Sabina Gold makes progress in Nunavut

Drill results from Sabina Gold & Silver’s (SBB-T) Back River project in southwestern Nunavut about 520 km northeast of Yellowknife and 50 km southeast of Xstrata Zinc Canada’s Hackett River silver-zinc project, demonstrate the high-grade and continuous nature of Back River’s Umwelt deposit, the company says.

Hole 12GSE217 returned 51.93 grams gold per tonne over 16.10 metres about 100 metres down plunge of the G2 zone — or about 700 metres below surface — while hole 12GSE214 cut 18.81 grams gold over 21.90 metres.

In other news, drilling on the company’s underexplored Boulder property about 15 km north of its Goose property at Back River has yielded encouraging results. Hole 12BRP001 returned 4.05 grams gold over 11.00 metres including 5.78 grams gold over 6.0 metres in an extensive thickness of altered and locally sulphidized iron formation. The intersection was 120 vertical metres below a 1993 historic hole that returned 3.91 grams gold over 12.15 metres.  

In addition, drilling on the George property has returned significant results from the Fold Forest area, where hole 12GRL046 intersected 5.92 grams gold over 5.00 metres including 11.04 grams gold over 1.0 metres within a broader 32.75-metre-wide interval of highly anomalous gold enriched iron formation.

Three hundred metres north of that hole, a 66.5-metre-wide zone of anomalously gold enriched iron formation including 7.37 grams gold over 2.0 metres and 5.79 grams gold over 1.0 metre was intersected in hole 12GRL047. Sabina notes that the iron formation encountered at Fold Forest “are significantly thicker than the narrow units that are common at George and coupled with the sulphide mineralization, stratigraphic orientation, strength of alteration and density of veining offer good potential for a large thick deposit to be found in the system.”

Sabina has also made some management changes and has hired Angus Campbell as vice president of exploration. Angus was a member of the Spence deposit discovery team who received the Bill Denis Award from the Prospectors and Developers Association in 1998.

Andrew Kaip of BMO Capital Markets described the impact as “potentially positive” and wrote in a research comment that “drill results in the vicinity of the proposed pit provide the opportunity to expand resource potential,” adding that results from regional exploration “demonstrate the potential to generate new discoveries within the larger Back River project area.” He also pointed out that Campbell has a successful track record in exploration “that should add depth to the SBB team.”

Kaip holds an Outperform rating on Sabina with a target price of $4.25 per share. At presstime Sabina was trading at $2.82 per share within a 52-week range of $1.66-$5.29. The junior has about 173 million shares outstanding.

Back River is about 75 km southwest of the tide water at Bathurst Inlet and is one of two of Sabina’s projects in the West Kitikmeot Region of Nunavut. It is made up of seven claim blocks of which only two — Goose and George — have been the focus of exploration.  The Goose property, which contains the Umwelt, Llama and Goose gold deposits — is about 50 km south of the George deposits.  All the deposits remain open at depth.

Sabina acquired Back River from Dundee Precious Metals (DPM-T, DPMLF-O) in 2009 and in May this year completed a preliminary economic assessment demonstrating average production of about 300,000 ounces a year over a 12.3 year mine life for total production of 3.7 million ounces beginning in late 2016 or early 2017.

The PEA envisioned a concurrent open pit and underground mining operation that would deliver material from the Llama, Umwelt, George and Goose deposits to a centralized processing facility near Umwel that would operate at a rate of 5,000 tonnes per day.

At a base case of US$1,250 per oz. gold, the project would yield a post-tax net present value of $650 million and an internal rate of return of 25% at a 5% discount rate.

The project would generate life-of-mine after-tax net cash flow of $1.1 billion on revenue of $4.6 billion with a payback in three years. Total cash costs would come in at about $542 per oz. over the life of the mine including royalties, refining and transport.

It would require pre-production capital expenditure of about $450 million and sustaining capital of about $388 million.   

At the time the PEA was released, Sabina’s president and chief executive Rob Pease noted that the high-grade and continuity of the deposits at Back River gives the company the flexibility to design and build a mid-tier gold mine “with attractive operating costs for a modest upfront capital commitment.” He also said Sabina has several financing options available to it including the possible monetization of part or all of the silver royalty it holds on Xstrata Zinc Canada’s Hackett River project.

Sabina expects to complete a prefeasibility study next year.