logo-loader

Northern Vertex sees positive indications from pilot plant at Moss mine as next phase looms

Last updated: 08:09 26 Nov 2013 EST, First published: 09:09 26 Nov 2013 EST

no_picture_pai

Northern Vertex (CVE:NEE) is advancing the pilot operations at its Moss project in Arizona with one key goal in mind: to recover and get paid for as much gold as it can, according to chief executive, Dick Whittington. 

The Phase I operations are part of a staged, three-phase development plan for the reactivation of the mine, which is situated in Mohave County, with the company saying recently that the mining component is essentially complete. 

“Now, effectively, there is just the leaching of the heap going forward – a process that will continue for 9-12 months,” says Whittington, who came on board as chief just a little over one year ago, tasked with taking the flagship project from development stage to production.

The company has come a long way so far, raising around $3.4 million through a private placement earlier this year, and putting the company’s three-staged plan in motion. 

“The whole purpose of the pilot plant is to prove the concept of what we have in the lab – can we make the transition from the lab to the field through our industrial pilot plant test and how do we use the test to also improve upon our activities?,” explains Whittington. 

So far, the junior explorer has loaded the mineralized material on the leach pad, with gold extraction beginning four and a half months ahead of the timeline projected in the preliminary economic assessment report (PEA) released earlier this year. 

The company has said that initial gold extraction rates are in line with expectations outlined previously, coming in at 61% after 40 days of leaching, with gold sales now underway. “We’re also finding the three-stage cone crushing is working very well, exceeding our expectations. We’re looking at using this processing method for our flow sheet in the next phase,” says the chief executive. 

Speaking to Proactive Investors, Whittington also highlighted that the heap has continued to hold up well at an increased bench height, with “good percolation”. “Results indicate that we can move to a higher heap height than the 27 feet used in the PEA. The more tonnes on a particular heap location, the more we can reduce the amount of real estate we need per tonne of heap.”

Importantly, the company’s Phase I and Phase II operations are restricted to patented land only, says Whittington, while Phase III – the conceptual expansion phase -- moves to unpatented land, not because of the deposit, but rather because Northern will “run out of real estate” on patented land. With the higher heap height, Phase II could potentially last an extra six months, according to the chief executive.

The aim is to get in the range of 4,000 to 5,000 ounces of gold production from the pilot phase.  The yellow metal is loaded onto carbon, shipped to an offsite stripping facility, poured into doré and further refined at an international refinery into bullion. So far, gold sales to date from the initial product shipment and carbon stripping have amounted to $0.36 million, based on 270.4 received ounces of gold and 588.6 ounces of silver. 

“Obviously, at this point, we are considering funding options for Phase II, and we’re not ruling anything out due to the market situation. If it makes sense, we will definitely consider it, but at the moment, we are focused on continuing the momentum towards building Phase II.

“How we fund it will be an ongoing discussion,” Whittington adds. 

The Moss mine is an open-pit gold and silver project in a well-known mining district, and will be led by an experienced team, with Whittington having taken Farallon Mining’s G-9 mine from discovery to full production in less than four years. 

Phase II of the project, according to the PEA, has an estimated IRR of nearly 118% pre-tax, and before royalties, with a net present value of US$110 million at a 5% discount rate. The economics of Phase II, or full operations, were calculated using a gold price of US$1,500 an ounce and $30 per ounce of silver. The payback period is seen at 15 months, with capex costs projected at US$26.6 million and cash costs estimated at US$490 an ounce.

When asked what separates the results of the preliminary report from other juniors on the market, Whittington highlighted the quality of the asset, first and foremost. “How understandable it is, how visible, how people can access it. There are no structural complications. It’s basically a high grade, epithermal, low-sulfidation system, which is shown in the grade, strip ratio, and the simplicity of the pit.”

He also noted the importance of jurisdiction, especially as events internationally over the last two years have made it a higher-risk proposition to build a mine in Africa or South America, while Arizona is a stark contrast to these regions. “We’re really in a first world jurisdictional system for regulations and investors understand this.”  Arizona is a very mining-friendly state, he points out, and the Moss mine is also only 20 minutes away from 35,000 people, which is why the “capex is so low” compared to mines built in Mexico. Instead of stocking inventory, key supplies will be on the shelves of stores in Bullhead City, or can be shipped in within a matter of hours from surrounding cities.  Workers on the project will also be able to live in their homes, requiring no fly-in, fly-out facility.  

“The hidden cancer in a lot of companies in remote regions is turnover, which we anticipate will be very low due to our great location.”

Permitting, too, has proceeded smoothly thus far, having established working relationships with regulatory bodies, communities and governments in the area. It secured an aquifer protection permit in six months, which Whittington boasts is “something of a record”. “As long as we follow all the requirements, we believe we have a compelling case to move forward with permits quicker than most while maintaining or exceeding Arizona state requirements.”

And the economics are nothing to sniff at either, says Whittington, who has never worked on a project “with these kinds of economic metrics”. “It’s one of those projects that falls in your lap once in your career. [The economics] are very powerful and believable because it’s not a complicated property.”

Even at a gold price of $1,300 an ounce, the IRR, on a pre-tax basis and before royalties, still comes in at 88%. “It’s a very robust project, even on the downside,” affirms the chief.

In addition to all this, through the pilot plant, the company is taking what Whittington calls a “huge step forward” in de-risking the project in a number of technical areas including drilling, blasting, crushing, and cyanide consumption. “We’ve established the PEA as a good basis going forward.”

For now, the company, with $5.5 million of cash in the bank, says it has enough funds to last it into the middle of next year, with Phase I operations to continue until such time as the decision is taken to move ahead with Phase II, which is dependent on financing.

“We’re getting a lot of interest. We’re certainly confident we’ll be able to raise funds to go forward to Phase II.”

The company has the right to earn a 70% interest in the project from Patriot Gold Corp (OTCMKTS:PGOL), and as part of the deal, is required to spend $8 million on the asset and present a feasibility study, which is expected to be completed in the second quarter of next year. 

Whittington is expecting a strong report. “A number of companies have not made the transition from the lab to the field as smoothly as they would like, but we have replicated lab results to our expectations, essentially proving the concept.” Indeed, according to the company, Northern is on track to achieve overall gold recoveries of 75% for gold, as outlined in the preliminary study.

Despite tough times ahead for Canadian juniors amid tight financing markets and a sharp drop in metals and minerals prices, Northern’s chief executive is confident in the asset’s potential. 

“Commodities have lost their shine with various investors and as a result, it has now become more of a supply-driven process than demand-driven. 

“Gold producers have had to cut costs amid lower prices. Our cash costs are projected to be the in lowest quartile of gold producers worldwide.”

Once in full, Phase II swing, the mine is expected to have a life of five years, producing at 5,000 tonnes per day, for 42,000 ounces of gold equivalent production per year.

Poseidon Nickel signs binding agreement with Mineral Resources to divest...

Departing Poseidon Nickel Ltd (ASX:POS, OTC:PSDNF) CEO Craig Jones and incoming CEO Brendan Shalders join Proactive’s Jonathan Jackson to discuss the divestment of Lake Johnston to Mineral Resources Ltd (ASX:MIN). Jones, who has played a pivotal role in this strategic move, shared insights on...

4 hours, 25 minutes ago