Richmont Mines (TSX: RIC; NYSE-MKT: RIC) is reaping the rewards of its extensive drilling campaigns last year, with a combined 187% increase in reserves at its two gold mines: Island Gold in Ontario and Beaufor in Quebec.
Reserves at its flagship Island Gold mine surged 206% to 561,700 oz. gold, net of depletion, and grade jumped 29% to 8.26 grams gold per tonne.
The increase came from the company converting nearly 80% of the resources from Island Gold’s Lower C zone, included in the 2015 preliminary economic assessment (PEA), to reserves. “We now have more than seven years of mine life based on reserves ahead of us, along with significant exploration potential both laterally and at depth,” Richmont’s CEO Renaud Adams said in a release. (The PEA considered a phased approach for mining deeper resources at Island Gold, with Phase 1 developing and extracting resources from 450 to 860 metres deep.)
Reserves at Island Gold grew 378,000 oz. — after removing 55,000 oz. production — over 2014’s reserves of 183,750 oz., with most of the ounces sitting below 400 metres. Tonnes increased to 2.1 million, compared to 895,000 in 2014.
This year, Richmont plans to complete the underground drill program at Island Gold that it started in late 2015, with the goal of adding more near-mine resources. It notes the lateral extension and deep directional drilling programs are ongoing, with the aim of finding the deposit’s potential to the east and west, as well as at depth below the 1,000-metre level.
Mackie Research analyst Ryan Hanley notes the reserve growth “significantly increases” his confidence in the asset, primarily at depth, as it “continues to look more and more like an iceberg.” He says the firm will “have success in expanding and exploiting mineralization at depth.”
In Quebec, reserves at the Beaufor mine grew 95% to 63,850 oz., while grade slipped 7% to 6.57 grams gold. Tonnes more than doubled to 302,100. In total, drilling last year at Beaufor added 31,000 oz. to reserves, after removing 26,000 oz. production. This will extend mine life by more than two years.
Richmont notes that most of the reserve increase at Beaufor last year came from upgrading inferred resources at the Q zone. Drilling this year will develop the Q zone and extend the resource block laterally and at depth.
Hanley says Beaufor could “grow production beyond our projected 26,000 oz. a year, given its growing reserve base.” He adds that the Camflo mill, 50 km away, has gained capacity, as operations at the Monique mine have ended.
Combined, the company’s total reserves grew 187% to 625,550 oz., from 2.4 million tonnes averaging 8.05 grams gold. Grade is up 25% over 2014.
The reserves assume C$1,300 per oz. gold, a C$1.2037 to US$1 exchange rate and cut-off gold grade of 4 grams for Island Gold, and 4.31 to 6.04 grams at Beaufor.
Richmont shares closed Feb. 10 up 4.5% at $6.09, after slipping nearly 2% a day earlier, despite the reserve increase. Hanley has boosted his $6 target to $7, with a “buy” on the stock.
In mid-January, Richmont reported 2015 production of 98,301 oz., beating the upper end of its revised estimate of 95,000 oz. Island Gold delivered 55,040 oz. — 5,000 more ounces than guided. The Beaufor and Monique mines produced 26,411 oz. and 16,580 oz., meeting their guidance.
This is pretty good news for the Island Gold Camp