Peak Gold sale ends, exploration revs up
Last updated 9/26/2019 at 7:23pm
Contango ORE Inc. June 11 announced that the sales process for the Peak Gold joint venture has concluded without identifying a buyer for the partnership that owns the high-grade Peak Gold project in Interior Alaska.
Two adjacent skarn deposits at Peak Gold – Main Peak and North Peak – host 9.2 million metric tons of measured and indicated resources averaging 4.08 grams per metric ton (1.21 million ounces) gold and 14.19 g/t (4.2 million oz) silver.
A preliminary economic assessment completed last year outlines plans for an open-pit mining operation that would provide ore for a 3,500-metric-ton-per-day mill that would produce 1.09 million oz gold and 2 million oz of silver over an initial eight-year mine-life.
Based on US$340 million in capital and closing costs, the cost for every ounce recovered from the mine outlined in the PEA is a remarkably low US$470.
As a result, the after-tax net present value (at a 5 percent discount) for the proposed Peak Gold Mine is calculated to be US$393 million and the after-tax internal rate of return is 29.1 percent.
Following the October release of the PEA, the Peak Gold JV, owned jointly by Contango ORE (60 percent) and a subsidiary of Royal Gold Inc. (40 percent), entered a joint process to sell all Peak Gold project properties in Alaska.
The Peak zones proposed to be mined in the PEA represent a small section of the roughly 850,000 acres of prospective ground held by the Peak Gold joint venture.
Sampling, mapping and geophysics have identified multiple exploration targets across this larger land package.
"The joint venture's technical team has identified both porphyry and skarn type exploration prospects following a comprehensive review of all data collected over the past 10 years on the project," Contango ORE President and CEO Brad Juneau said earlier this year.
Despite the strong economics of developing a mine at Peak Gold and the prospectivity of the wider property, Contango ORE and Royal Gold were not able to negotiate a sale that reflects the value of the Peak Gold land package.
The Barrick Gold-Randgold Resources and Newmont Mining-Goldcorp mergers likely contributed to the inability to find a buyer willing to pay what Contango ORE and Royal Gold were asking for the Peak Gold Mine project and wider potential of the property.
In addition to taking four of the world's top gold producers out of the running, these mega-mergers will likely spin off additional gold projects. As a result, at least some potential Peak Gold buyers are waiting to see what is available once the expanded Barrick Gold and Newmont Goldcorp have prioritized their merged portfolios.
While the formal joint sales process has ended, Contango ORE said it is continuing to work with its advisors to evaluate strategic options for its share of Peak Gold while at the same time the JV is continuing exploration and collecting the baseline data that will be needed to advance the mine outlined in the PEA toward permitting.
"As previously announced, we are continuing with our permitting activities for development of our defined resource areas in Peak and North Peak, as well as exploration activities to find new resources," said Contango ORE President and CEO Brad Juneau.
In May, the Peak Gold JV announced plans for US$6.9 million exploration program on the property this year.
Funded on a pro rata basis – US$4.1 million for Contango ORE and US$2.8 million for Royal Gold – this program began with an induced polarization geophysical survey and additional sampling over new and existing exploration targets at Peak Gold.
Results from this work will be used to target a 5,000-meter drill program slated to begin in August.
In addition to work in an area surrounding the Peak Gold deposits, the JV is investigating porphyry targets across the 675,000-acre land package leased from Tetlin Village Council, as well as reconnaissance mapping and sampling on blocks of state of Alaska claims immediately to the west.
"We continue to believe that our large acreage position holds significant exploration upside, and we remain focused on maximizing the value of this project for our shareholders," said Juneau.