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PanTerra Gold (ASX: PGI), formally known as EnviroGold, is a near term gold producer at its Las Lagunas project in the Dominican Republic with construction scheduled for completion in December 2011. The project has an expected life of seven years at an annual production rate of 65,000 ounces of gold and 600,000 ounces of silver.
PanTerra Gold is also active in Ecuador with the advanced Azuay Gold Mining project and the San Gerardo Gold Mining prospect. At the Azuay project, construction is targeted to commence in mid 2012.
EnviroGold targets 100,000 gold ounce annual production in Ecuador with full ownership
EnviroGold (ASX: EVG) stands to benefit from the upside in the Azuay gold mining project in Ecuador, 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.
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.
