Pure Gold Mining: Developing Ontario’s Next Gold Mine
A Definitive Feasibility Study on the Madsen Gold Project is planned to be completed in Q4 2018, following a 2017 PEA that projects over 900,000 oz. of gold produced over 14 years and a robust after-tax IRR of 47 per cent, with an initial capital investment of $51 million.1
Pure Gold Mining (PGM: TSX-V) is advancing the Madsen Gold Project towards the development of a new mining and processing operation in the Red Lake mining district of Ontario, Canada. Red Lake is an iconic mining district in Northern Ontario that has produced over 29 million ounces of gold over 90 years, making this one of the largest gold producing districts in Canada.
In a world of low margin ounces from increasingly unpredictable jurisdictions, this district continues to produce some of the highest grade and highest margin gold ounces in the world.
The Madsen Gold Project
Pure Gold purchased the project in 2014 and, over the following four years, has completed over 180,000 metres of diamond drilling. This major investment and the careful study of the geoscience and engineering data it generated has resulted in a significant new understanding of the Madsen deposit, which produced nearly 2.5 million ounces of gold at an average grade of 9.9 grams per tonne between 1938 and 1976, making it the second largest historic gold mine in Red Lake.
In August 2017, Pure Gold completed an updated mineral resource report for the Madsen deposit. The Madsen deposit contains an indicated resource of 1,648,000 ounces gold (5.79 million tonnes at 8.9 g/t Au), and an inferred resource of 178,000 ounces gold (0.599 million tonnes at 9.4 g/t Au) 3, situated close to existing infrastructure.
These ounces, and those previously mined, were discovered along the multi-kilometre Madsen gold trend, which bisects the property. Through application of modern geoscience, Pure Gold has unlocked the geology of the trend, linking what were previously viewed as separate target areas into a common geological model, demonstrating the potential size of the Madsen mineral system.
New discoveries of Russet South and the Fork satellite deposits, located approximately 1.5 kilometres from the Madsen milling infrastructure, were included in a year-end 2017 resource update, quantifying resources from satellite deposits for the first time.4
New indicated mineral resources at Russet South total 56,000 ounces (259,000 tonnes at an average grade of 6.7 g/t gold) and inferred mineral resources total 71,000 ounces (322,000 tonnes at an average grade of 6.8 g/t gold) at a 4.0 g/t cut-off.4
New indicated mineral resources at Fork total 40,000 ounces (194,000 tonnes at an average grade of 6.5 g/t gold) and inferred mineral resources total 47,000 ounces (255,000 tonnes at an average grade of 5.8 g/t gold) at a 4.0 g/t cut-off4.
The Fork and Russet South deposits have the potential to positively impact annual throughput and the production profile at Madsen.4
Additionally, in early 2018 the company announced the discovery of multiple new zones of high grade gold mineralization located approximately three kilometres by road south of the Madsen milling infrastructure. This important new discovery, referred to as the Wedge Target, outcrops at surface, adds 1,100 metres of strike length to the Madsen Mine trend, clearly highlights an exciting new area for potential resource expansion, and underlines the inherent scalability of the Madsen Gold Project.5
PEA indicates robust 14-year underground mining operation
Last September, Pure Gold evaluated a potential new underground mining operation at Madsen with an updated Preliminary Economic Assessment (PEA). The 2017 PEA showed a robust after-tax net present value (at a five per cent discount rate) of $258 million and an after-tax internal rate of return of 47 per cent, with a 2.8-year payback of initial capital. The mine would produce a total of 911,497 ounces of gold over a mine life of 14 years, with a pre-production construction period of 12 months and an initial capital requirement of $51 million.1
The low initial $51 million capex owes in part to the significant existing infrastructure present at the Madsen Project including a mill, tailings facility, shaft, portal and ramp all located on the provincial highway and power grid. The company can also draw on a skilled local workforce, with the town of Red Lake only a 12-minute drive by paved road.
Recent work to reopen the underground via the Madsen portal and ramp allows the company to “touch” the Madsen deposit through both underground drilling and the commencement of a mini-bulk sample planned for mid-2018. The PEA contemplates underground mining via the ramp, which currently provides access to the upper 150 vertical meters of the Madsen deposit.1 The portal and ramp is located approximately one kilometre southwest from the Madsen Mill and tailings management pond.
Ultimately, Pure Gold’s goal is to define a robust gold mining operation in Red Lake while demonstrating growth and scalability through exploration providing opportunities to both extend the mine life and increase the production profile. A more detailed feasibility study is now in progress with supporting environmental, geoscience and engineering studies ongoing.
While the definitive feasibility study is in progress, Pure Gold continues to explore for additional gold deposits though a 33,000m drilling program5 that includes 5,000 meters of underground drilling on their 47 square-mile property in Red Lake to provide future growth in the gold production rate and mine life.
With the definitive feasibility study set to complete in Q4 20186, Pure Gold management will review the results with the objective of making a positive production decision.4 With positive economics, existing infrastructure in place and baseline work to update key permits held by Pure Gold underway, there is a unique opportunity to advance Madsen quickly to production, with potential for initial gold production by Q3 2019.
- See News Release 17-18, Pure Gold Announces Positive Preliminary Economic Assessment for the Madsen Gold Project, September 14, 2017.
- The mineral resource estimate reported herein for the Madsen Gold Project is set out in the NI 43-101 technical report “Technical Report for the Madsen Gold Project – Restated Preliminary Economic Assessment and Initial Satellite Deposit Mineral Resource Estimates” with an effective date of December 14, 2017.
- See News Release, 17-13, Pure Gold Announces Significantly Expanded Mineral Resource Estimate for the Madsen Mine, August 2, 2017.
- See News Release: 17-28, Pure Gold Expands Mineral Resource With Additions From Russet South and Fork Satellite Deposits, December 14, 2017.
- See News Release 18-02, Pure Gold Makes High Grade Discovery South of the Madsen Mine, dated January 31, 2018.
- See News Release 17-27, Pure Gold Begins Definitive Feasibility Study on Madsen Gold Project, dated December 11, 2018.