Site visit: West Vault Mining likens its Hasbrouck project to ‘gold in a secure vault’

West Vault Mining’s (TSXV: WVM; US-OTC: WVMDF) Hasbrouck gold project in Tonopah, Nev., stands out among the wave of gold, silver and lithium explorers sinking exploration dollars into the Tonopah Silver District. After advancing the project to a feasibility study in January, it’s now content to bide its time. 

The company compares the project to having gold stored securely in a vault – a project ready for construction, backed by favourable economics and a strategic approach, CEO Sandy McVey said on a recent site visit. 

“We know that fewer gold discoveries are being made, and more gold is being produced yearly. Time’s on our side. Patience pays,” the mining veteran says. 

With an advanced asset under its care, West Vault waits in the hope that regional consolidation will include the sale of its flagship prefeasibility study-level project for the right price. 

Situated three hours north of Las Vegas by paved road, the three hills comprising the Hasbrouck project form a series of mineralized mounds standing guard as one enters Tonopah. 

West Vault bought Hasbrouck from distressed conditions nine years ago, in line with its strategy of acquiring undervalued assets and readying them for sale when market conditions improve. 

“We bought (the Hasbrouck project) in 2014, and to date, it’s withstood deep dives by all sorts of people (including Centerra Gold),” McVey said from atop Hasbrouck Mountain, a short but exhilarating 4×4 drive up what will someday become an open pit right next to Highway 95. 

The brainchild of Peter Palmedo, chairman and president of Sun Valley Gold which owns 46% of the company, West Vault has groomed the project for as much as it’s willing to pay and put up the for-sale signs. 

A January prefeasibility study calculated an after-tax net present value (5% discount rate at US$1,790 per oz. gold) of US$206 million and an internal rate of return of 51%. 

The initial Three Hills operation will cost an estimated US$66 million (and sustaining and growth capex of US$156 million). Between the Three Hills and Hasbrouck Mountain deposits, the company has outlined potential total production of 561,000 oz. gold, or 71,000 oz. per year over eight years at all-in sustaining costs of US$701 per oz. gold, net of byproduct credits. 

The study was based on proven and probable reserves of 44 million tons grading 4.8 grams gold per ton for 753,000 oz. of metal. About 175,000 oz. gold is held in the Three Hills deposit, with 578,000 oz. gold in the Hasbrouck deposit. 

 

McVey emphasizes the project’s advanced stage. “We’ve got wet stamp drawings, we’re way beyond study levels… state, federal – fully permitted,” he said. 

At the heart of the project lies the Three Hills deposit, which requires no pre-stripping. This smaller deposit has a 0.8 to 1 stripping ratio. Employing a straightforward run-of-mine heap leach method, West Vault anticipates a recovery rate north of 80%. 

Adjacent to Three Hills, the Hasbrouck pit emerges as the project’s second phase. Though it presents a slightly higher stripping ratio of about 1.1 to 1 and necessitates crushing, the Hasbrouck pit holds a bigger promise. Operating for six years, followed by a two-year closure process. 

McVey says free cash flow will pay for the subsequent development at Hasbrouck, especially in the current market, with gold prices hovering around US$1,800 per ounce. 

Takeout candidate? 

McVey claims West Vault is significantly undervalued in the market, based on price to net asset value (P/NAV) benchmarking. 

He says West Vault’s current market capitalization of about US$46 million against its 561,000 oz. of in-situ gold equals an opportunity to acquire a quality, albeit small, project for about US$81 per ounce. 

The CEO has a somewhat unorthodox approach to maximizing value for shareholders. “People think production is how you make money. It’s not. It’s buying low and selling high,” he says. 

Theoretically, the ideal candidate has already entered the valley. Centerra Gold (TSX: CG) swooped back onto the scene in early 2022, fresh from being kicked out of Kyrgyzstan and with about US$1 billion in cash burning its pocket (and possibly making it a takeover target for the cash). The gold miner splurged on the nearby Gemfields project, buying it for US$207 million from private capital firm Waterton Nevada Resources. 

 

McVey breaks down the math: for 483,000 saleable oz., Centerra paid a total price of US$427 per oz. gold, compared with West Vault’s current theoretical acquisition value of US$81 per saleable oz., meaning it’s cheaper and would deliver more ounces than the Gemfield transaction at current prices. 

“Bear in mind, Hasbrouck also has stronger economics than Gemfield, which at US$1,300 per oz. gold delivers a 46% IRR for Hasbrouck versus 20% for Gemfield,” McVey says. 

However, Centerra may first want to get to grips with what they bought (could explain the drills visible from the roadside) at Gemfield, which they’re now busy drilling, before entertaining any further ideas of regional consolidation. While West Vault Mining avoids unnecessary drilling or exploration activities, Hasbrouck holds potential for future expansion, with indications of a high-grade feeder system warranting further exploration. 

The Three Hills resources entail 10.4 million tons indicated at 0.6 gram gold per ton for 185,000 oz gold, and the Hasbrouck deposit holds measured and indicated resources of 42 million tons grading 0.5 gram gold per ton for 651,000 oz. gold and 9 grams silver for 12.2 million ounces. 

With nearly $4 million in the bank and a four-year runway ahead, the company is prepared to wait it out because conditions must turn – eventually. 

At 88¢ per share in Toronto at press time, West Vault shares are down almost 10% over 12 months, having touched 83¢ and $1.15. It has a market capitalization of $51.1 million.