Months after reconfirming its commitment, Australian-based
In early June, Bolnisi reportedly began financing negotiations for Ocampo, having entered the final stages of a feasibility review. Aside from past results, the study included those from 12,500 metres of infill holes the company had sunk over the past 16 months.
Under the early 2002 agreement, Bolnisi could earn 60% in four concessions by developing an open-pit mine capable of handling not less than 1.25 million tonnes per year. As part of the deal, commercial production had to be achieved by March 2004 and Gammon Lake had to be carried the entire way.
When the deal was inked, the concessions — Plaza de Gallos, Refugio, Conico, Picacho and La Estrella — were independently estimated to host 16.6 million tonnes of measured and indicated resources averaging 1.28 grams gold and 49.33 grams silver per tonne. Bolnisi itself was able to bump just 4.4 million tonnes up to reserve status, though the average grade came in at 1.79 grams gold and 81 grams silver.
According to the feasibility study, completed in September (but not released by Gammon Lake), capital costs ring in at US$14 million and total cash costs amount to US$233 per oz. Both estimates exclude about $935,000 that Bolnisi has paid to maintain its option and to cover penalties for failing to achieve commercial production by September.
As for Gammon Lake, it plans to incorporate Bolnisi’s data with results from an adjoining project, dubbed Ocampo Northeast. That property hosts both underground and near-surface resources, boding well for its neighbour’s eventual development.
According to a recent indepedent study, the measured and indicated portions of the underground resource at Ocampo Northeast can support a 1,400-tonne-per-day milling operation capable of producing 92,400 oz. gold and 4.6 million oz. silver annually over seven years. Development would cost US$14.5 million, to be repaid in five months.
At a gold price of US$325 per oz. and a silver price of US$4.60 per oz., the project generates an internal rate of return of 247%. Its net present value chimes in at US$174 million, or US$138.7 million when the discount rate is doubled to 10%.
Measured and indicated resources stand at 3.51 million tonnes grading 5.86 grams gold and 302 grams silver. An additional 4.52 million tonnes at 6.09 grams gold and 298 grams silver are classifed as inferred. Both estimates are based on a cutoff grade of 0.4 gram gold-equivalent.
Underground development and drilling (65,000 metres) are under way in an effort to prove up the underground resources. Results from the first 30 stepout and infill holes have proven encouraging (T.N.M., Sept. 22/03).
Near-surface resources at Ocampo Northeast stand at 3.49 million tonnes grading 1.26 grams gold and 55.11 grams silver. The estimate is based on a cutoff grade of 0.4 gram gold-equivalent and was excluded from the preliminary economic review. In all resource cases, the cutoff grade is based on a silver-to-gold ratio of 65:1.
Gammon Lake recently topped up its till by privately placing just over 2.4 million shares at $6.15 apiece. That’s in addition to $17.2 million raised in mid-August, when roughly 4.7 million shares were privately placed at $3.20 apiece.
A portion of the proceeds from the recent financing will be used to cover the payment due to Bolnisi.
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