Anaconda moults to become producer

A recently received feasibility study has Anaconda Gold (ANX-V) convinced it will be pouring gold at the Pine Cove project, near Baie Verte, Nfld., before year-end.

The study, prepared by A.C.A Howe International, envisages the production of 38,000 oz. at a cash cost of US$283 apiece during the first year. Total production over the six-year lifespan is pegged at 181,000 oz. at US$238 per oz. The proposed open-pit operation carries a pre-production price tag of $11.4 million.

The positive production decision means that Anaconda has now earned a 30% interest in the 28-sq.-km project from New Island Resources (NIS-V). Anaconda can double its stake to 60% by arranging project financing and bringing the property to commercial production. Barrick Gold (ABX-T) retains a 7.5% net profit interest on the property.

Also under the deal, Anaconda is entitled to all project cash flow until its recoups its capital expenditures. The operation’s earnings before interest and taxes are estimated at $24.1 million, and the rate of return a respectable 23.9%.

Mining at Pine Cove will target diluted reserves totalling 2.3 million tonnes grading 2.8 grams gold per tonne. Another 1.9 million tonnes of probable material runs 2.9 grams gold, and the inferred category contains a further 392,751 tonnes averaging 2.5 grams gold. The estimates are based on a cutoff grade of 0.95 gram gold and a gold price of US$400 per oz.

Anaconda is confident it will expand those reserves, and is currently in the midst of a drilling program aimed at testing the recently discovered Animal Pond zone along strike and at depth. Other exploration targets include the Romeo and Juliet zone, which is home to a high-grade quartz vein.

Late last year, Anaconda produced 1,045 oz. gold from a 6,337-tonne bulk sample from Pine Cove. The block model predicted a grade of 5.4 grams gold per tonne; the mill grade returned 5.3 grams gold per tonne (a 96% recovery was achieved). The ore was processed on a contract basis at Richmont Mines‘ (RIC-T) Nugget Pond mill 50 km away.