Dalradian advances Curraghinalt amid low gold prices

Dalradian Resources (TSX: DNA) has published the results of  first 25 drill holes from its 2015 exploration program on its Curraghinalt gold project in Northern Ireland, confirming the project’s quartz veins carry high-grade gold mineralization. 

The company began drilling in March as part of its fully funded $30-million work program at the deposit that started last September, with a goal of completing a prefeasibility study and an environmental impact assessment (EIA). 

Assays from the 25 holes, released on July 15, represent 5,800 metres of the planned 21,000-metre campaign, which includes 20,000 metres of infill and 1,000 metres of geotechnical drilling.

The main objective of the infill drilling is to convert the inferred resources at Curraghinalt to the indicated category for the upcoming prefeasibility study. 

So far, the drill results have been positive, BMO analyst Andrew Kaip writes in a note. They indicate “resource continuity and highlight the potential for higher-grade zones within the Curraghinalt resource,” he says.

The best intercepts to date included 54.84 grams gold per tonne over 4.4 metres and 15.26 grams gold over 4.7 metres (not true widths).

“The weighted average grade for the new results released was 18.74 grams gold per tonne over an average intercept of about 1.4 metres,” Kaip says. This surpasses the resource grade in the 2014 preliminary economic assessment (PEA).

The PEA outlines 3 million measured and indicated tonnes grading 10.41 grams gold for 1 million oz. gold, plus 8 million inferred tonnes at 9.67 grams gold for 2.5 million oz. gold.

Building a mine at Curraghinalt could cost US$249 million. Once up and running, it could produce 194,000 oz. gold a year for the first five years, and 149,000 oz. gold a year for the remaining 13 years. Estimated life-of-mine cash costs are US$485 per oz., including royalties, refining costs and by-product credits.

Given the low start-up and operating costs, the returns are robust. Based on a US$1,200 per oz. gold price, Curraghinalt has an after-tax net present value of US$504 million using an 8% discount rate, and a 36.5% after-tax internal rate of return.

Dalradian hopes to improve on those numbers with its drilling efforts. The current program covers 45% of the resource’s 1.7 km strike length and goes down 400 metres, while the resource reaches 700 metres deep. 

Once the drilling wraps up in the third quarter, Dalradian will update Curraghinalt’s resource in September or October, company spokesperson Marla Gale says. 

The prefeasibility study should be out by year-end, followed by the EIA in early 2016. 

Both the prefeasibility study and EIA will support a permitting and planning application to build a mine at Curraghinalt. The junior intends to submit that application by the end of March 2016, Gale says. 

Since the company reported the drill results, its shares have slid. It recently closed at 75¢ per share, down 15¢ since July 15. Gale largely attributes the downward movement to the tumbling gold price. 

The spot price for gold hit a five-year low on July 20, slipping below US$1,100 per oz. to close at US$1,097.70 in New York. The metal has fallen 4.2%, or US$49 per oz., since July 15. 

Kaip has a “speculative outperform” rating on the stock, with a $1.25 target.