There is gold all over the Yukon. Economic gold is a whole other story.
Golden Predator’s (V.GPY) Brewery Creek mine has plenty of gold, some of it quite high grade. After all, Brewery Creek was a mine run by Viceroy Resources until the price of gold plunged to less than $300 an ounce in 2002. There is still valuable rock on the leach pad and in the ground.
The challenge for Golden Predator is to figure out how to bring Brewery Creek back into economic production. GPY, as Janet Sheriff, its CEO, points out, begins with some real advantages. There is a road. There is significant infrastructure on-site and recently GPY confirmed, “in writing” that the original permitting for the mine was still in effect. A Socio-Economic Accord and Council Resolution with Tr’ondek Hwech’in supporting resumption of mineral production is in place.
All of which is a good start for a phased approach to restarting the mine. The first phase is restarting the heap leach operation. The key to this restart is that Viceroy had placed “run of mine” rock on its leach pads. GPY estimates that this means there is likely to be 100,000 ounces of recoverable gold left in that rock. “We need to reprocess the heap which means crushing the rock as it was never crushed, having been put directly on the pad from the blasted bench,” explained Sheriff. “We’re doing a feasibility study on the heap restart which should be done by April.”
When the feasibility study is complete, Golden Predator’s Board will make the production decision. That decision will take into account the advice and report of Kappes, Cassiday & Associates one of the world’s leading heap leach consultancies.
“We realize that we’ll have a modest rate of return during the reprocessing,” said Sheriff. “But the two or three years of reprocessing will buy us time to recommence mining. It will give us the opportunity to buy the new equipment we need to process the new material out of internally generated funds.”
Sheriff is very much aware of the difficulties in financing most potential producers let alone exploration companies. “Speculative capital has fled the mining industry over the past few years making us all that much happier that we believe we will be able to finance a very large portion of our expected modest CAPEX with debt. The debt markets are hungry for yield offering an excellent window for financing projects into production without incurring substantial dilution”
Using a phased approach, with near term revenue and a relatively modest CAPEX, sets the stage for the company to begin to mine and process new material. And with a lower CAPEX the risk of managing debt is also lowered.
“Brewery Creek is looking bigger than we anticipated,” said Sheriff. “The 2019 drilling program was designed to expand and upgrade the existing resource. We drilled outside the existing resource area and the results are exciting for us because they show there is more there than we thought. A good portion of our new drill results are oxide material which will add to our already robust resource base.”
Those new drill results were published in a press release dated February 6, 2020, and Sheriff states, “It is clear from our drilling and geological interpretation that Brewery Creek hosts larger, more continuous zones of mineralization than previously believed. Of 18 holes drilled into the Kokanee and Golden Zones, 16 encountered significant gold grades. These new results build on previous drill data confirming resource continuity along strike and resource growth potential down dip as the separate oxide resources now merge into a single larger area of gold mineralization.”
More is always good and the fact the material is oxide gold means that it should leach well.
“The recently announced 43-101 resource almost doubled in the Reserve Trend where previous mining occurred with approximately 1.2 million ounces of gold in all categories,” said Sheriff. “And it looks as if there is more towards the southern end of the property that will require additional drilling to move towards establishing a resource on it.”
At this point in our conversation, Bill Sheriff, Golden Predator’s Chairman took over the story. “There are two systems on the property: at the southern end, we have a classic alkalic porphyry which had about 100,000 ounces when it was last looked at in 2012. It is lower grade, .75 to .8 gpt but it is very consistent. It’s all oxidized to the limits of drilling (approximately 200 meters depth) and there are a lot of potentially recoverable ounces given the excellent metallurgy we have seen from that intrusive. There just hasn’t been enough drilling yet. There is no urgency as there is better grade in the other, thrust hosted, system (which is licensed for mining) which takes priority for us in terms of increasing and developing more ounces at higher grades for nearer-term production possibilities. The intrusive ounces promise to enlarge the overall project and extend its life for many years.”
“The thrust hosted system is where the earlier mining has occurred,” said Sheriff. “We have been looking at this area using different statistical techniques and different cut off grades. Using Kreiging and a lower cutoff grade expands the resource. Our original analysis used a cut off grade of .6 gpt, we changed that to .45 gpt.”
“The original analysis had quite a few different pits,” said Sheriff. “These small pits needed smaller, less efficient equipment. However, the new analysis, which does not include the holes we drilled “in between” in 2019, suggests that it may well make a lot more sense to build one larger pit That would let us use bigger, more efficient equipment. This deposit is really leveraged to gold as you can see by its rapid growth in ounces with a modest increase in gold price.”
“The 2019 holes were drilled outside the resource area and we found gold from surface in quite a few of them,” said Sheriff. “Thrusts are commonly stacked one above another and that appears to be the case at Brewery as we have identified a new horizon below the limits of previous drilling in the Kokanee Golden areas. As with previous drilling, most of the area remains open to further discovery and resource expansion”.
“Most of our drilling is shallow and finding oxide mineralization from near-surface clearly adds to the just published model. We look forward to release of all the 2019 holes and a new resource estimate in later Q2,” said Sheriff. “We continue to find similar structures and mineralization from surface along the 6km Reserve Trend”.
Brewery Creek will be a mine again. The question Golden Predator is trying to answer is how big a mine and how profitable a mine. The next few months will tell that story.