PanTerra Gold (ASX: PGI) has achieved the milestone start of gold and silver production with high grade refractory tailings from the Pueblo Viejo mine at the Las Lagunas Project being fed to the now operational process plant at around 30% throughput.

The first 15 kilograms of dore will be poured after carbon in the carbon-in-leach tanks has fully absorbed the precious metals from the cyanide solution and the metal is stripped during a batch elution and subsequent electrowinning/smelting process.

PanTerra is expecting first dore production in mid-June, with the dore comprising 10% gold and 90% silver. 

Planned throughput will increase to 50% next month, with Las Lagunas ramping up to full production of 70,000 tonnes per month in September.


Revenue generation

Las Lagunas is expected to generate free cash flow of nearly US$100 million within 18 months, in addition to repaying Macquarie Bank’s $37.5 million project loan. 

Another bonus for PanTerra is the company will recover its investment in the project of around $90 million to 30 June 2012 under the profit sharing agreement with the Dominican Republic Government.

The Government will then receive 25% of operating profits, but PanTerra will not pay any income tax on its profits.

At a gold price of around US$1,400 per ounce and a silver price of about US$28 per ounce, Las Lagunas could generate around $300 million in surplus cash over the next three and a half years.  

The Las Lagunas project involves the reprocessing of high grade gold and silver refractory tailings from the Pueblo Viejo mine, derived from open pit operations between 1992 and 1999.

Las Lagunas is expected to produce about 69,000 ounces of gold and 630,000 ounces of silver per annum.

Comment

With PanTerra on the precipice of production at Las Lagunas, the company has a market cap of just $86 million which appears slight.

The company is set to increase its March quarter cash position of $4.7 million with the impending cash flows from Las Lagunas.

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PanTerra Gold (ASX: PGI) has increased its land holding in the Dominican Republic, acquiring two concessions close to the company’s Las Lagunas Project which are highly prospective for precious and base metal mineralisation.

The company has finalised the acquisition of Vancouver based Novus Gold Corporation, issuing 18.4 million shares to Novus shareholders under a one for three agreement.

Novus holds two highly prospective concessions close to PanTerra’s Las Lagunas project in the Dominican Republic through its subsidiary Invercropolis; the La Yagua Project and the La Paciencia Project.

Preliminary exploration at the 99 square kilometre La Yagua project has identified significant precious and base metal mineralisation in five targets.

Grab samples at the project graded up to 18% copper, 13 grams per tonne (g/t) gold and 29g/t silver.

The mineralisation is strata bound Volcanogenic Massive Sulphide type, the same as Perilya’s (ASX: PEM) producing Cerro de Maimon copper-gold mine, which is 19 kilometres along strike from La Yagua.

Meanwhile, La Paciencia covers 86 square kilometres, 10 kilometres east of the plus-25 million ounce Pueblo Viejo project, is being redeveloped by Barrick Gold Corporation (NYSE: ABX, TSE: ABX) and Goldcorp (NYSE: GG, TSE: G) for more than US$3 billion.

La Paciencia has the same underlying geology as Pueblo Viejo, and prospecting has identified elevated gold values along structural lineaments.

Las Lagunas production imminent

PanTerra is nearing cash flow at Las Lagunas, following the start of commissioning of the process plant in January, with the first gold pour expected in May.

The Las Lagunas project involves the reprocessing of high grade gold and silver refractory tailings from the Pueblo Viejo mine, derived from open pit operations between 1992 and 1999.

Las Lagunas is expected to produce about 69,000 ounces of gold and 630,000 ounces of silver per annum.

In March, PanTerra enhanced the economic forecast for Las Lagunas, confirming a profit sharing arrangement with the Government of the Dominican Republic.

Based on an average gold price of US$1400 per ounce for unhedged production, and a silver price of US$28 per ounce, over the 6.5 year project, the net present value is now forecast to be about US$272 million, at a 10% discount rate.

Free cash flow to PanTerra from the project is expected to be around US$312 million.

