Chesapeake’s preliminary economic assessment positive for Metates

Chesapeake Gold (CKG-V) shares were up 15¢ or 1.65% at $9.25 per share in mid-day trading following news of a positive preliminary economic assessment on its 100%-owned Metates gold-silver project in Mexico’s Durango state.

The PEA forecasts a mine life of 27 years with a total life-of-mine production of 14.8 million oz. gold, 391 million oz. silver and 2.44 billion lb. zinc.

The large tonnage open-pit operation, 175 km northwest of Mazatlan, would use conventional mining and milling to produce a sulphide concentrate, followed by pressure oxidation.

At base case prices of US$900 per oz. gold, US$14 per oz. silver and $1 per lb. zinc, the mine would yield a pre-tax internal rate of return of 13% and a net present value of US$1.2 billion at an 8% discount rate, including zinc recovery.

Initial capital costs have been estimated at US$3.19 billion including US$493 million in contingency costs and working capital.

The payback period would be 5.7 years and the mine would yield a cumulative life-of-mine net cash flow of US$11 billion.

Metates has a measured and indicated resource of 936.1 million tonnes grading 0.57 gram gold per tonne (contained gold of 17.8 million oz.), 15.5 grams silver per tonne (466.57 million oz. silver), and 016% zinc (3.39million lb. zinc). In the inferred category there are 135.3 million tonnes grading 0.60 gram gold, 14.3 grams silver, and 0.12% zinc.

The PEA was based on a production rate of 90,000 tonnes per day processed by a crushing and grinding system utilizing high pressure grinding to feed a sulphide flotation plant.

The bulk sulphide rougher flotation concentrate representing about 11% of the original weight of the ore, will be transported 140 km downhill by a slurry pipeline.

A new process will be used to produce high quality zinc metal sulphide from the pressure oxidation solutions, and the sulphides will be shipped to a smelter for final processing.

A dedicated coal-fired power plant will provide the electrical power and the cost of building it is included in the PEA’s initial capital cost estimate.

Overall gold and silver recoveries are estimated at 84.7% with zinc recovery estimated at 85%.

Chesapeake plans to advance the project towards pre-feasibility at a cost of about US$3 million. The prefeasibility study should take about 12-15 months.

Potential exists to expand the gold resource because the deposit remains open along trend in both strike directions. As such, a significant tonnage of material within the existing pit design that has not been drill-tested is classed as waste rock.

Chesapeake has $12 million in cash and liquid investments.