I think we are dealing with Canaccord here as this broker and their clients are selling for the last six months which for the last three were joined by First Marathon. I just read the news release of Francisco Gold about their deposit which has over 3.2 million ounces and they hope with their drilling to move it to 4 million level. The intersting part is about the capital costs and other factors as they also had preliminary engineering scoping study done. This company as you mentioned was used as an example on the meeting for GHE surpassing the geological resource of El Sauzal,therefore only as a comparison since I don't know any recent work of GHE or estimate for that matter,
we can look what sort of figures they are talking about:
VANCOUVER, British Columbia--(BUSINESS WIRE)--Dec. 3, 1997-- Francisco Gold Corp.
(Vancouver Stock Exchange:FGX) is pleased to announce that it has received an independently
calculated geological resource estimate for the El Sauzal gold deposit indicating that it contains over
3.2 million ounces at a grade of 2.1 grams gold per tonne using a 0.5 grams per tonne gold cut-off
grade. The El Sauzal deposit remains open to the west, east, north and at depth. Mine Reserves
Associates Inc. of Wheat Ridge, Colo., calculated the geological resource estimate based upon assay
results from 86 diamond drill holes totalling approximately 15,000 metres and over 1,000 surface
chip channel samples averaging approximately 5.0 metres each. Mine Reserves developed a series of
variograms based on 5 metre drillhole composites and then employed a restricted kriging process to
generate the resource estimate. A summary of the resource calculations is provided below for four
cases utilizing different gold cut-off grades.
Gold Cut-Off Tonnes Grade Contained Gold
Grade (g/T) (Millions) Gold (g/T) (Million Oz.)
0.4 52.11 1.967 3.30
0.5 46.97 2.133 3.22
0.6 41.70 2.333 3.13
0.7 36.69 2.563 3.02
Two diamond drilling rigs have commenced a step-out program on targets outside the defined area
for the resource calculation. Based on recently completed structural and stratigraphic work it is
management's belief that significant upside potential exists to expand the El Sauzal gold resource to
over 4 million ounces with infill definition drilling, down-dip drilling and testing the lateral extensions
into adjacent, undrilled areas. The current drill program will test the outside target areas and continue
through 1998. Francisco has also received a preliminary engineering scoping study on the El Sauzal
deposit completed by Behre Dolbear and Company, Inc. of Denver, Colo. The purpose of the study
was to determine the viability of developing a mine and to determine the appropriate mining methods
together with estimated capital and operating costs. Behre Dolbear's study recommended that El
Sauzal should be developed as an open pit mine with ore processing in a conventional carbon in
leach plant with additional gravity circuitry. The study confirms that gold production at El Sauzal
would be economically viable and that the project economics would be robust. Behre Dolbear's
initial scoping study identified two production case scenarios for the El Sauzal deposit. The Base
Case considered the mineable resources developed to date and proposes ore being processed at a
rate of 8,000 tonnes per day resulting in approximately 254,000 ounces of gold production annually.
The estimated capital cost for the project is US$174.5 million which includes sustaining capital and a
US$29.0 million contingency. The operating costs are estimated to be US$98.62 per ounce while
total costs, including operating and capital costs, are estimated to be US$181.63 (see note) per
ounce of gold produced. Behre Dolbear's mineable resource, used in their Base Case evaluation,
was obtained using a floating cone analysis on their own resource model, with a gold price of
US$350 per ounce and their own cost, recovery, and other parameters. An allowance for dilution
and waste for the haulage ramp was then added to the floating cone resource. Behre Dolbear's
mineable resource is 20.5 million tonnes at a grade of 3.02 grams of gold per tonne at a cut-off grade
of 0.65 grams of gold per tonne, and a stripping ratio of 0.90 tonnes of waste to one tonne of ore.
Based on a 25 percent larger mineable resource, Behre Dolbear considered a Upside Case. For this
production scenario, Behre Dolbear projected ore being processed at a rate of 10,000 tonnes per
day with annual production of 318,000 ounces of gold. The estimated capital cost would be
US$199.0 million including sustaining capital and a US$33.1 million contingency. The operating costs
are estimated at US$94.44 per ounce and the total costs, including operating and capital costs, are
estimated to be US$169.74 (see note) per ounce of gold produced. A summary of the two
production rates is set out below together with financial evaluations for both an after tax and before
tax basis.
Base Case Upside Case
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Daily Operating Rate (Tonnes) 8,000 10,000
Ore Grade (g/T Gold) 3.02 3.02
Average Recovery % 89.6 89.6
Stripping Ratio (waste/ore) 0.90 to 1 0.90 to 1
Operating Cost/Recovered oz US$98.62 US$94.44
Capital Cost/Recovered oz US$83.01 US$75.30
Full Cost(see note) US$181.63 US$169.74
Payback at US$325/oz
Before Tax (years) 2.4 2.2
After Tax (years) 3.4 3.1
Payback at U$350/oz
Before Tax (years) 2.2 2.0
After Tax (years) 3.1 2.8
Note: Includes credit for salvage value
Behre Dolbear's study concludes that "the risk of El Sauzal not being a viable project, even at low
gold prices, appears minimal." On-going drilling at El Sauzal is expected to increase the current
geological resource. Mine Reserves and Behre Dolbear will continue to update their reports as
additional resources are developed.
On Behalf of Francisco Gold Corp.
P. Randy Reifel P. Randy Reifel, President |
