Solitario Exploration & Royalty Corp.(TSE:SLR)(AMEX:XPL) and Ely Gold & Minerals (CVE:ELY) announced positive feasibility study results on the Centennial gold deposit situated on the Mount Hamilton property in Nevada.
The feasibility study demonstrates robust economics with excellent potential for developing additional resources, the joint venture partners said. Solitario and Ely began working together on the property in 2010.
Assuming a gold price of $1,323 per ounce and silver at $25.34 per ounce on a pretax, base case basis, the project has an internal rate of return of 35 percent, net present value at a five percent discount rate of $145.3 million and a payback period of 2.7 years, generating approximately $226 million in cash flow over the mine's currently anticipated eight-year mine-life.
At gold and silver prices of $1,700 and $33 per ounce, respectively, the project is projected to generate nearly $390 million in life-of-mine cash flow, Solitario said.
After tax on a base case basis, the project has an internal rate of return of 25.4 percent, net present value at a five percent discount rate of $83.1 million and payback of 3.2 years generating cash flow of $136.4 million.
Initial capital costs are estimated at $71.9 million, including a contingency of $6.3 million.
Life-of-mine cash operating costs on a gold equivalent basis are estimated at $535 per gold-equivalent ounce recovered, well below world-average industry cash costs. On average, silver production contributes approximately 11 percent to the overall project revenues, the company said.
With a production rate at 8,500 tons of ore per day, average annual gold production is seen at 48,000 ounces with silver output of 330,000 ounces for average annual gold-equivalent production of 54,000 ounces.
Average gold recovery is seen at 79 percent, with average silver recovery of 90 percent.
Solitario's president and CEO Chris Herald said: "Completion of this comprehensive Feasibility Study represents the culmination of an intensive one-year effort by our staff and SRK.
"With this study in hand, we are now moving forward with permitting the mine, arranging project financing and adding new reserves.
"With its robust economics, we believe we will have an array of financing opportunities available to us. Our mine plan is well conceived from both an operational and environmental standpoint, however, we will continue to evaluate a number of opportunities identified in the Feasibility Study that have the potential to reduce capital and operating costs.
"Additionally, we believe with a modest amount of infill drilling marginal to the current reserves and confirmation drilling in the historic Seligman pit area, we will be able to add several years of additional low-cost production."
Development of the project will deliver "significant" economic benefits to the local economy of White Pine County, Solitario said, with an estimated 120 fulltime jobs.
With the completion of the feasibility study, Solitario will hold an 80 percent interest in Mount Hamilton LLC, a limited liability company which holds 100 percent of the Mount Hamilton project assets.
Ely Gold will hold a 20 percent interest in the company. The feasibility study has been prepared on behalf of the company by SRK Consulting.
Ely Gold's president and CEO, Trey Wasser, added: "The completion of the Mt. Hamilton Feasibility Study is an exciting milestone for Ely Gold. The project represents an important building block in our corporate strategy of participating in North American precious metal development projects."
The Mount Hamilton gold project will be an open pit mining operation with heap leach processing. The reserves are contained within a well-defined ore body, displaying continuity of mineralization that will be mined within a single open pit.
The Centennial deposit has a measured and indicated resource estimate of 23.6 million tons at a grade of 0.022 ounces per ton containing 526,854 ounces gold and 3.15 million ounces of recoverable silver at a grade of 0.133 ounces per tonne.
The companies said that the feasibility study resource and reserve estimations demonstrate a potential to increase the size of the existing Centennial deposit through step-out exploration drilling around the east and southeast margins of the current pit configuration.
This mineralization falls entirely within a pit design based on $1,600 per ounce gold and $40 per ounce silver and is situated immediately adjacent to the reserve pit.
Drilling is planned in these areas with the objective to upgrade the mineralization to measured and indicated resources.
Solitario is also planning a drilling program to upgrade mineralization around the nearby historic Seligman pit area.
The Seligman deposit, situated approximately 2,000 feet north of the planned Centennial pit, was partially mined in the mid-1990's. About 310 drill holes defined a well mineralized, near surface gold deposit that was abandoned due to low gold prices.
Solitario believes these two resource expansion programs may have the potential to extend mining for three to four years, it concluded.