Las Lagunas Progress

The company is nearing cash flows at its Las Lagunas gold project in the Dominican Republic following the start of commissioning of the process plant in January.

Construction of the process plant is nearing completion with commissioning underway.

The first gold pour has been delayed by a month due to minor delays from unseasonal rain and is now expected in May.

Plant feed is scheduled to begin next month, with manning and mining to stockpiles progressing well.

The Las Lagunas project involves the reprocessing of high grade gold and silver refractory tailings from the Pueblo Viejo mine.
 
These tailings were derived from open pit operations at the mine between 1992 and 1999 and were impounded in a purpose built valley catchment dam.

The project is expected to produce about 69,000 ounces of gold and 630,000 ounces of silver per annum.
 
The Pueblo Viejo mine is being redeveloped by Barrick Gold Corporation (NYSE: ABX, TSE: ABX) and Goldcorp for more than US$3 billion.

The company has apointed Franz Ulloa as general manager and Ernesto Castillo as operations manager.

Ulloa will have ultimate responsibility for profitable operation of EnviroGold’s Las Lagunas gold tailings project, overseeing exploration activities and feasibility studies on the La Yagua, La Pacienca and Fuerte concessions, and for administration and Government relations.

Since 1995, Ulloa has acted as Country Manager in Costa Rica for Canadian companies, including Placer Dome Inc, managing mid-sized gold mining operations with up to 400 employees. He also managed significant exploration programs for U.S. companies, including Phelps Dodge.

Castillo will be responsible for the operation of the Las Lagunas Albion/CIL process plant where his extensive experience should be invaluable in optimising gold grade in flotation concentrates, prior to their feed to the plant.

Castillo has been focussed on supervision of operations for large scale (100,000 tonnes per day) copper/gold concentrators for companies such as Southern Peru Copper Corporation and the Hothschild Group, in Peru.

Brian Johnson, executive chairman of EnviroGold, said interviews were being conducted in order to appoint a CEO to be based in Canada, and a general manager in Ecuador, both with a mining background and experience in Latin America.

EnviroGold successfully completed a “trial mining” exercise on its Las Lagunas gold tailings project in the Dominican Republic in August.

The trial demonstrated ease of operations under dry conditions, and confirmed contractor’s pricing.

Brian Johnson, executive chairman of EnviroGold said today, “it is exciting for the company to be nearing gold and silver production early next year in an environment of record bullion prices.

“If current prices are maintained for the first two years of operations, profits over the two year period would be expected to increase from the previously estimated US$78 million to approximately US$104 million after tax and Government profit sharing, which would result in significant early cashflow for an emerging producer”.

During the dry season (approximately six months of the year) it is proposed to doze tailings to an excavator which will load directly into a moveable penstock. The material will then be slurried before being pumped to the process plant, 200 metres downstream from the storage dam.

At the same time, contractors will move material by articulated off-highway trucks to stockpiles outside the dam which can be recovered during the wet season when rain would otherwise interrupt operations.

Meanwhile, EnviroGold has updated financial forecasts for its Las Lagunas tailings retreatment project.

Total capital costs for the development are expected to increase by about US$1.0 million to US$82.0 million as a result of increased construction management and financing costs, and unexpectedly high legal costs of the project’s financier which are passed on to the company.

EnviroGold said it will meet the cost overrun in addition to the US$36.0 million equity it has already contributed.

The project is fully funded by Macquarie Bank with a US$7.5 million advance against a 3% gold royalty, and a US$37.5 million project loan.

The company also has access to an undrawn US$5 million facility from Ban Reservas, a Dominican Government owned Bank.

Envirogold said the project economics are not capital sensitive and have been revised to incorporate reduced power costs which are indexed to falling US LNG prices, other reduced costs of consumables, increased cyanide costs, and a corporate tax rate increased last month by the Dominican Government from 25% to 29%.

Total forecast after tax profits for the 6.5 year project have decreased by 5% to US$202 million based on an assumed average gold price of US$1250 per ounce.

