Integra Gold (ICG.V) has released more drill results from the No 4 Plug zone on its Lamaque gold project in Val D’Or, Québec. We were looking forward to see the assay results, as the No4 Plug could play a very important role in the future development of the Triangle Deposit which is located just a few hundred meters away.
The drill program didn’t disappoint, and results of 10.9 meters of 10.26 g/t gold (6.34 g/t if capped at 34.3 g/t) and 3.7 meters of 25.29 g/t (12.52 g/t capped) are mind-blowing considering a) the average grade at No4 Plug is ‘just’ 8.3 g/t and b) the total resource at the No4 Plug contains just 140,000 ounces of gold so the recent drill results definitely highlight the exploration potential there. What’s important here is how the No 4 Plug fits in the bigger picture. In a previous report we already explained we would expect Integra Gold to look at a different mine plan whereby the satellite zones could contribute mill feed to the Sigma mill as the company will be able to unlock additional economies of scale if it could be running the plant at the nameplate capacity of 2,200 tonnes per day rather than the 1,500 tpd envisaged in the previous PEA.
In order to provide the additional mill feed, Integra needs to have a pretty good idea of where the ore will have to come from, and that’s where the Parallel Zone, and now more importantly, the No4 Plug zone come into play. Integra Gold intends to release an updated resource estimate at the No 4 Plug in the third quarter of this year and whilst we do expect the total amount of gold to increase to 250,000-350,000 ounces, the average grade (on a capped basis) might come in a bit lower than the current average grade. Once this new resource estimate will have been completed, Integra’s next step will very likely consist of confirming whether or not the No4 Plug would be suitable for underground bulk mining. The average grade will be a lower than the Triangle Zone, but a blend mill feed consisting of high-grade Triangle ore and the ore from the No4 Plug (at a slightly lower grade but still in excess of 5 g/t) might unlock additional economies of scale that could mitigate the impact of a lower average grade compared to the Triangle mine plan.
We feel sorry for Integra’s IR department as they will have a very busy summer considering there’s an assay backlog of in excess of 66,0000 meters which will only increase as the company is now expanding its 2016 drill program to 120,000 meters.
It’s now also starting to look like our previous back of the envelope calculations (indicating an after-tax NPV5% of C$300M) will be too conservative considering a) the updated PEA will contain more ounces and b) the gold price (in Canadian Dollar) is now trading substantially higher (+ 17%, or C$250/oz). We’re glad the market is finally catching up on Integra Gold as the company’s share price has increased by 138% since we published our updated expectations for the Lamaque project in January.