The story “Probe Mines brings ex-Barrick CEO on board” (T.N.M., Sept. 29-Oct. 5/14), included analysis of Probe Mines’ (TSXV:PRB)Borden gold project by Mike Hocking, a mining analyst at Scotia Capital. The story implied that Hocking had used a high cut-off grade in an economic analysis of Borden that found a stand-alone underground mine exploiting the deposit’s high-grade zone (HGZ) would have marginal economics. Hocking did use a high cut-off grade of 5.5 grams gold per tonne in an unfavourable report on Probe Mines in April. However, he used the company’s assumptions, including a 2.5 gram cut-off, in a report in June.
Based on indicated underground resources of 9.3 million tonnes grading 5.39 grams gold (for 1.6 million oz.) at a cut-off grade of 2.5 grams gold, the June report found that a 2,500-tonne-per-day stand-alone underground mine at Borden would have a net present value (NPV) of $51.6 million and an 11% internal rate of return, with an eight-year payback period compared with a mine life of 13 years. The calculation uses an 8% discount rate and assumes a $263-million initial capex. The NPV rises to $102 million at a 5% discount rate.
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