Northern Freegold advances flagship project with initial economic assessment

VANCOUVER – Less than four years after establishing an initial resource at its Freegold Mountain project in the Yukon, Northern Freegold Resources (NFR-V) has a positive preliminary economic analysis (PEA) for the project.

Freegold Mountain lies about 200 km northwest of Whitehorse and covers almost 200 sq. km of the Dawson Range. The road-accessible property is home to three defined deposits; two of them, known as Nucleus and Revenue, formed the basis of the PEA.

The study envisioned an open pit mine at Freegold Mountain churning through 30,000 tonnes of ore a day to produce an average of 150,000 oz. gold, 17.3 million lbs. copper, 4.2 million lbs. molybdenum, and 355,000 oz. silver annually over an 11-year mine life.

However, Northern Freegold’s president and CEO, John Burges, stressed in a conference call that this PEA is just a start.

“We believe we’ve really just scratched the surface of what this property has to offer because this really is a district-scale anomaly,” Burges said. “The property remains very lightly drilled, both deposits remain open at depth and along strike, and we have numerous mineralized showings that have not really been tested.”

With so much untested potential, Bruges and his team believe the deposits at Freegold Mountain could easily prove large enough to host a mine many times larger than the operation outlined in this initial economic study.

“In my mind we’re looking at more like a 75,000 to 100,000 tonne per day operation, in the long run,” Burges said. “We just have so many targets waiting to be drilled off. And that was Geovector’s main recommendation: drill, drill, drill.” Geovector Management is the company that prepared the Freegold Mountain PEA.

The challenge in following that recommendation is money. Northern Freegold had just $1.5 million in working capital available as of September 30 and the company’s share price has been languishing in the 10 to 20¢ range for almost a year. Both of those factors make it difficult to advance a project quickly.

“Frankly what we will be able to do this year will depend on the market,” said Burges. “It would be irresponsible to raise a bunch of money and go do a huge amount of drilling, if I’m raising money at a share price that reflects a valuation of just $4 per ounce of gold in the ground and my discovery costs at $3 per ounce.

“That’s not accretive,” he continued. “We have one of the largest resources in the Yukon, so adding ounces for the sake of adding ounces – if you’re not getting valuation improvements – doesn’t make sense. That being said, there are a lot of ways we can advance the project in the next 12 months outside of diamond drilling – we have to think about how to move this project forward while keeping expenditures reasonable.”

Completing an initial, small-scale PEA that showcases the project’s current strengths is one of those ways. According to the PEA, in the mine’s first five years of operation annual gold output would exceed 200,000 oz. During that time the operation would only tap into the Nucleus deposit. Ore from Nucleus would be crushed and ground; coarse gold would be recovered via a gravity circuit.

To recover the rest of the gold as well as the copper and silver Northern Freegold plans to use a process known as SART, or sulphidization-acidification-recycle-thickening. Mineral processing specialist SGS Lakefield developed SART in conjunction with Teck Resources (TCK.B-T) as a way to recover metals without the usual hindrances that accompany leachable copper and zinc, which are present at Nucleus. SART also regenerates cyanide, which lowers costs.

In year five the Freegold Mountain mine would start to tap into the Revenue deposit. The metallurgy at Revenue is more straightforward, so Revenue ore would be processed via conventional flotation for copper and moly followed by cyanide leach for gold. Using SART on Nucleus ore and conventional processes on Revenue ore would enable life-of-mine recoveries averaging 89% for gold, 50% for silver, 80% for copper, and 79% for molybdenum.

To get the first phase of the mine built is expected to cost $500 million. Expanding the operation in year five would require another $78.6 million.

At Nucleus, in-pit resources total 52.5 million indicated tonnes grading 0.607 gram gold per tonne, 0.8 gram silver per tonne, and 0.052% copper per tonne, plus 2.7 million inferred tonnes of slightly lower grade. In-pit resources at the Revenue deposit came in at 62 million inferred tonnes averaging 0.374 gram gold, 3.18 grams silver, 0.129% copper, and 0.042% molybdenum.

Mining the two pits generates a life-of-mine strip ratio of 2 to 1.

The PEA’s base case used three-year trailing average prices for gold, copper, and silver, which came in at US$1,455 per oz. gold, US$3.65 per lb. copper, and US$27.55 per oz. silver. For molybdenum the base case used a price of US$14 per lb., slightly below the three-year trailing average.

Those inputs gave Freegold Mountain a pretax net present value of $614.8 million, using a 5% discount rate. The project as envisioned would generate a 23.4% pretax internal rate of return, which would enable payback of the initial capital in 4.2 years. 

Freegold Mountain may be in the Yukon, but it is not an isolated property. It is road accessible along a 70-km road from Carmacks, a road that will be extended and upgraded if Western Copper and Gold (WRN-T) starts building a mine at its Casino property to the west. Freegold Mountain also sits just 30 km from the Yukon electrical grid.

News of the PEA did little to Northern Freegold’s share price, which fell half a penny to close at 10¢. The company has a 52-week trading range of 7.5¢ to 29¢ and has 126 million shares outstanding.