Partners explore wider Peak Gold potential
Mining Explorers 2019 – Published Nov. 1, 2019
Last updated 8/14/2020 at 9:15am
Building upon the strong economics of developing a mine at the high-grade Peak Gold project, joint venture partners Contango ORE Inc. (60 percent) and Royal Gold Inc. (40 percent) are investing US$6.9 million on exploring some of the intriguing outlying targets across this highway-accessible property in eastern Alaska.
Discovered by Contango ORE in 2009, Peak Gold (sometimes referred to as Tetlin) hosts two skarn deposits – Main Peak and North Peak – on an underexplored property that covers roughly 850,000 acres west and south of Tok, a crossroads town on the Alaska Highway.
The adjacent deposits 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 toward the end of 2018 outlines plans for open-pit mines at these deposits and a 3,500-metric-ton-per-day mill that would produce 1.09 million oz of 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.
This combination of relatively low development and production costs, coupled with a mine-plan designed to maximize grade in the early years, means it is only expected to take two years to pay back the initial development capital, after taxes.
The Peak Gold partners put this tantalizing project on the market early in 2019. However, despite the strong economics of developing a mine and the prospectivity of the wider property, a deal was not reached that reflects the value of the Peak Gold land package.
The Peak zones proposed to be mined in the PEA represent a small section of the prospective ground held by the Peak Gold JV.
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," said Contango ORE President and CEO Brad Juneau.
The Peak Gold JV continued to add to this data with a US$6.9 million exploration program this year.
Funded on a pro rata basis – Contango ORE (US$4.1 million) and Royal Gold (US$2.8 million) – 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 was used to target a 5,000-meter drill program that got underway in August. This drilling Tested three targets – East Peak, a new target in the Peak zone area; North Saddle, an interesting zone about 2,000 meters north of the Peak deposits; and Taixtsalda, a large circular geophysical anomaly about 25 miles southeast of the Peak zones with a magnetic and resistivity signature indicative of a porphyry copper system.
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 north and 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.
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 Juneau.