Dalradian nails key permit at Curraghinalt

A permit application for underground exploration development at Dalradian Resources’ (TSX: DNA) high-grade Curraghinalt gold project in Northern Ireland has been approved.

The Omagh District Council and the Strategic Planning Division of the Northern Ireland Department of Environment have both signed off on the application for Curraghinalt, 127 km from Belfast.

Now management can start awarding surface and underground contracts, begin earthworks, and update the mineral resource, all scheduled for the first quarter of 2014. Dalradian then plans to update the preliminary economic assessment and start underground blasting in the second quarter, stoping in the third quarter and metallurgical testing in the fourth.

“The company can now move to advanced exploration activities that are the logical next steps to further de-risk the project by improving the deposit resource model and mining plan,” John Hayes of BMO Capital Markets wrote in a brief  “flash”note to clients. “While permitting of a full mine/mill complex is undoubtedly more exhaustive, the permit for the underground development provides a degree of confidence that an underground mine can be permitted and developed at Curraghinalt.”

A PEA completed in 2012 outlined a 15-year mine life, initial capex of $192 million (including $38 million in contingency), and cash costs of US$532 per oz. At US$1,378 per oz. gold the project offers an after-tax internal rate of return of 41.9%, which would drop to 33.4% at US$1,166 per oz. gold and to 20.2% at US$814 per oz. gold.

Curraghinalt is a lode gold system made up of structurally controlled, high-grade gold bearing quartz-carbonate veins. It contains measured resources of 0.02 million tonne grading 21.51 grams gold per tonne for 10,000 contained oz., and indicated resources of 1.11 million tonnes averaging 12.84 grams gold for 460,000 contained oz. Inferred resources add another 5.45 million tonnes grading 12.74 grams gold for 2.23 million contained oz.

The deposit consists of at least 10 primary gold-bearing veins, ranging in width from less than 0.5 metre to more than 3 metres, and is open along strike, across strike and at depth. Recent work shows that mineralization continues beyond the boundaries of the current resource model.

Canaccord Genuity initiated coverage of the company on Nov. 27 with a speculative buy rating and a 12-month target price of 80¢ per share.

Analysts Joe Mazumdar and Scott McLean forecast the company will have the permit to develop and operate the gold project by the latter half of 2015 after which it can start a two-year period of construction and underground development, followed by production likely in early 2019.

They also anticipate little permitting risk. “As we have modeled an underground operation feeding a crush-mill-sequential gravity to sulphide concentrate circuit (1.7 kt/d of ore) with no cyanide plant, we believe the permitting risk is lessened,” they write in a research note.

The pair forecast a total of $140 million in equity financing between 2014 and 2016 at 60¢-65¢.

In morning trading on the TSX, Dalradian’s shares were trading at 62¢ per share with a 52-week range of 48¢-$1.80.

The company has nearly 90 million shares outstanding and at the end of the third quarter reported cash of $9.1 million and working capital of $9 million.