With the company about to commence an active exploration program of copper/gold and copper/gold/molybdenum prospects, the company is considering change a name change to better reflect its expanded objectives.

In 2013 free cash flow is expected to be in the order of US$52 million. The project loan should be repaid in approximately 18 months from the start of production, or sooner if current gold and silver prices persist.

The development of the Azuay project in Ecuador will be the company’s primary focus in 2012, together with drilling of the La Yagua prospect in the Dominican Republic and San Gerardo in Ecuador.

Cash generated from the Las Lagunas project should fund the exploration program and the US$22 million equity required for the Azuay project in 2012-13.

The interest from Sinom in EnviroGold is no doubt due to the company moving closer to the first gold pour at the Las Lagunas gold project in the Dominican Republic.

Earlier in the month EnviroGold announced at the project that the assembly of the modular oxygen plant is expected to be completed by the end of August.

Construction of the CIL/Albion processing plant is then due to be completed in December 2011, providing the first gold pour in the March quarter of 2012.

Las Lagunas is a gold tailings project wholly owned by EnviroGold.

The project will be reprocessing high grade refractory tailings from the Pueblo Viejo gold mine to produce around 65,000 gold ounces and 600,000 silver ounces annually for 6.5 years.

The Inferred JORC Resource is; 5.137 million tonnes of tailings at 3.8 grams per tonne (g/t) gold and 38.6g/t silver, for 621,000 gold ounces and 6.4 million silver ounces.

The tailings resulted from inefficient gold recovery by Government-owned Pueblo Viejo mine processing refractory ore (1992-1999) without changing installed technology (suitable only for previously mined oxide ore) - stored in purpose-built dam for later processing with appropriate technology.

EnviroGold has provided US$36 million of project equity, with Macquarie Bank (ASX: MQG) advancing US$7.5 million for a 3% gold royalty and providing a US$37.5 million project loan (expected 18 month payback).

The forward gold sales of 30% total project production (126,000 ounces) have been effected at US$1358 per ounce less fees, with anticipated operating costs US$302 per gold ounce equivalent.

The assembly of the modular oxygen plant is expected to be completed by the end of August.

Construction of the CIL/Albion processing plant is then due to be completed in December 2011, providing the first gold pour in the March quarter of 2012.

Las Lagunas is a gold tailings project wholly owned by EnviroGold .

The project will be reprocessing high grade refractory tailings from the Pueblo Viejo gold mine to produce around 65,000 gold ounces and 600,000 silver ounces annually for 6.5 years.

The Inferred JORC Resource is; 5.137 million tonnes of tailings at 3.8 grams per tonne (g/t) gold and 38.6g/t silver, for 621,000 gold ounces and 6.4 million silver ounces.

The tailings resulted from inefficient gold recovery by Government-owned Pueblo Viejo mine processing refractory ore (1992-1999) without changing installed technology (suitable only for previously mined oxide ore) - stored in purpose-built dam for later processing with appropriate technology.

Testwork at Xstrata’s Albion pilot plant in Brisbane demonstrated expected recovery of 421,000 gold ounces and 3.9 million silver ounces.

EnviroGold has provided US$36 million of project equity, with Macquarie Bank (ASX: MQG) advancing US$7.5 million for a 3% gold royalty and providing a US$37.5 million project loan (expected 18 month payback).

The forward gold sales of 30% total project production (126,000 ounces) have been effected at US$1358 per ounce less fees, with anticipated operating costs US$302 per gold ounce equivalent.

EnviroGold will place 15 million shares at $0.14 to a small number of existing shareholders to raise $2.1 million.

The company has also received a commitment from Moonstar Investments Pty Ltd, a trustee company associated with EnviroGold's chairman Brian Johnson, that it will progressively convert 10 million listed options at $0.15 before the 31 December 2011 expiry date.

Azuay offers a substantial potential return for EnviroGold after the company elected to retain 100% of the project.

