Equinox Gold tables PEA for underground development at Aurizona

Equinox Gold (TSX: EQX; NYSE-AM: EQX) has released the results of a preliminary economic assessment (PEA) on an underground development within its Aurizona mine site in northeastern Brazil.

The early-stage study suggests a feed contribution of 2,800 tonnes per day from the Piaba underground to the existing 8,000-tonne per day plant at the site. This incremental operation would deliver an additional 740,500 oz. gold over 11 years at all-in sustaining costs (AISCs) of US$925 per oz. at an initial capital cost of US$69.7 million. The resulting after-tax net present value for this development, at a 5% discount rate, comes in at US$122 million, with a 25% internal rate of return.

“This PEA demonstrates the substantial opportunity for both mine life extension and increased annual gold production at Aurizona through development of an underground mine,” Christian Milau, the company’s CEO, said in a news release. “With the potential for expansions to the current open pit, additions of other near-surface resources, and further opportunities for Piaba underground resource expansion at depth and along strike, Aurizona is expected to be a long-life cornerstone asset for Equinox Gold.”

Based on the PEA, the underground deposit would be extracted through bulk mining with first mill feed expected 2.3 years after the start of sub-surface development. Steady-state production of 2,800 tonnes per day would be achieved at the end of the fourth year following the start of construction. The deposit would be accessible from a main ramp developed off of the existing pit.

Of the 7.3 million tonnes of indicated resources at 1.96 grams gold per tonne and 16.5 million inferred tonnes grading 1.98 grams gold at Aurizona, the PEA envisions development of 2.8 million tonnes of the indicated material grading 2.73 grams gold and 6.2 million tonnes of the inferred subset at 2.89 grams gold.

The company plans to advance further studies on an underground development of Piaba, with a pre-feasibility expected next year. Additional drilling is planned to upgrade existing resources. The Piaba deposit has been traced over 4 km along the Aurizona shear zone and drilled down to a depth of roughly 600 metres. It remains open at depth and along strike.

The Aurizona open-pit mine achieved commercial production in July 2019. The company’s most recent production guidance for the asset this year was 115,000 oz. to 125,000 oz. gold at AISCs of US$1,100 to US$1,150 per ounce. These numbers do not include the potential impacts of COVID-19.

Equinox Gold’s shares closed at $12.71, up 26¢, or 2.1%, on a trading volume of 1.5 million shares. In the last year, the company has traded within a range of $5.10 and $13.53 per share.

Kerry Smith, a mining analyst at Haywood Securities, has a buy rating on the stock and a target price of $15 per share.

“The PEA outlines a decent underground project; however, a considerable amount of drilling is required to improve the confidence of the underground resource and development is still several years away,” he wrote in a research note today. “In our opinion, this mine will continue to grow in mine life, both from the open pit and underground.”

— This article first appeared in our sister publication, Canadian Mining Journal.