Patagonia Gold
Patagonia Gold give the green light to Lomada da Leiva
Patagonia Gold's Lomada da Leiva project in Argentina's Santa Cruz province was acquired along with a portfolio of exploration projects from Barrick Gold less than two years ago in February 2007.
The property had already been drilled to a limited extent, and following further resource drilling, during which an indicated/measured resource of 161,346 ounces was defined, plus a further 74,000 ounces in the inferred category, PGD felt confident enough to go straight to a scoping study. This had the dual aim of progressing to cash flow as soon as possible, and circumventing the need to pay Barrick a further $1.5 million dollars if an indicated resource of more than 200,000 ounces was delineated.
Today, PGD announced the results of the scoping study conducted by Chlumsky, Armbrust and Meyer, LLC (CAM), which suggests that in approximately one year's time, PGD will be mining gold from the project.
Three processing scenarios were examined, including conventional grinding and milling, heap leaching following crushing/screening for improved recovery, and straight ROM heap leaching. Whilst metallurgical testing of conventional processing did show potential recovery of 97% of the contained gold, both capital and operating costs are high. Therefore PGD have initially chosen the ROM heap leaching route, due to its low capex requirement, low operating costs and reasonable recovery of approximately 80% of the contained gold. Although PGD do point out that this projected 80% recovery could be pessimistic due to the free leaching nature of the ore.
On this basis CAM have modelled an open pit mine producing 21,000 ounces of gold per annum, with a 1:1.25 stripping ratio, cash costs of just $299 per ounce and a 14 month payback. At $650 gold this suggests free cash flow of some US$35 million over a 7 year minelife, whilst at US$850 gold, the project will produce US$76.7 million. After tax NPVs at US$650 gold and US$850 gold are US$18.9 million and $36.9 million respectively. These figures have been prepared on the basis of 100% equity financing, and take into account all applicable export taxes, royalties, etc.
There is significant resource upside at Lomada da Leiva, both down dip and along strike, and at the adjacent Brecci Sofia project, which – once mining has commenced - could significantly extend the life of the Project and provide PGD with positive cash flow for the foreseeable future. In addition, the availability of higher tonnage throughput from increased resources could see unit costs dropping sufficiently to allow the addition of a crush circuit to the operation, which would enhance gold recovery to 93% and improve profitability.
The company will now move forward to an Environmental and Social Impact Study, with a view to commencing a trial heap leaching operation in the second half of 2009. MD Bill Humphries commented: “The development of the Lomada de Leiva Project will move Patagonia Gold to be cash positive by mid 2011 and, with the high cash flow generated in the early years of operation, will assist in the rapid development of the much larger Cap-Oeste Project.”
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Other Patagonia Gold articles
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21/11/08 Patagonia Gold Scores Twice with Maiden Resource for Cape-Oeste and Positive Scoping Study for Lomada de Leiva
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31/03/08 Patagonia Gold - Esquel? Encore!
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27/02/07 Patagonia Gold acquires Barrick Projects
Other Patagonia Gold news
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04/11/08 Maiden resource for Patagonia Gold’s Cap Oeste
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22/10/08 Patagonia Gold raise £1.845 with strong support from directors
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29/09/08 Patagonia Gold says Cap-Oeste Resource Estimate Nearly Complete
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15/07/08 Patagonia Gold directors increase stakes
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03/06/08 Patagonia Gold reports good progress on all fronts
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09/05/08 Patagonia signs JV with Santa Cruz mining heavyweight
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23/04/08 Patagonia Gold climbs on positive drill results
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18/03/08 Patagonia Gold jumps on bonanza gold and silver
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