At a base-case gold price of US$1,300 per oz. and US$25 per oz. for silver and throughput of 45,000 tonnes per day, an open-pit mine at International Minerals‘ (IMZ-t) Converse project in Nevada returns a pre-tax, non-discounted cash flow of US$494 million over a mine life of 14 years, based on conceptual production of 217 million tonnes at an average grade of 0.52 gram per tonne gold and 3.9 grams silver per tonne.
The results of the scoping study on the 100%-owned project are positive enough to advance the project to full feasibility next year, the company says. The study envisions an open-pit mine using cyanide heap leaching, followed by carbon adsorption and stripping, and electrowinning to produce gold-silver dore bars.
Average annual gold production at Converse is forecast at 160,000 oz. a year, with silver production of 638,000 oz. a year. Life-of-mine gold production will likely reach 2.17 million oz. gold and 8.47 million oz. silver.
At a 5% discount rate, pre-tax cash flow reaches US$185 million and falls to US$70 million at an 8% discount rate. The company expects that average metallurgical recoveries for gold will be 60% and 31% for silver. The average life-of-mine strip ratio of waste rock to mineralized rock is 2-for-1.
The pre-tax internal rate of return works out to 10.5% and total cash operating costs – including refining charges – are estimated to be US$745 per oz. gold, with silver as a by-product credit. A US$60 million contingency, initial capital requirement is estimated at US$455 million.
“The study has a positive impact on our model,” Adam Graf, an analyst at investment bank Dahlman Rose, wrote in a research note. “While capital costs are higher than anticipated, operating costs are lower due to higher grades, lower stripping and silver by-product recovery.” Graf has a “buy” rating on the stock with a target price of $8.99 per share. At presstime International Minerals traded at $5.97 per share within a 52-week trading range of $5.47-8.22. The company has 120.5 million shares outstanding.
An updated resource for Converse is expected next year. Measured and indicated resources at a cut-off grade of 0.27 gram gold per tonne stand at 320 million tonnes at an average grade of 0.5 gram gold per tonne and 3.7 grams silver per tonne, for 5.2 million contained oz. gold and 38 million oz. silver.
Inferred resources add 31 million tonnes grading 0.51 gram gold and 3 grams silver for 0.5 million oz. gold and 3 million oz. silver.
Converse is in north-central Nevada in the Battle Mountain-Cortez mineralized trend, 13 km from Newmont Mining‘s (NMC-T, nem-n) Lone Tree processing plant and 8 km from Goldcorp‘s (G-T, GG-N) Marigold mine.
In addition to Converse, International Minerals has a 100% stake in the Goldfield project, also in Nevada, and varied gold interests in Ecuador.
The company produces silver and gold from the Pallancata mine in Peru, in which it owns a 40% stake. The mine is operated by Hochschild Mining (HOC-L). Last year Pallancata produced 10.1 million oz. silver and 36,000 oz. gold on a 100% project basis.
International Minerals also has a 3% net smelter return royalty on Barrick Gold‘s (ABX-T, ABX-N) Ruby Hill gold mine in Nevada, which produced 80,000 oz. gold in 2010.
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