Discovery Ventures lays groundwork for production at Willa in BC

VANCOUVER — Discovery Ventures (TSXV: DVN) is eager to develop its Willa gold-copper-silver deposit, located 8 km south of Silverton, southeast B.C., now that the company has secured complete ownership of the Max mine and mill complex, 135 km south, and recieved a bulk-tonnage permit from the B.C. Ministry of Energy & Mines.

The company acquired 35% in Max from 42 Metals — formerly a subsidiary of TSX venture-delisted Roca mines — three years after collapsing molybdenum prices forced the 500-tonne-per-day operation to a standstill in 2011.

Discovery’s chief financial officer Kenneth Phillippe tells The Northern Miner during a phone interview that the company has been “waiting to acquire the remainder of Max, before we got the engines going at Willa.

“It’s a once-in-a-lifetime opportunity. It doesn’t come along often when you can pick up these distressed assets, combine them and make a largely profitable business,” he says.

Discovery negotiated full ownership of the Max for $3.7 million, and issued 3 million shares in October — which is a “steal of a deal,” Phillippe explains, considering the modern facility has a $65-million replacement value.

“We’re going to use all the equipment and assets we acquired from the mine site, because it’s compatible, works perfect and everything is in great shape,” he says. “We have people on the ground now, greasing all the bearings and doing everything we need to get this project ready to go.”

The company has obtained a bulk sample permit from the B.C. government so that it can remove 10,000 tonnes of ore at a rate of 1,500 tonnes per day. Discovery’s president Akash Patel says during a phone interview that he expects to see “shovels to be in the ground” by June 2016, but there are also plans to advance the project towards a small-mines permit in the future.

“We are ramping up to mine, so this is a small test run before we chase bigger fish,” Patel says. “We’re working towards the paperwork to apply for a small mines permit, which should be complete in the next few months.”

The open-ended, pipe-like, breccia-hosted deposit was a target in the 1980s, but due to declining gold prices, the previous operators stopped operations before they began. The $18-million investment partly went towards building 2,575 metres of tunnels underground and over 57,250 metres of drilling into the resource, which stands at 758,000 tonnes in the measured and indicated categories, grading 6.67 grams gold per tonne, 0.9% copper and 12.54 grams silver, using a 3.5-gram gold cut-off.

The company is already rebuilding the road access to the underground portals, which could be done by January.

Although Discovery is also working to release an updated preliminary economic assessment (PEA) report for the deposit within the coming weeks, Phillippe says the project doesn’t have to reach full feasibility before starting production.

“The quality of work done by Newmont, Esso, Noranda and British Petroleum is why we’re not going to feasibility or prefeasibility,” he says. “There have been huge amounts of drilling, and we’re confident that what they stated in their drill holes is there.”

The 2012 PEA envisages a 500-tonne-per-day operation over a four-year mine life, with $12.8 million in capital expenses and an all-in cash cost of $781 per oz. gold.

The report predicts that Willa has an after-tax net present value at a 10% discount rate of $55 million, and a 412% after-tax internal rate of return, assuming metal prices of US$1,200 per oz. gold, US$20 per oz. silver and US$3 per lb. copper.

The calculations also take into account existing infrastructure at the Max mill, along with a $50-million tax-loss carry forward that Discovery inherited from 42 Metals.

“We’re eager to move this project forward, and we can do so economically — anybody can make money on this project,” he says. “We are working, things are happening and we’re all very excited.”

The company announced a private placement and stock option grant of 7,333,333 units at 15¢ per unit, totalling gross proceeds of up to $1.1 million. Patel says the money will help buy equipment for the operation, but because of the large shareholder interest, it might reconsider its debt-to-equity ratio to fund the rest of the project.

“There have been a lot of shareholders calling to see if they can get in for subscription agreements,” Patel says. “We have the money to move ahead, so we need to sit down and determine how best to take the company to the next level.”

Discovery has traded with a 52-week window of 9¢ to 25¢, and closed at 16¢ at press time. The company has 87 million shares outstanding for a $13.9-million market capitalization.