Sonoro Gold's Robust PEA
Sonoro Gold has announced the results of the new Preliminary Economic Assessment (PEA) of the Cerro Caliche Gold Project, located in Sonoro State, Mexico.
The PEA returned a post-tax net present value (NPV) of US$47.7 million and a post-tax internal rate of return (IRR) of 45% for an open pit oxide focused heap-leach operation with a nine-year life of mine based on a gold price of US$1,800 per ounce and a silver price of US$23 per ounce.
This initial operation is forecast to generate an average of c. US$17 million in operating cash flow per annum, which Sonoro plans to reinvest into exploration at the project, reducing the company's reliance on dilutive equity market financing, while also allowing it to fully assess the exploration potential of the project.
Permitting for the project is underway, and once this is secured Sonoro will look to secure the development financing and then move the project into production.
The initial capital expenditure (capex) in the updated PEA was just US$15.5 million, which should be a fundable amount for a company of Sonoro's size.
Investors should take note that the PEA's economics do not demonstrate the true potential value of the project, but are instead an intermediate step in its evolution.
The PEA demonstrates that in the near-term Sonoro can build a low capex oxide-focused operation to generate cash, cover its corporate costs and fund an extensive exploration programme to fully evaluate the Cerro Caliche project.
Cerro Caliche has significant exploration upside potential highlighted by the fact that Sonoro has defined just over 30% of known gold mineralised zones with drilling to date (Figure 1).
The Bellotoso and El Rincon Zones in the north region of the concession, have only been partly drilled to date but contain favourable rock types with epithermal style boiling textures indicating the potential higher-grade gold mineralisation and possibly greater vertical extent of northwest trending gold-bearing zones (Figure 2).
The PEA was based on a NI 43-101 compliant pit-contained total mineral resources estimate of 440,000 ounces of gold equivalent at an average grade of 0.45 grams per tonne (g/t) gold equivalent.
An exploration target* of 125,000 to 285,000 ounces of gold equivalent, at a potential average grade of 0.26 to 0.39 g/t gold equivalent has already been defined within areas that have already been drilled but require additional drilling to become resources.
This would represent a 28% to 65% increase in the existing resource base used for the PEA, adding further upside to the project economics. Additional exploration on other gold occurrences could add further value to the Cerro Caliche project.
Sonoro Gold's Cerro Caliche Project has the potential to generate significant near-term cash flow that can be redeployed to assess the project's full potential while minimising equity market reliance. The next milestones investors should look for will be the award of the mining and associated permits, which will be followed by sourcing the development finance.
*The potential quantity and grade ranges noted above are conceptual in nature and insufficient exploration has been conducted to define this material as a Mineral Resource. It is uncertain if further exploration will result in these exploration target estimates being delineated as Mineral Resources or converted to Mineral Reserves in the future.
Cerro Caliche Gold Project Updated Preliminary Economic Assessment
The updated PEA for the Cerro Caliche Gold Project returned post-tax NPV of US$47.7 million and a post-tax IRR of 45% based on a base case gold price of US$1,800 per ounce and a silver price of US$23 per ounce.
Figure 1 - Pit Shells at Cerro Caliche
Source: Sonoro Gold Corp (TSX-V:SGO, OTCQB:SMOFF).
Figure 2 - Gold-in-Soil Anomalies
Source: Sonoro Gold Corp (TSX-V:SGO, OTCQB:SMOFF).
The project has an initial capex of US$15.5 million and an all-in sustaining cost (AISC) of US$1,395 per ounce gold equivalent and is expected to produce an average of 33,000 ounces of gold equivalent over the nine-year life of mine, totalling 287,575 ounces of gold equivalent.
The heap-leach operation will have an initial two-year production rate of 4,000 tonnes per day increasing to 12,000 tonnes for the remaining life of mine.
The project is optimised for gold recovery, with an average gold recovery rate of 72%, and silver recovery of 27%. The project has an average strip ratio of 2.1:1.
The Cerro Caliche heap leach operation is expected to generate average annual revenue of c. US$60 million, totalling US$535.6 million over the life of mine, and average annual operating cash flow of c. US$17 million, totalling US$150.2 million over the life of mine.
Directors Supported Recent Placing
Sonoro recently raised a total of C$2 million in two tranches at a price of C$0.10 per unit.
Each unit consists of one share and one warrant, with an exercise price of C$0.15 per share.
Directors strongly supported the placing, subscribing for a total of 14,170,260 units, which is around 71% of the total placing.
Sonoro now has a total of 163,478,912 shares outstanding and 225,989,598 on a fully diluted basis.