Francisco expands at El Sauzal property — New study suggests lower capital, operating costs

Francisco Gold (FGX-V) has pulled encouraging values from diamond drilling at its El Sauzal project in Mexico’s Chihuahua state.

The junior recently drilled five stepout holes along the southwestern flank of the West zone. The target area measured 300 by 100 metres, and the drill results have expanded the zone’s resources.

Highlights are as follows:

• Hole 131 intersected 44 metres averaging 2.06 grams gold, starting at a down-hole depth of 35 metres. The hole was collared about 50 metres northwest of hole 130, which had returned 114 metres of 5.57 grams gold, including 34 metres grading 13.28 grams gold.
• Hole 132 was collared 100 metres northwest of 131 and intersected 60 metres averaging 5.68 grams gold, starting at a down-hole depth of 3 metres. This was followed by a 10-metre interval of 2.35 grams gold, starting at 95 metres down-hole.
• Hole 133 was collared 50 metres south of hole 132 and cut 45 metres averaging 3.4 grams gold, starting from the surface.
• Hole 134 was collared 50 metres southeast of hole 130 and intersected 28 metres averaging 4.15 grams gold, starting 37 metres down-hole. This included a 6-metre section that assayed 17.25 grams gold. At a depth of 84 metres down-hole, a 21-metre interval assayed 0.96 gram gold and bottomed in mineralization.
• Hole 140 was collared 30 metres southwest of hole 131 and intersected 3 metres grading 1.49 grams gold, starting from the surface. This was followed by a 16-metre interval of 0.99 gram, starting 77 metres down-hole.

  Francisco Gold also drilled two infill holes in an attempt to define the resource in the northern section of the West zone. Holes 138 and 139 were collared 150 metres northwest and north of hole 130, respectively.

• Hole 138 intersected 94 metres averaging 1.73 grams gold, starting at 38 metres down-hole.
• Hole 139 cut 142 metres averaging 4.04 grams gold, starting 45 metres down-hole. This included a 56-metre section that assayed 7.08 grams gold.

The company says both holes provided excellent correlation with surrounding drill holes and confirmed the continuity of high-grade gold mineralization.

At last estimate, El Sauzal had an indicated resource of 50.6 million tonnes averaging 2.21 grams gold per tonne, or 3.6 million contained ounces.

A capital and operating cost study by M3 Engineering & Technology of Tucson, Ariz., indicates that the deposit can be developed at costs lower than anticipated.

M3 Engineering bases its calculations on Behre Dolbear’s recoverable, diluted minable resource, pegged at 23.5 million tonnes averaging 2.98 grams gold, or 2.25 million contained ounces. (The estimate takes into account mine extraction losses and dilution rates.)

The M3 study uses a long-term gold price of US$325 per oz. and a cutoff grade of 0.72 gram gold; average gold recovery is estimated at 92.9%; annual production is set at 300,000 oz. with a waste-to-ore stripping ratio of 1.58-to-1; M3 estimates a total capital cost of US$138.8 million, compared with Behre Dolbear’s projected US$207 million; and average cash operating costs are pegged at US$85 per oz., or 12% lower than Behre Dolbear’s calculations.

Total cash operating costs (capital and operating) are estimated at US$149.50 per oz., compared with Behre Dolbear’s US$185.50 per oz.

Based on a gold price of US$325 per oz., M3 estimates a payback period of 1.2 years and an after-tax internal rate-of-return of 48%. The after-tax net present value based on a 5% discount rate is US$184 million.

Francisco credits a reduced mining fleet, more efficient processing, and lower estimates for infrastructure with bringing the costs down.