(Source: Exploration Insights)
If you're into investing in the mining sector, you should know the above chart very well. This series covers the three projects with the most significant drill interceptions over the past week, as well as the prospects of the companies which own these projects. I will use data from the weekly bulletin of RSC Mining and Mineral Exploration, which can be found on its website. Note that the drill interceptions are converted into grades of gold equivalents using the following formula:
(Source: RSC Mining and Mineral Exploration)
RSC Mining and Mineral Exploration has chosen gold as the metal equivalent for all conversions, as it considers it the most widely used and best-understood benchmark to determine or appreciate the grade tenor of a drilling intercept.
(Source: RSC Mining and Mineral Exploration)
1) Kiena gold mine complex in Canada
On July 31, Wesdome Gold Mines (OTCPK:WDOFF) released a new set of results from the ongoing underground definition and exploration drilling campaign at the Kiena Deep A Zone of its Kiena mine complex in Val d'Or. The best interception was 19m @ 68.24g/t Au from 182.9m in hole 6456, which is equal to 1,297(AuEq.)m.
The current drill program is focused on the up and down plunge extensions and recent resource infill. Wesdome plans to drill around 50,000 meters as part of its 2019 underground exploration program at Kiena, of which around 30,000 have been completed so far. A new resource estimate should be released in the second half of 2019, which will serve as the basis for a preliminary economic assessment.
Kiena is a high-grade past-producing mine with more than 2.8 million ounces of historical gold production. It was put under care and maintenance in 2013, and it has a 2,000 TPD permitted mill as well as a 900-meter production shaft. Kiena has an area of more than 7,500 ha with eight shafts:
On December 12, the company released a resource estimate for the complex, which showed that it contains more than 1.5 million ounces of gold:
2) La Colorada silver project in Mexico
On August 1, silver major Pan American Silver (NASDAQ:PAAS) released quarterly drill results from its La Colorada project and the best intersection was 126m at 55g/t Ag, 0.22% Cu, 3.79% Pb and 6.56% Zn from 533.4m in hole U-46-19. This is equal to 769(AuEq.)m and the company said that drill holes now cover a horizontal area of about 600 meters by 300 meters, delineating skarn and manto zones which are still open laterally and at depth.
By the end of 2019, American Silver plans to complete a 50,000-meter drill program at La Colorada and release an initial resource estimate for the skarn discovery in late 2019.
La Colorada produces a silver and gold dore and silver-rich lead and zinc concentrates and is the largest silver producing mine in Pan American Silver’s portfolio.
In 2018, Pan American added 11.1 million ounces of new silver reserves to La Colorada.
In 2017, the company completed a $137 million expansion of the mine which included a new 618-meter deep mine shaft, a new sulphide processing plant, further development of the underground mine as well as a new 115 kilovolt power line.
3) Kumtor gold mine in Kyrgyzstan
On July 30, Centerra Gold (OTCPK:CAGDF) announced new exploration results as part of its Q2 earnings release and there were some impressive hits at the Kumtor gold mine. The most impressive drill result was 67.5m @ 8.32g/t Au from 322.5m in hole D1882. This is equal to 562(AuEq.)m and this hole formed part of infill drilling at the SB Zone deep extension of Kumtor. The aim of the infill drilling at the zone is to add to the open pit mine life.
Kumtor is a large open-pit mine located in eastern Kyrgyzstan:
In 2019, it’s expected to produce between 550,000 ounces and 575,000 ounces at AISC of in the $635-$685 per ounce range. As you can see, it’s among the lowest-cost gold mines in the world.
With reserves of just over four million ounces of gold, there’s a lot of remaining mine life during which the project should generate very significant cash flow for Centerra:
Wesdome is continuing to release impressive drill results from Kiena ahead of the publishing of an updated resource estimate in the second half of 2019. Drill results from the company's Eagle River project have also impressed me this year. However, Wesdome’s shares have had a great run and the company is now valued at more than $700 million, which I think is too much for the moment.
Pan American Silver delivered another batch of great drill results from the newly discovered wide zones of mineralization below the current production levels at La Colorada and I expect this system to significantly improve the latter’s reserves and mine life. However, I’m not a fan of the silver mining sector as I think that pretty much every silver producer is overvalued from a discounted cash flow perspective.
Centerra posted very good results from infill drilling at the SB Zone deep extension of Kumtor and this should help the company extend the mine life of the project. I think that Kumtor is an amazing mine, which will bring in near $200 million annually of net cash flow over the next few years. Regarding Centerra’s valuation, the company’s shares have benefited greatly from gold’s summer rally and I think that it’s a bit overvalued at the moment.
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