Vista doubles gold reserves at Mt. Todd

In barely five months Vista Gold (VGZ-T, VGZ-N) has doubled the gold count at its Australian Mt. Todd project with an updated prefeasibility study.

The Batman deposit at its Northern Territory-based project now contains an estimated 149.8 million reserve tonnes of 0.85 gram gold per tonne for 4.1 million contained ounces gold; up from 60 million reserve tonnes of 1.05 grams gold for 2 million oz. in the August 2010 prefeasibility study.

Measured and indicated resources remain at 190.9 million tonnes of 0.84 gram gold for 5.1 million contained ounces gold.

The new study uses a 0.4 gram gold cutoff compared to a 0.55 gram gold cutoff for the previous study, as well as an assumed gold price of US$1,000 per oz., a US$50 increase.

Along with tweaks to the assumed metrics, however, came a significant increase of the mine processing rate. The updated plan calls for a 30,000-tonne-per-day open-pit operation, up from 18,000 tonnes, which will in turn allow Vista to produce roughly 240,000 oz. gold per year, up from the previous estimate of 188,000 oz. gold.

The increased processing capacity was in turn made possible by deferring the construction of a costly tailings expansion until later in the mine’s life, with Vista instead relying at first on the remaining capacity of the current 60-million-tonne tailings pond.

The deferral means capital costs work out to about US$590 million, while sustaining capital comes in at US$260.5 million, including US$147.3 million for the new tailings pond.

The old tailings pond is a legacy from the mine Pegasus Gold built in the 1990s, which closed a year after opening due to production difficulties, and low gold prices helped lead to the eventual bankruptcy of the company.

The historic mine left paved road access to the site, a natural gas pipeline, water storage and treatment facilities and other infrastructure. Vista plans to make use of the gas pipeline by building a gas-fired power plant that will both power the mine and continue to operate after the mine is decommissioned.

Mine closure is, however, also put off with the latest update with Vista having stretched the expected mine life from nine to 14 years. In the life of the operation, Vista expects to produce 3.4 million oz. gold from the deposit at a total average cash production cost of an estimated US$530 per oz. gold.

The economics work out to a 13.9% pretax internal rate of return (IRR) and a net present value (NPV) of US$385 million using a 5% discount. After tax, the IRR is 10.7% and the NPV, again with a 5% discount, is US$184.3 million.

Vista Gold bought the mine in 2006 for the bargain price of roughly US$2 million from the Northern Territory government, which had been saddled with costly reclamation liabilities when Pegasus went under. Last November, the government renewed an agreement for five years that allows Vista to develop and manage the site.

When announcing the renewed agreement, the government also emphasized that projects in the Northern Territory now require a 100% rehabilitation security bond. Pegasus had only provided a US$900,000 bond.

The original mine ran into trouble not only because of the low gold price, but also because the ore at Batman is especially hard. Vista is planning a four-stage crushing operation that will include primary and secondary crushing, then tertiary crushing with high-pressure grinding rolls and finally a large ball mill.

Metallurgy was also a problem due to the copper content and high cyanide use. Vista reports, however, that it has achieved recoveries of 82% in test samples through a combination of leaching and a carbon-in-pulp recovery circuit with “acceptable levels” of cyanide consumption.

The Denver-based company is also in the final permitting stage for its 143,000-oz.-per-year Concordia gold project in Baja Sur California, Mexico.

Vista’s share price climbed 68¢ over two days following the release of the study to close at $3.06 on a total of 425,000 shares traded. The company has a 52-week share price range between $1.33 and $3.59, and 46.6 million shares outstanding.