The PEA indicates a large 120,000 tpd open pit operation with a 20 year mine life. Annual gold equivalent production over the mine life is projected to average 1,158,000 ounces at a direct cost of $434 per ounce including zinc credits. M3 expects to complete a pre-feasibility study on Metates in the fourth quarter in 2012.
From opportunity, Chesapeake also recognizes that exploration success creates shareholder value. The company's exploration is focused on gold projects that have the potential for district-scale success. Generative exploration has led to three potential bulk tonnage targets near Metates that Chesapeake plans to advance to the drill stage in 2012.
Chesapeake's management and technical team have an exceptional track record. With Francisco Gold Corp., this team discovered El Sauzal and Marlin, two robust world-class gold mines now owned by Goldcorp (GG) in Mexico and Guatemala.
The company reported the second-quarter financial results on August 29 with the following highlights:
|Net loss||$1.8 million|
The company continues to focus on completing a PFS which is expected in Q4 2012. Thereafter the company will continue to advance Metates to final feasibility. The company is also advancing three Mexican grassroot exploration properties in Durango, and Sinaloa and plans to drill one project in Q4 2012.
There are five analysts with a Buy rating on the stock. The target price range is from $22 to $61. The next major milestone for the stock will be the completing of a PFS for the Metates project in Q4 2012. The latest insider buy transactions are from May 2012. The stock could be a good pick in anticipation of the PFS results.
4. International Tower Hill Mines (THM) is focused on the rapid exploration and development of its 100% controlled world-class Livengood Gold project located 70 miles north of Fairbanks, Alaska. At a resource size of 16.5 million ounces in the Measured & Indicated categories plus 4.1 million ounces in the Inferred category, the Livengood project ranks as one of the largest gold deposits discovered globally in 20 years.
Led by a team of major mining experts from AngloGold Ashanti (AU), Teck Resources (TCK) and Kinross (KGC) with strong track records of development, permitting and operational success, ITH is committed to advancing the Livengood Project towards becoming Alaska's next major gold mine.
The company reported the second-quarter financial results on August 14 with the following highlights:
|Net loss||$1.1 million|
International Tower Hill Mines announced on September 18 that it has closed the second tranche of its previously announced non-brokered private placement financing of common shares to raise total gross proceeds of $29.6 million.
The Feasibility Study [FS] for the Livengood project is currently underway and scheduled to be released in the first half of 2013. During the first quarter of 2012, the company selected Samuel Engineering, Inc. of Greenwood Village, Colorado, to provide process engineering services for its FS.
The stock has met its bearish $2.5 price target from the Point and Figure chart. I believe the next major catalyst for the stock will be the Feasibility Study results due in the first half of 2013. I believe the stock could be a good pick in the anticipation of the results.
5. Gabriel Resources (GBRRF.PK) is a Canadian, Toronto Stock Exchange listed, resource company engaged in the exploration and development of mineral properties in Romania. Gabriel is presently in the permitting stage and preparing to develop its majority-owned Rosia Montana gold and silver project. Through its equity shareholding in Rosia Montana Gold Corporation [RMGC], Gabriel has a beneficial 80.69% ownership interest in the Project. CNCAF Minvest S.A. (Minvest), a Romanian state-owned mining company, owns the remaining 19.31% equity shareholding in RMGC. Gabriel holds a right of first refusal to acquire that non-controlling interest in RMGC from Minvest.
The company reported the second-quarter financial results on August 2 with the following highlights:
|Net loss||$2.7 million|
The company's key objectives in the short term include to:
- Reduce substantially monthly costs until such time as the new Government moves ahead with project permitting;
- Continue efforts to increase the Romanian public and Government awareness of the project benefits, economic and otherwise, and support for the permitting of the project;
- Complete the revised estimate of capital and operating costs of developing the project, such that a new NI 43-101 technical report can be issued;
- Obtain approval of the EP and all other required permits that allow construction activities to commence;
- Maximize shareholder value, while optimizing the project benefits to those in the community and the surrounding area.
The stock has met its $2 price target from the Point and Figure chart. The Rosia Montana project has a 14.6 million ounce gold deposit. The initial capital costs to build the mine are expected to be $876 million. The life of mine cash costs are expected to be $335 per ounce. The next major obstacle for the project is the goverment permitting. If the project is able to gain all required permits the stock could be a good investment from the current level.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in CHPGF.PK over the next 72 hours.