Dual-listed precious metals producer McEwen Mining on Monday filed a new preliminary economic assessment (PEA) for the extension of production from the El Gallo complex, in Mexico, with the new plan adding another 12 years to the operation’s mine life.
The key outcomes of the extension, dubbed Project Fenix, include an average production rate of 47 000 oz of gold equivalent, a 12-year mine life, initial capital cost of $41-million, mine pay-back of 4.1 years and an after-tax internal rate of return (IRR) of 28% at current gold and silver prices.
The initial PEA, which was published in May, outlined ten years of production from Project Fenix, with a base case IRR of 25%, an upside IRR of 30%, as well as an upside after-tax net present value (NPV) of $77-million.
The finalised PEA increased the base case and upside IRR to 28% and 33%, respectively, while the upside NPV decreased by $2-million to $75-million.
The Fenix project involves a two-phase development process, in which Phase 1 includes the reprocessing of material on the gold heap leach pad at the existing El Gallo gold mine, and Phase 2 includes the processing of openpit gold and silver mineralisation from several deposits including El Gallo Silver, Palmarito, El Encuentro and Carrisalejo.
The process plant will use conventional and proven mineral processing and precious metals recovery technologies.
Phase 1 would have a throughput rate of 5 000 t/d, while during Phase 2, fresh mineralised material from the higher grade silver deposits (El Gallo Silver primarily) can be processed at a maximum of 3 250 t/d.
In terms of future permitting and timing, Phase 1 requires an amendment of the current permits to include the construction of a mill and leach circuit at the location of the existing El Gallo gold mine for the reprocessing of the heap leach pad material.
The permit amendment will also include the backfilling of the Samaniego pit with mill tailings as part of an integrated concurrent closure plan for the El Gallo Gold mine.
Phase 2 permitting will require authorisation to augment the tailings volume to be stored in the Samaniego pit, and El Gallo Silver permits require amendments to change the processing location to El Gallo Gold.
The Fenix project has approval for the extraction of groundwater and for the construction of wells.
Advancing the project will require permit amendments and approval by the Federal Environmental Authority (SEMARNAT) for Phase 1 and subsequently for Phase 2.
The company seeks to obtain approval of the Phase 1 El Gallo permit modifications by the fourth quarter of 2018 and Phase 2 approvals by the third quarter of 2019, with further project advancement in 2019 subject to permit approvals.
Meanwhile, the company believes there are opportunities to further improve the economics of the Fenix project through ongoing testing and trade-off studies that will be continued throughout 2018.
Creamer Media Senior Researcher and Deputy Editor Online