Trek Mining (TREK-V) is on track to revive its flagship Aurizona gold mine in northwestern Brazil.
On July 31, the company unveiled a re-imagined feasibility study (FS), modelling a $131-million redevelopment plan that would result in “first gold pour” at the site within eighteen months.
Trek formed earlier this year when debt-heavy, former Aurizona operator Luna Gold merged with JDL Mining. The project was shuttered in third-quarter 2015, following a period of falling gold prices and a slate of operational limitations that included material crushing and processing.
The newly-formed company is hoping its new mine plan, which includes increasing throughput from 5,500 tonnes per day to 8,000 tonnes per day, will underpin sustainable operations.
Trek’s FS outlines an open-pit gold mine producing roughly 136,000 oz. gold annually, with an initial 6.5-year mine life, at all-in sustaining costs of US$754 per oz. Aurizona’s proven-and-probable reserves now total 19.8 million tonnes at 1.52 grams gold per tonne for 971,000 contained oz.
The US$49-million, re-engineered plant includes the expanded crushing and grinding circuit, which will reportedly allow “all known types of mineral bearing rock at Aurizona to be processed through the gold recovery plant.”
The plan requires a new primary jaw crusher, semi-autogenous grinding (SAG) mill, ball mill and pebble crusher. Trek would also invest in new hydro-cyclones, a intensive leach reactor, three leach tanks, a refurbished carbon-in-pulp (CIP) circuit, a pressurized elution circuit, a carbon regeneration kiln and a high-rate thickener.
“About one year ago we identified this study as a key milestone in pouring gold again at Aurizona by the end of 2018. It’s a simple open-pit mine with a compact footprint,” explained Trek CEO Christian Milau during a conference call.
“The thesis here is really the near-term development of a good-sized gold mine, which are becoming especially scarce in the current market. There aren’t many single-asset developers coming into production over the next few years, and we’ve seen many takeovers by majors recently,” he added.
Trek’s operating assumptions include US$2.44 per tonne mined (excluding taxes), a 91.2% gold recovery rate and a 5.7 strip ratio. The company will also transition to contract mining.
Under a US$1,250 per oz. gold base case, Aurizona would generate a US$197 million after-tax net present value (NPV) at a 5% discount rate, along with a 33.8% internal rate of return (IRR).
“It’s still not a great financing market, but we’ve been able to pull together equity and we’re working on the next steps,” Milau continued. “We’d clearly prefer to address the balance with debt. The sweet spot is low capital intensity and high returns, but the real kicker is that the valuation at Aurizona doesn’t even include the exploration upside yet.”
In mid-March, Trek announced it had closed a $83.4-million, non-brokered private placement wherein it issued 41.7 million subscription receipts, which each entitle the holder to one share and a $3 purchase warrant exercisable through October 2021.
The company said its most “significant opportunity to add value” is via exploration across its expansive land package, which covers 2,250 sq. km in Maranhão State in northeastern Brazil.
Trek inherits a regional joint-venture with AngloGold Ashanti (AU-NYthat encompasses 2,000 sq. km of greenfield property across “underexplored greenstone belts hosting orogenic gold systems.” AngloGold can earn a 70% interest in the ground by spending $14 million over four years.
In late May, the company reported initial results from a 30,000-metre drill program that indicated the central Piaba gold deposit continues at depth and along strike west of the pit.
The project’s pit-constrained, measured and indicated resource stands at nearly 30 million tonnes grading 1.67 grams gold for 1.6 million contained oz., and inferred of 2.7 million tonnes at 0.72 gram gold for 61,600 contained oz.
Trek’s first 18 drill holes were headlined by 3.9 grams gold over 11 metres in drill hole 575, which was 300 metres beyond the westernmost edge of the Piaba open pit, and starting from 49 metres depth.
Trek’s vice-president exploration Scott Heffernan the results signaled a “fantastic start to our program,” and added that the company would be following Piaba mineralization along strike and down-plunge.
The company has 176 million net shares outstanding for a $176 million press-time market capitalization.
Trek has requested that its existing license to operate (LO) be amended to cover changes to Aurizona’s operating parameters, including the 8,000-tonnes-per-day increased plant throughput and raises to the Vené tailing facility. The company expects to receive its license to install (LI) by the third quarter.
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