The planned expansion at the project in 2012-2013 covers four small scale underground mines within the San Gerardo lease to produce a total of 300,000 tonnes of ore annually.

On the basis of a Scoping Study, forecast production from 2014 to 2026 is 1,134,000 gold ounces, or around 96,000 ounces annually for 12 years.

Scoping Study outcomes from 100% EnviroGold

- Total Development Costs: US$87 million
- EnviroGold Equity: US$27 million
- Mining Target: 4.0 million tonnes
- Project Life: 12 years
- Annual Mining Rate (after 12 months ramp up): 300,000 tonnes
- Head grade: 11g/t gold
- Average Annual After Tax Profit (Project Life): US$41.6 million
- Average Annual Cash Flow (Project Life): US$44.6 million
- NPV Project (10% discount rate, USD AUD parity): US$180.3 million

Comment

EnviroGold's two major projects have an Net Present Value (NPV) in excess of $US350 million, yet a market cap. of just $A85 million. Even after factoring in risk and probabilities and the "blue sky" of the San Gerardo property, it makes current valuation look low.

With the appointment of Toronto-based Haywood Securities Inc. as sponsor of the company’s proposed dual listing on the Toronto Stock Exchange, this is likely to tap a wider base of investors in North America that will appreciate better the company's Latin American projects.

It will also likely act as a spur for Haywoods to take a line through similar, but higher valued North American emerging gold producers - acting as a catalyst for re-rating of the company.

The planned expansion at the project in 2012-2013 covers four small scale underground mines within the San Gerardo lease to produce a total of 300,000 tonnes of ore annually.

On the basis of a Scoping Study, forecast production from 2014 to 2026 is 1,134,000 gold ounces, or around 96,000 ounces annually for 12 years.

EnviroGold had previously committed to the involvement of the local minority partner Empresa Minera Papercorp S.A., but has decided not to proceed with that option after receiving recent demands for an increased profit share for transferring their Papercorp mine to a proposed joint venture.

EnviroGold said the demand was made despite the commercial arrangements and basic terms of the joint venture having been formally established.

Brian Johnson, executive chairman of EnviroGold, said “As a result of the decision to progress the Azuay project on its own, EnviroGold will gain significant flexibility in decision making and the rate of progress of development, and also increase its return on funds invested.”

The company is aiming to make a development decision in mid-2012 to expand mining operations in these mines, and to construct a process plant and associated infrastructure.

This would include tailings dams at a site 7 kilometres from the mines and 2 kilometres from a major highway and power grid.

The tight grouping of the four mines will result in efficiency in surface drilling which will commence when environmental approval is received for the San Gerardo property.

The environmental permitting process is well advanced and expected to be handed down within two months.

Exploration continues

EnviroGold is currently conducting channel sampling of high-grade structures and surveying vein sets in 1200 metres of drives within these mines, in advance of developing a computer model which will assist in positioning surface drill holes.

Mining is currently being carried out by contractors in the four mines nominated for expansion, as well as three others on the San Gerardo property, under subleases registered with the Ecuador Mines Department.

Importantly the subleases terminate concurrently with EnviroGold's exercise of the company's US$4.0 million option over the concession in November 2013.

Processing of ore is carried out offsite and the property has no environmental or social liabilities from past operations.

Highlighting the potential, historical mining in the narrow vein (0.5 metres to 1.0 metre) structures on the San Gerardo lease has consistently been in ore grading from 10g/t gold to 15g/t gold.

EnviroGold said the current channel sampling program should confirm this advice provided by mining contractors.

Scoping Study outcomes from 100% EnviroGold

Total Development Costs: US$87 million
EnviroGold Equity: US$27 million
Mining Target: 4.0 million tonnes
Project Life: 12 years
Annual Mining Rate (after 12 months ramp up): 300,000 tonnes
Head grade: 11g/t gold
Average Annual After Tax Profit (Project Life): US$41.6 million
Average Annual Cash Flow (Project Life): US$44.6 million
NPV Project (10% discount rate, USD AUD parity): US$180.3 million

Comment

EnviroGold's two major projects have an Net Present Value (NPV) in excess of $US350 million, yet a market cap. of just $A85 million. Even after factoring in risk and probabilities and the "blue sky" of the San Gerardo property, it makes current valuation look low.

