Rubicon grows Phoenix resource; feasibility underway

Rubicon Minerals (TSX: RMX; US-OTC: RBYCF) has released updated resources for its Phoenix gold project in the Red Lake gold district of northwestern Ontario, with 811,000 oz. gold in the measured and indicated category and 464,000 inferred ounces.

The update features 3.9 million measured and indicated tonnes at 6.45 grams gold per tonne with an additional 2.1 million inferred tonnes at 6.97 grams gold per tonne, which represents a global increase in tonnes as well as a modest increase in grades compared to the 2019 resource.

The growth of the measured and indicated resource is due to infill drilling completed last year. The drill program aimed at upgrading resources above the 976 metre level; the entirety of this resource class sits above this elevation.

The current measured and indicated resources are in close proximity to existing underground infrastructure.

“The expansion of the measured and indicated mineral resource estimate above 800,000 oz. has given us the confidence to begin mine planning and engineering work at the Phoenix gold project, with the goal of demonstrating the project’s commercial viability,” George Ogilvie, the company’s president and CEO, states in a news release. “We have accordingly initiated a feasibility study on the project and anticipate its completion in the second half of this year.”

Current resources are contained within the F2 zone, which covers a strike length of approximately 1,200 metres and extends down to the 1,403-metre level and remains open on strike and at depth.

The main elements of the geological and structural model for the project, developed in 2018, remain valid at depth at the F2 zone. The company has updated its structural model with a remodelling of one of the primary fault zones in the Red Lake district, which extends along the western part of the F2 zone.

The mill at Rubicon Minerals’ past-producing Phoenix gold mine in Red Lake, Ontario. Credit: Rubicon Minerals.

Rubicon expects to complete a feasibility study on the deposit in the second half of the year. Work is also ongoing at surface to upgrade the existing tailings facility, as well as to analyze tailings for paste backfill design. There is an operational hoist, camp and water treatment plant at the site.

The company sees additional upside potential from infilling and upgrading 190,000 oz. inferred resources between the 976 metre and 1,098-metre levels, which could be added to the feasibility study mine plan. Drilling at depth has started. Additional target areas have also been identified, which the company plans to drill in the future.

Last year, Rubicon released a preliminary economic assessment (PEA) for Phoenix, which outlined an underground mine producing an average of approximately 80,000 oz. gold annually at all-in sustaining costs (AISCs) of US$882 per oz. with head grades of 5.31 grams gold.

The project would feature ramp access and ore skipping from the 610-metre level, and mining would be done predominantly with bulk methods. The initial capital costs were estimated at $101 million, with an associated $135 million project net present value at a 5% discount rate and a 40.2% associated internal rate of return.

In the past, the geological understanding of the deposit was a challenge for the company. Test mining of the deposit commenced in 2015, based on a resource update issued in 2013. At the time, Rubicon skipped the feasibility stage, and the mining scenario was based on a preliminary economic assessment. After it ran into trouble with grade reconciliation, the company decided to re-analyze the deposit.

Mining was suspended by late 2015. Ogilvie stepped in as CEO in late 2016, and Rubicon started a reinterpretation of the deposit in 2017 (as a Riedel shear system). After months of validating its model against underground data, it arrived at a more continuous deposit model, which could now potentially allow extraction through bulk mining methods.

In 2018, the company extracted a 32,551 tonne bulk sample, with processing results indicating a positive reconciliation with the 2018 mineral resource estimate. The sample was mined using the bulk sublevel long hole stoping method.

Oligvie was the CEO of Kirkland Lake Gold (TSX: KL; NYSE: KL) between 2013 and 2016, where he led the operational improvement at the Macassa mine.

Andrew Mikitchook of BMO Capital Markets has an outperform rating on Rubicon, with a target price of $2.00 per share. At press time the company was trading at $1.03 per share with a 52-week range of 62¢ to $1.38.

“The updated resource extends to only the 976-metre level, with the press release indicating they are looking to infill drill to the 1,098-metre level for inclusion into the feasibility,” Mikitchook says in a research note. “This is significantly shallower than the 1,403 metres assumed in the 2019 PEA, which should suggest a reduction in sustaining capital with less vertical development scheduled.”

“As the mill is standing and operated in 2019 for test mining, the quantity of engineering required is not that significant,” he adds. “Surface feasibility work will focus on tailings, an ammonia plant, and a paste back-fill facility. Underground work will focus on scheduling mining and sustaining capital.”

Ryan Hanley of Laurentian Bank has a $2.50 target for the stock and expects a 12-18 month construction period for the project following release of the feasibility study in the second half of the year.

Hanley is of the view that “limited (or no) value has been ascribed to the Phoenix project” and adds that “aside from existing infrastructure, an updated structural interpretation, updated resource, and positive reconciliation results from trial mining have all been released”.