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Pure Gold Mining's Madsen feasibility study shows high-grade, low cost mine; eyes start of development

The pre-tax net present value was pegged at $353 million with an IRR (internal rate of return) of 43%
Underground mine workers
Madsen is set to be Ontario's next gold mine

Pure Gold Mining Inc (CVE:PGM) (OTCMKTS:LRTNF) has released a feasibility study for its flagship Madsen gold project, which outlines a robust 12-year high grade, 800 tonne per day underground mining operation with low initial capital costs.

The pre-tax net present value was pegged at $353 million, with an IRR (internal rate of return) of 43% with a pay-back of initial capital put at three years.

READ: Mackie stays bullish on Pure Gold Mining after positive Madsen resource update

Last week, the group issued a posted a positive updated resource estimate on the project, which lies in the heart of Ontario's famous Red Lake mining district and is hoped to be Canada's next gold mine.

That showed that higher confidence indicated resources had risen by 319,000 ounces to 2.06 million ounces at an average grade of 8.9 grams of gold per tonne, while inferred resources rose by 171,000 ounces to 467,000 ounces at an average grade of 7.7 grams of gold per tonne.

"The Madsen-Red Lake orebody is an exceptional foundation on which to build a gold mining company, said Darin Labrenz, the president and CEO of Pure Gold in a statement Monday.

"With access to existing infrastructure, a high grade reserve, and exceptional growth potential, Madsen is one of the outstanding gold deposits in Canada. The completed study outlines a long life high margin mine, with low initial capital requirements and a fast timeline to production."

Labrenz also highlighted that further exploration targets and satellite resources, which were not part of the report, suggested an opportunity for near-term growth to potentially further enhance the economics of the project.

Probable mineral reserves are 3.5 million tonnes (Mt) at 9 g/t (grams per ton) containing 1 million ounces of gold.

Mine life of 12.2 years

The mine life is 12.2 years and peak annual production was put at around 125,000 ounces, with average annual gold production in years three through to seven of around 102,000 ounces.

The LOM (life of mine) all in sustaining cash cost (AISC) was estimated at US$787 per ounce of gold recovered.

Total pre-production capital cost (capex) is estimated at C$94.7 million (US$71.0M), inclusive of a C$8.1 million contingency. The total life of mine capex is C$327 million (US$245M), inclusive of closure costs.

"The project benefits from significant mining, milling and tailings infrastructure already in place, resulting in one of the lowest capital intensity, undeveloped gold projects in the world," said Pure Gold.

The existing mill and tailings management facility will be upgraded to include the installation of new pumps, two new batch gravity concentrators as well as expansion of the grinding circuit through replacement of the existing ball mill to achieve forecast productivity.

Now that the feasibility study is complete, the firm will move towards development. Last August, it appointed Endeavour Financial as its advisor to aid with debt financing to construct and develop the project and this process is well advanced and discussions are underway, the company said.

"Assuming the project execution starts in April of 2019, the first gold production would be expected in May of 2020," the company also told investors.


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