Sabina continues explorer-developer transformation
Last updated 4/3/2016 at Noon
Sabina Gold & Silver Corp. March 25 reported the realization of several critical milestones for the Nunavut-focused precious metals exploration company, while still conserving cash.
"As planned, 2015 was a transformational year for Sabina," said Sabina President and CEO Bruce McLeod.
"During the course of the year, we delivered a fit-for-purpose robust feasibility study on the Back River gold project using a gold price of US$1,150 per ounce; we made great strides in evaluating 30 years of exploration data at Back River defining a multitude of targets, which culminated in the discovery of two new very prospective zones at the Goose property; we advanced Back River through the environmental assessment phase and are nearing the completion of that process with our final hearings coming up at the end of April; and we have focused on treasury conservation and reduced costs company-wide." The company completed two feasibility studies for the Back River project in 2015.
The first, published in May, demonstrated that a 6,000-metric-ton-per-day operation returned compelling economics but requires significant initial capital.
As a result, a second feasibility study was undertaken to investigate starting with a 3,000-metric-ton-per-day mine focused on Goose, one of the properties that comprise the larger Back River project.
At a gold price of US$1,150 per ounce, this study indicates that this smaller project could generate a post-tax internal rate of return of 24.2 percent and net present value (five percent discount) of C$480.3 million with a payback of 2.9 years.
At an average head grade of 6.3 grams per metric ton gold, the 3,000 tpd operation would produce an average of 198,100 ounces of gold per year over an 11.8-year mine life at a cost of US$534 per oz., according to the study.
Initial capital for the project is estimated at C$415 million, with sustaining capital of C$185 million.
"Through our work, we believe we are demonstrating a first-in-class company with a world-class asset," said McLeod.
As a result of its treasury conservation efforts, Sabina ended 2015 with C$18.4 million in cash, cash-equivalents and short-term investments.
This more than covers the company's C$11 million budget for 2016, which includes a base budget of C$7 million, plus a discretionary budget of up to $4 million.
The base budget includes funding of activities to advance Back River through completion of the environmental assessment phase as well as utilizing roughly C$2.2 million of flow-through funds raised in 2015 to test high-value, near-surface targets with spring and summer drilling and field programs.
"We believe that the catalysts we can deliver by de-risking the project in 2016 will continue the re-rating of the company and continue to create value for our shareholders," said McLeod.
The company's 2016 spring exploration program, now underway, is focused on assessing new discoveries and targets at Back River.
This two-drill program will test three targets on the Goose property.
The first target being tested is a newly discovered showing at Kogoyok, where outcrop grab samples of up to 33.86 g/t gold occur near the convergence of an untested segment of iron formation stratigraphy with felsic intrusions.
The Convergence target, which is conceptually similar to Kogoyok, also will be tested with drilling this spring.
Prior to drilling, a short ground geophysics program will be run to better define targeting.
Roughly 600 meters in three drill holes are planned to test Convergence.
Drilling at the third zone, Hivogani, will test the characteristics of a new and emerging target type that is hosted in the clastic sediment stratigraphy outside of the conventional iron formation.
In 2015, a 140-meter drill hole at Hivogani returned intervals of anomalous gold over its entire length, including 0.82 g/t gold over 13.75 meters.
Up to three drill holes will test positive features in and around Hivogani, where targets are characterized by localized quartz veining and sulphide mineralization showings, anomalous gold values in both rock and till samples and partially coincident induced polarization chargeability anomalies.
"Using over 30 years of historic data, we have developed robust targeting concepts which we believe will start to pay dividends on district-scale discovery," said McLeod.
"This work enabled us to vector in on two new discoveries last year, one of them, Hivogani, a new style of mineralization outside of the iron formation and Kogoyok, an outcropping iron formation zone approximately 1,500 meters from the proposed Goose mill." Sabina is also planning two short summer programs comprised of field mapping and till sampling, similar to the work done in 2015 that identified the Kogoyok and Convergence targets.