With the appointment of Toronto-based Haywood Securities Inc. as sponsor of the company’s proposed dual listing on the Toronto Stock Exchange, this is likely to tap a wider base of investors in North America that will appreciate better the company's Latin American projects.

It will also likely act as a spur for Haywoods to take a line through similar, but higher valued North American emerging gold producers - acting as a catalyst for re-rating of the company.

EnviroGold will be presenting at the Proactive Investors One2One Forums - Sydney, on Wednesday the 22nd June 2011. For more information, click here.

EnviroGold is also progressing construction on its Las Lagunas gold/silver project in the Dominican Republic with the key modular oxygen plant having been shipped by the supplier ahead of schedule.

The project remains on schedule for early 2012 start-up of gold and silver production and is set to benefit from high gold and silver prices.

Envirogold is constructing an Albion/CIL Plant for this purpose and has reported that it will reprocess 5.137 million tonnes of refractory tailings from the Pueblo Viejo mine grading 3.8 g/t gold and 38.6 g/t silver (JORC Resource of 621,000 ounces of gold and 6,400,000 ounces of silver) with an estimated production cost of US$313 per ounce of gold.

Spot gold last traded at $1546.60 an ounce after setting a new all-time high of $1,577.40. Spot Silver last traded at $43.99 an ounce.

The company said that if current prices prevail for the next two to three years, annual after tax profits from the first two years of production should be in the order of US$45 million to US$48 million.

In addition, Macquarie Bank’s US$37.5 million project loan would be repaid within 18 months of commissioning. Macquarie Bank is a substantial shareholder of EnviroGold with 5.95%.

The Las Lagunas project has an expected life of approximately seven years at and Envirogold has arranged equity and debt financing of US$81,000,000 for the project.

Recently, EnviroGold flagged an intention for a dual listing on the Toronto Stock Exchange in two to three months. The proposed listing is expected to coincide with a placement of around 7% of the company’s shares (30 to 40 million) to Canadian investors to create initial liquidity in the local market.

Companies listed on the Toronto Stock Exchange with projects in Latin America tend to trade at higher valuations given the understanding of political issues, geological potential, and the widespread activity of Canadian mining companies in Latin America.

EnviroGold has been under the radar in Australia but this looks likely to change as North American investors become aware of its valuation increasing Las Lagunas project as it moves toward production.

The company said it is not aware of any material information that has not been announced which may explain the sudden investor interest.

EnviroGold did however state in the company's response to the ASX:

"It is probable the market is becoming aware of the company’s emergence as a gold producer with the commencement of production from its Las Lagunas project in the Dominican Republic scheduled for January 2012."

Las Lagunas project has an expected life of approximately seven years at an annual production rate of 65,000 ounces of gold and 600,000 ounces of silver. Envirogold has arranged equity and debt financing of US$81,000,000 for the project.

It is constructing an Albion/CIL Plant for this purpose and has reported that it will reprocess 5.137 million tonnes of refractory tailings from the Pueblo Viejo mine grading 3.8 g/t gold and 38.6 g/t silver (JORC Resource of 621,000 ounces of gold and 6,400,000 ounces of silver) with an estimated production cost of US$313 per ounce of gold.

Recently, EnviroGold flagged an intention for a dual listing on the Toronto Stock Exchange in two to three months. The proposed listing is expected to coincide with a placement of around 7% of the Company’s shares (30 to 40 million) to Canadian investors to create initial liquidity in the local market.

Companies listed on the Toronto Stock Exchange with projects in Latin America tend to trade at higher valuations given the understanding of political issues, geological potential, and the widespread activity of Canadian mining companies in Latin America.