International Minerals completes PEA on Converse

At a base-case gold price of US$1,300 per oz. and US$25 per oz. for silver and throughput of 45,000 tonnes per day, an open-pit mine at International Minerals‘ (IMZ-T) Converse project in Nevada returns a pre-tax non-discounted cash flow of about US$494 million over a mine life of fourteen years, based on conceptual production of 217 million tonnes at an average grade of 0.52 gram per tonne gold and 3.9 grams silver per tonne.   

The results of the scoping study on the 100%-owned project are positive enough to advance the project to full feasibility next year, the company says. The study envisions an open-pit mine using cyanide heap leaching followed by carbon adsorption/stripping and electrowinning to produce gold/silver dore bars.

Average annual gold production at Converse is forecast to be about 160,000 ounces a year with silver production of 638,000 ounces a year; life-of-mine gold production will likely reach 2.17 million ounces of gold and 8.47 million ounces of silver.

At a 5% discount rate, pre-tax cash flow reaches US$185 million and falls to US$70 million at an 8% discount rate. The company expects average metallurgical recoveries for gold will be about    60% and 31% for silver. The strip ratio of waste rock to mineralized rock is 2.3:1.

The pre-tax internal rate of return works out to 10.5%. Total cash operating costs including refining charges are estimated to be US$745 per ounce gold (with silver as a by-product credit). Including a US$60 million contingency, initial capital required is thought to be around US$455 million.

“The study has a positive impact on our model,” Adam Graf of investment bank Dahlman Rose & Co. wrote in a research note. “While capital costs are higher than anticipated, operating costs are lower due to higher grades, lower stripping, and silver by-product recovery.” Graf has a buy rating on the stock with a target price of $8.99 per share. At presstime in Toronto International Minerals was trading at $5.97 per share within a 52-week trading range of $5.47-8.22. The company has about 120.5 million shares outstanding.

Converse has measured and indicated resources at a cut-off grade of 0.27 gram gold per tonne of 320 million tonnes at an average grade of 0.50 gram gold per tonne and 3.7 grams silver per tonne for about 5.2 million ounces of contained gold and 38.0 million ounces of silver.

Inferred resources add 31 million tonnes grading 0.51 gram gold and 3.0 grams silver for 0.5 million ounces of gold and 3.0 million ounces of silver.

Converse is in north-central Nevada in the Battle Mountain-Cortez mineralized trend, about 13 km from Newmont Mining‘s (NMC-T, NEM-N) Lone Tree processing plant and 8 km from Goldcorp‘s (G-T, GG-N) Marigold mine.

In addition to Converse, International Minerals has a 100% stake in the Goldfield project, also in Nevada, and variable interests in gold projects in Ecuador. The company also produces silver and gold from the Pallancata mine in Peru, in which it owns a 40% stake. The mine is operated by Hochschild. Last year Pallancata produced 10.1 million ounces of silver and 36,000 ounces of gold (on a 100% project basis). International Minerals also holds a 3% net smelter return royalty from Barrick Gold‘s (ABX-T, ABX-N) Ruby Hill gold mine in Nevada, which produced about 80,000 ounces of gold in 2010.

At presstime in Toronto International Minerals was trading at $5.97 per share within a 52-week trading range of $5.47-8.22. The company has about 120.5 million shares outstanding.