Maritime Resources (MAE.V) has released the results of a Preliminary Economic Assessment on its Hammerdown gold project in the Baie Verte area of Newfoundland and Labrador. The mine plan is calling for a total of 2.14 million tonnes to be processed and based on an average head grade of 7.82 g/t gold and a recovery rate of 97%, the mine is slated to produce in excess of 500,000 ounces of gold over a 9 year mine life.
The average production rate will be almost 58,000 ounces of gold which are expected to be mined at an all-in sustaining cost of US$940/oz. Given the current strong gold price environment and the low initial capex of C$57M (approximately US$42-43M) it shouldn’t be a surprise to see a relatively high after-tax NPV of C$154M at US$1500 gold and a 65% Internal Rate of Return. At $1650 gold the NPV increases to almost C$205M with an IRR exceeding 80% but on the other side the results remain acceptable if one would apply a gold price of just $1225/oz: the after-tax NPV5% decreases to just below C$59M (which isn’t spectacular), but the Internal Rate of Return remains above 30%.
This PEA is also good news for Commander Resources (CMD.V) which now finally has a tangible and independent study to market its NSR on. Commander owns a 2% NSR of which 1% could be repurchased for C$1M in cash, and the NSR is valid on the Hammerdown deposit (which contains 302,000 ounces of gold in the M&I categories and an additional 85,000 ounces in the inferred category in the open pit. Looking at the underground resource, Hammerdown contains an additional 55,000 ounces of gold in the measured, indicated and inferred resource categories (in both the open pit and underground resource we have ignored the intervein-based inferred resources.
Once Maritime files its technical report of the Hammerdown PEA, we can have a closer look at the NSR owned by Commander Resources and perhaps run a quick back of the envelope NPV calculation depending on when the Hammerdown resources come into play in the mine plan.
Disclosure: The author has no positions in either company but could go long Commander Resources.