JV opts to delay Peak Gold exploration
Contango ORE, Royal gold postpone programs due to COVID North of 60 Mining News – May 8, 2020
Last updated 9/26/2020 at 2:23pm
Contango ORE Inc. May 6 announced that management of the Peak Gold joint venture – Contango ORE (60%) and Royal Gold Inc. (40%) – has decided to postpone exploration on the Tetlin gold project in eastern Alaska in order to protect the health of workers and stakeholder during the COVID-19 outbreak.
"These are certainly difficult times for everyone, and our primary concern is to ensure that our employees, contractors and community members remain safe and healthy," said Contango ORE President and CEO Rick Van Nieuwenhuyse.
Roughly 675,000 acres of the larger 850,000-acre Peak Gold JV property is leased from Tetlin Village, an Alaska Native community that owns surface and subsurface rights of the property leased to Peak Gold.
Protecting the health of the roughly 125 residents of Tetlin, as well as other nearby communities such as Northway and Tok, factored into the decision to postpone exploration at Peak Gold until the COVID-19 threat has subsided.
"As regards to the Peak Gold deposit, we will continue to work closely with our business partner Royal Gold and the Tetlin tribe to safeguard the health of everyone associated with our project activities," said Van Nieuwenhuyse. "To that end, we have formally adopted a care and maintenance budget to ensure that our high-quality Peak Gold asset retains its value for our shareholders."
This high-quality asset includes two adjacent deposit on the property leased from Tetlin – Main Peak and North Peak – that 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.
"There is a lot of work to do to demonstrate a feasibility level reserve, but in mining grade is king and Peak has it," said Van Nieuwenhuyse in January, when he took over the role of Contango ORE president and CEO. "The project represents an excellent opportunity to develop Alaska's next gold mine."
The larger Peak Gold property, which also includes roughly 175,000 acres of state mining claims adjacent to the Tetlin lease, hosts significant exploration upside. These include additional high-grade skarn targets similar to the Peak zones and larger bulk tonnage porphyry copper-gold prospects.
Testing some of the exploration targets was in the planning stage prior to COVID-19 and are expected to be included in the programs carried out when exploration continues on the large and highly prospective land package.
For 2020, Peak Gold JV has approved a US$1.8 million budget for care and maintenance of the property. As 60% owner of the Peak Gold JV, Contango ORE's share of the 2020 budget is approximately $1.1 million.
"We will re-visit options to conduct exploration activities on the Tetlin project when it is safe to do so," said Van Nieuwenhuyse. "The company is well positioned to weather these unusual COVID-19 related disruptions with US$3.4 million in cash and strong working relationships in Alaska. When business does get back to the 'new normal,' we will be prepared to continue to add shareholder value."