Trek Mining (TREK-V) shallow step-out holes drilled at 100%-owned Aurizona gold project in Brazil have extended gold mineralization to the west of the past-producing Piaba open-pit mine. Drill results from some of the first 6,500 metres of a 30,000-metre drill program this year indicate that the Piaba gold deposit continues at depth and along strike to the west of the pit, and the company believes that continued infill drilling should lead to a resource increase.
Aurizona hosts proven and probable reserves of 18.6 million tonnes grading 1.62 grams gold per tonne for 969,000 contained oz. gold. The reserves were calculated in June 2016 using a US$1,104 per oz gold price.
The project’s pit-constrained, measured and indicated resource stands at 29.9 million tonnes grading 1.67 grams gold for 1.6 million contained oz. gold and inferred of 2.65 million tonnes at 0.72 gram gold for 61,600 contained oz. gold.
Gold reserves are contained primarily within the Piaba pit, which remains open along strike and at depth. Piaba West is a potential extension of the Piaba gold deposit and is the first of several near-mine targets to be drilled in the current US$7.5 million program.
Highlights from Trek’s first 18 drill holes include 3.90 grams gold over 11 metres in drill hole BRAZP575, which was 300 metres beyond the westernmost edge of the existing Piaba open pit, and starting from 49 metres downhole. Another hole, BRAZP576, intersected 0.71 gram gold over 6 metres a further 100 metres west of BRAZP575, from a depth of 110 metres.
Other results were 2.63 grams gold over 9 metres in hole BRAZP572; 0.99 gram gold over 15 metres in hole in hole BRAZP571; and 1.22 grams gold over 33 metres including 2.27 grams gold over 11 metres in BRAZP569.
“These intercepts have some excellent grades and are well above reserve grade at Piaba,” mining analyst Kerry Smith of Haywood Securities commented in a research note, adding that he views “the resource upside at Aurizona as a key part of this story, along with management’s desire to also grow through prudent acquisition in the Americas.”
Scott Heffernan, Trek’s executive vice president exploration, quite pleased with the first round of results.
“It’s a fantastic start to our program,” Heffernan says. “It’s pretty exciting. We have a 30,000-plus-metre program that will take us to the rest of 2017 with a few key goals: 1) to grow the existing resource and 2) to start testing regional targets that are somewhat defined currently both within a short proximity to the main deposit but also further afield.”
Heffernan says the immediate priority is to follow the mineralization at Piaba along strike and down plunge and to increase drill hole density below the western edge of the current reserve pit and the initial 300-metre west extension. The company also plans to test an additional 600 metres of westerly strike once it interprets a recently completed 38,000 line-km airborne magnetic and radiometric survey.
“We’re drilling underneath the westernmost end of the pit to test the depth continuation of mineralization and were successful drilling mineralization to depths of 200 metres, so it’s underneath the pit,” he explains. “And then there’s the extension from the western pit limit to some 300 metres beyond, so the drilling shows the mineralization continues to depth under the pit and the 300-metre extension.”
A pre-feasibility study examining the economics of restarting the open-pit mine released in September 2016 recommended a new mine plan that would expand the mill’s capacity to 8,000 tonnes per day from 5,500 tonnes per day. The increase in mill capacity would lead to production of 150,000 oz. gold a year at all-in sustaining costs (AISCs) of US$708 per oz. based on a mine life of six and a half years. The prefeasibility study estimated capex of US$146 million.
The company subsequently launched a feasibility study, which it expects to complete shortly. The study will examine incorporating a new crushing and grinding circuit that will allow all known types of mineral-bearing rock to be processed through the gold recovery plant. A new mine plan would also involve upgrades to the power station, a new mine fleet and some improvements to existing infrastructure.
“The feasibility study will be a key milestone for us after which we hope to announce a construction decision in the third quarter this year,” Heffernan says, “and all of that is leading to a first gold pour in December 2018.”
The mine produced a total of 329,042 ounces of gold from 2010 to 2015 at an average grade of 1.28 grams told per tonne. It was shut down in mid-2015, however. Falling gold prices and a stream-finance deal with Sandstorm Gold (SSL-T) hindered its cash flow, while operational issues resulted in cost overruns and production shortfalls. In the second quarter of 2015, the mine produced just 14,260 oz. gold at AISCs of US$1,119 per oz. gold.
In addition to its 450 sq. km property at Aurizona/Piaba, Trek is in a joint-venture with AngloGold Ashanti (AU-NY) on an adjoining land package of 2,000 sq. km. Trek currently owns 100% of the property and AngloGold is funding all costs in order to earn a 70% interest. Under the agreement, AngloGold must spend US$14 million over four years financing and operating the joint-venture, and plans to drill 18,000 metres by the end of this year.
“The key takeaway is exploration is taking place on a number fronts and all results are super-exciting,” Heffernan says. “We want to get into a steady state exploration to generate a steady flow of exploration results in the marketplace.”
The company has US$85 million in cash, enough, Heffernan says, to move into construction, although Trek will have to seek debt.
Smith of Haywood Securities estimates that Trek “will be able to consider multiple sources of funding for Aurizona given the strong economics of the project, relatively limited upfront capital costs, and Trek’s balance sheet.”
In March, Trek closed an $83.4 million equity financing at $2.00 per share.
In addition to Piaba, Trek owns 75% of the Koricancha mill in Peru. The custom-built gold and silver processing facility is a 10-minute drive from the Pan American Highway in southern Peru’s Nazca-Ocona gold district. The mill processes gold bearing ore purchased from small-scale and artisanal miners. Payments are set at the time of purchase at a discount to market, the ore is processed, and then the gold and silver is sold at spot prices for Koricancha’s account.
Trek is also involved with the Warintza project, a porphyry copper-molybdenum exploration project in southeastern Ecuador, the Ricardo porphyry copper-molybdenum exploration project in Chile, and Elk Gold, a past-producing high-grade gold mine in British Columbia. |
