A preliminary economic assessment (PEA) of Magellan Minerals’ (MNM-V) Coringa gold project in Brazil’s Amazon basin, 1,200 km northwest of Brasilia and 995 km southwest of the Atlantic port city Belem, says it would be economic even if the gold price were to slip to US$750 per oz.
The PEA demonstrates an internal rate of return of 34% and a net present value (NPV) of US$41 million, assuming a 5% discount rate and a gold price of US$950 per oz. The NPV rises to US$56.7 million at a 0% discount rate and US$82.5 million assuming a gold price of US$1,200 per oz.
The news sent Magellan’s shares up 3¢ or 4.84% to close at 65¢ apiece. The junior has a 52-week trading of 52¢-$1.20 and 73.7 million shares outstanding.
The study used a cutoff grade of 3 grams gold per tonne. Coringa has a measured and indicated resource of 830,460 tonnes grading 9.64 grams gold for contained gold of 257,388 oz., and 239,620 inferred tonnes grading 11.86 grams gold, for 91,334 oz. gold.
The mine life is estimated at 7.6 years and average annual production is forecast to be 36,490 oz. gold at an operating cash cost of US$418 per oz.
The initial capital expenditure has been estimated at US$26.4 million with a life-of-mine capex of US$50 million. Payback is expected to be 3.7 years.
Even if capital costs and operating costs were both to increase by 50% and the gold price were to fall to US$750 per oz., the company says Coringa would still be economic.
The PEA also noted that the vein system is open both at depth and along strike.
The project lends itself to a conventional carbon-in-leach circuit and that testwork so far has indicated gold recoveries of between 97.7% and 99%.
The PEA includes a recommendation to advance the project through a feasibility study.
Currently, Magellan is in the midst of a 2,500-metre drill program designed to expand the resource.
Initial drill results are expected during the next two months and a decision about whether to advance to a feasibility study will be made before July.
The Coringa project is a shear-vein system, hosted in volcanic rocks from the Salustiano formation and in granites from the Maloquinha suite in the Tapajos gold province. This province was the site of a major gold rush by artisanal miners from the late 1970s until the late 1990s and had a historical production of at least 10 million oz., gold with actual production believed to be closer to 30 million oz, according to a technical report on the project.
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