Low Mining Costs Makes Pershing Relief Canyon Especially Attractive
Pershing Re-Envisages Relief Canyon as Low Cost MineFollowing one year of infill drilling and number crunching, Pershing Gold (TSX: PGLC; NASDAQ: PGLC) has produced a pre-feasibility study (PFS) for its Relief Canyon open-pit, heap-leach gold project, 150 km northeast of Reno, Nevada. The study shows an after-tax net present value of US$126 million, assuming a 5% discount rate, and an after-tax internal rate of return of 85%.
Pershing’s president and CEO Stephen Alfers describes Relief Canyon as a low-cost, low-capital expenditure project. With initial permits already in hand, he expects Pershing could reach a production decision later this year.
“We’re extremely pleased with the results,” Alfers tells The Northern Miner during a phone interview. “When you flip through the PFS and study it, the only conclusion is the high degree of technical detail found in it. To get the most shareholder value out of a project like this, we tried to get the highest mine rates at optimal capital costs, and that’s what we ended up with.”
Pershing would use a contract miner to produce 93,900 oz. gold over a 5.6-year mine life at cash costs of US$770 per oz. gold.
Alfers says that contract mining, rather than in-house mining — as contemplated in the project’s 2016 preliminary economic assessment — has become the more attractive option for the company.
“The economic model discloses some really terrific mining costs under contract mining, but it also built in the option for us to acquire equipment and pursue self-mining if that’s a decision we want to make later on down the road,”
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Pershing acquired Relief Canyon, which is comprised of three historic pits and a fully built heap leach processing facility, for US$20 million in 2011.
The increase in capex reflects a need to start with three leach pads, as opposed to one, prompted by the company’s decision to crush and agglomerate mineralized material, as opposed to having a run-of-mine component.
"The capital costs are modest almost any way you cut it; they’re the kind of costs that Pershing can take on its balance sheets,” Alfers says.
Alfers says the drilling resulted in a “near-perfect” conversion of the project’s resources into reserves, which now stand at 27.7 million proven and probable tonnes at 3.87 grams gold per tonne. Indicated and inferred resources add another 27.4 million tonnes of 0.58 gram gold and 5.2 million tonnes of 0.31 gram gold.
“We saw 80% of our resources converted into reserves in this update. That level of conversion really speaks to the quality of our geological model and to the resource itself,” he says. “We’ve gained a strong understanding of the structures that control mineralization on the property and they’ve become very predictable to target as we step out.”
Some of the drill holes hit mineralization outside the proposed pit-walls, which puts weight behind Pershing’s expectations that Relief canyon could become a “long-life operation.”
Drill results from the Phase 1 drill program, which was intended to extend the western resource boundary, intercepted 7.3 metres of 1.83 grams gold, including 1.5 metres of 13.9 grams gold.
The hole is 168 metres from a previous drill hole that intersected eight zones of mineralization totalling 50.7 metres in length and averaging 1.6 grams gold.
“We focused on wide step-outs on areas that are still shallow enough to come into the pit,” he says. “Later this year, we’ll start infill drilling these areas and add additional ounces to the resource.”
Cantor Fitzgerald analyst Rob Chang has maintained the firm’s “buy” recommendation on Pershing shares, and has raised his target price a nickel to US $4.65 per share.
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