St Andrew says no thanks to feasibility study

St Andrew Goldfields‘ (SAS-T) goal of re-igniting mining at the former Holt and Holloway mines in northern Ontario is getting ever closer.

With a fresh technical report in hand, St Andrew says a feasibility study isn’t needed and that it’s ready to push ahead with development once financing is secured.

How a lack of a feasibility study will play out with the banks that St Andrew intends to turn to for debt financing remains to be seen, but Scott Wilson Roscoe Postle Associates, the writers of the technical report, has put its weight behind St Andrew’s position.

“The preparation of a full feasibility study is not considered to be necessary based on the level of information available and the fact that the project involves the restart of existing mines where all of the facilities have been maintained and where diamond drilling and mine development over the course of the current shutdown has advanced the level of geological knowledge and increased the amount of development in place for the exploitation of mineral reserves.” Scott Wilson RPA writes in its report.

The Holloway-Holt project draws its hyphenated name from the two historical mines the project encompasses, on opposite sides of Highway 101, east of Timmins and just west of the border with Quebec.

The Holt part of the name comes from the past producing Holt-McDermott mine that put out 1.37 million ounces of gold from 1988 to 2004.

Holloway, which sits just 1 km away from Holt, went into production in 1996 and by 2005 had turned out roughly 900,000 oz.

St. Andrew acquired the project in 2006 from Newmont Mining (NEM-N, NMC-T) for $40 million in cash and a 1% net smelter return royalty to be paid to Newmont.

The technical report estimates undiscounted cash flows of $118 million using a gold price of US$775 per oz. over the 6.5 year life of the operation. The report put the internal rate of return at a whopping 92% and pre-production capital payback of 2.3 years. Net present value was calculated with a low discount rate of 5%, and came in at $89.7 million

St Andrew says it will cost roughly $23 million to get the mine into production.

Once there, the operation is slated to turn out 88,000 oz. per year with total production cost of US$594 per oz.

Measured and indicated resources at the project — inclusive of reserves — are 4.2 million tonnes at a grading of 6.8 grams gold for 919,000 oz.

The proven and probable reserves within that estimate is 3.4 million tonnes grading 5.7 grams gold for 629,000 oz.

St Andrew has all the required permits in place, and being a recently producing mine site, the infrastructure is in good condition it says.

Such infrastructure includes underground access near each of the mining areas, an operational 3,000 tonnes per day mill, surface facilities and a tailings management facility.

To whip its balance sheet into the best possible shape so that debt financing will be easier to attain, St Andrew converted $42 million worth of its debt into equity, and plans to pay down its trades payable liability with the $20 million it is set to receive from the sale of its stock mill to Apollo Gold (APG-T).

It says it is still reviewing just how much funds it will be seeking.

When and if the financing is in place, St Andrew says it will take six month to get to commercial production.

The company currently has 311 million shares outstanding, and its share price has moved between 23 and 83 over the last 52-week period.