VANCOUVER — Developer Romarco Minerals (TSX: R; US-OTC: RTRAF) believes it can set a positive example for others looking to permit new gold mines in the southern U.S.
In early January the company announced it had navigated the permitting process for its development-stage Haile gold property, 5 km northeast of the town of Kershaw, S.C. The entire review took 3.5 years, but may provide some optimism for an industry that views much of the continental U.S. as a permitting minefield.
But there are a few caveats to Romarco’s example, in that Haile lies predominantly on private land and the project site is the location of a historic mining operation. But the company still had to cope with a late-stage challenge from the Sierra Club, and scored a wetlands permit from the federal Environmental Protection Agency to cross the finish line.
“It’s been a long time coming, but I think it’s still quite remarkable in terms of U.S. permitting timelines,” president and CEO Diane Garrett says during a phone interview. “When we first arrived on-site we immediately reached out to let everyone know about our plans for the project. We held numerous town-hall meetings, and talked about cyanide from day one. We were transparent with the community, and hosted over 100 site visits at the property. I think that open-door policy really helped build the trust and confidence.”
In order to tackle the Sierra Club challenge, Garrett says Romarco “did what it does best,” which involved reaching out to the group to discuss issues. In the end a settlement was just a matter of bumping the total reclamation in the permit by US$5 million to US$65 million over Haile’s mine life.
Romarco also crafted into its mine plan environmental safeguards that weren’t required by local mining legislation. For example, the company committed to backfilling its pits since it was dealing with a lot of pyrite ore. In addition, Haile’s operation will include a cyanide destruction circuit to assure the community and conservation groups that tailings are safer.
“We’re really serious about creating, designing, building and operating a state-of-the-art facility as a showcase to demonstrate how mining should be done,” Garrett says. “We believe there will be other mining companies coming to this area since Haile has been such a significant discovery, and we want to be able to work with the state and set that example for those who follow us.”
But working with communities, stakeholders and non-governmental organizations hasn’t really materially changed Romarco’s core development strategy. In December the company filed an updated feasibility study for the project that marked the first revised economic model in three years.
Haile sits in the historic Carolina slate belt, which hosted gold production from 1800 through 1999. Three significant past producers are located along a 64 km trend, with the Haile operation at its centre. Kennecott’s nearby Ridgeway mine produced 1.5 million oz. gold, while the Brewer mine in the northeast cranked out 216,000 oz.
The slate belt, which extends from Virginia to Georgia, is an ancient island arc system that formed next to Africa and attached to North America during the Paleozoic era. Gold mineralization is typically found within the Richtex Formation near the contact with the Persimmon Fork Formation. All of the major deposits within the district are near this boundary. Gold is found in stratabound, silicified lenses of hydrothermally altered metasediments.
Romarco intends on using conventional open-pit methods to crank out 150,000 oz. gold annually at Haile over a 13-year mine. The company’s plant design assumes jaw-crushing, semi-autogenous and ball milling, flotation, fine grinding of the flotation concentrate and carbon-in-leach cyanidation. The plant would process 6,350 tonnes per day, with gold recovery pegged at 83.7% based on a 2.06-gram-gold-per-tonne head grade.
Haile’s proven and probable reserves total 30.5 million tonnes grading 2.06 grams gold for 2 million contained oz. Measured and indicated resources stand at 71.2 million tonnes of 1.77 grams gold for 4.04 million contained oz.
Romarco’s mining plan hasn’t changed too much over four years, but a few details in its new study stand out.
First, the project’s capital expenditures have increased little. That’s a major win for a junior company in an environment marked by rising development costs.
Garrett points out that the new capital estimate of US$333 million is just 2.5% higher than the company’s projections in its 2011 study. The second aspect is that the project has benefitted from an aggregate boost in gold prices.
Haile’s after-tax net present value has jumped 72% to US$329 million at a 5% discount rate, while the 20.1% internal rate of return speaks to the deposit’s high grades. Economic outcomes assume a US$1,200 per oz. gold price.
Garrett says Romarco has drilled 76,000 metres since its last resource update, and the company is expecting a boost in gold recoveries following new metallurgical work.
Romarco is also enjoying renewed access to financial markets after having passed the permit milestone. The company announced a $300-million bought-deal financing in late January, wherein it will issue 517.3 million shares at 58¢ per share.
To top it off, Romarco is closing in on a credit agreement that will see Haile’s development fully financed. If all goes according to plan the company will break ground in April and pour gold by late 2016, after 18 months of construction.
“I’ll say it’s a large raise in the markets, especially over the past two years, and it’s a large raise relative to our market capitalization,” Garrett continues. “But good projects always get funded. Haile has reserves at lower gold prices, and it’s a U.S.-based, low-cost asset that has tremendous margins. These are the types of mines people are willing to step up and fund.”
Access to capital has another upside for the company, which can get back to what it does well: exploration. In April 2013 Romarco announced it was suspending exploration drilling to preserve capital, but it didn’t stay completely idle.
Garrett says the company mobilized its geological team to canvas 60 historic projects in the region. Romarco has narrowed its focus to 11 prospects and is planning near-term exploration activities.
“There are literally hundreds and hundreds of historic gold mines in the state, so it doesn’t seem plausible to think that Haile is the only multi-million ounce deposit out there,” Garrett says.
“Our goal is to focus on that higher-grade undeground at Haile, but at the same time step out and do some regional work. I think the market, and our shareholders, expect Haile to get bigger. On the other hand, if we can demonstrate a discovery regionally it will underscore our belief that we’re dealing with a district play,” she adds, noting that Romarco is budgeting between US$11 million and US$13 million in exploration over the next 18 months.
Romarco has traded within a 52-week window of 41¢ to 99¢, and closed at 55.5¢ per share at press time. The company has 725 million shares outstanding for a $404-million market capitalization.
When Romarco acquired the Haile mine area, it consisted of 3 smoke open pits. Subsequent mapping & geochemical sampling indicated that a large open pit resource existed. Subsequent expanded that resource, including a large underground underground high-grade resource existed. The large potential resource attracted Oceanagold who ultimately purchased Romarco and has put the area into gold production.