HALIFAX, NS (MINEWEB) - In these difficult financing days the phrase "Go big or go home"has been turned on its head for juniors. There is heightened fearamong investors that juniors in general cannot pull off or sellbig, complex mining projects. Soto assuage those fears, manyprecious metals juniors are downsizing project scope and flockingto higher grades to ensure less daunting capital cost estimates orsexier cash flow scenarios. Grade has always been King. It justhappens that as financing options go famine, King Grade turns outto be a tyrant. |
There are different shades of the race to make mining projects morepalatable. For Extorre Gold Mines (TSX: XG) even a modest-sizedhigh-grade project looks to be worth making yet more modest inscale and even higher in grade. Extorre already has top notchgrades at its Cerro Moro project in Argentina, with 1.35 millionounces gold equivalent @ 7.4 g/t gold and 498 g/t silver inindicated resources. Not so long ago Extorre figured Cerro Morowould make a fine project at 1,300 tonnes per day with capitalcosts around $207 million.
But this week Extorre made it known that it was looking at asmaller, higher grade option for Cerro Moro that would cost around$100 million less to build, initially, and operate at 600 tonnesper day. Ramp up to higher production rates would then follow. Toscale back capital costs, Extorre CEO Trevor Mulroney reasoned, "isan important consideration given the state of current capitalmarkets." And where a junior has both high and low grade projects, the formeroften wins out. Late last year Sabina Gold & Silver (TSX: SBB)offloaded its Hackett River zinc-silver project, selling it toXstrata for C$50 million (while retaining sizeable productionroyalties), to focus on its more manageable Back River goldproject, both of which are in the Canadian Arctic.
Back River isno fruitfly - Sabina sees it as a 300,000 ounce per year gold mine- but in comparison, Hackett River is a giant, with estimatedcapital costs in the billion dollar range. In a similar vein, Pretium Resources (TSX: PVG) has put its stockin the Brucejack gold project. Brucejack is a stone's throw fromPretium's Snowfield project, which resource wise is anover-heavy-weight comprising 26 million ounces gold in resources. Yet Snowfield bows to Brucejack as far as grade goes - 5 millionounces indicated at 17.3 g/t gold and 10 million ounces inferred @25.5 g/t Au. Pretium has, for the time being, placed its betsthere.
Even those whose chief projects are to remain bulky, high gradefactors moreso than ever in exploration. Next door to Pretium, forinstance, Seabridge Gold (TSX: SEA) operates the KSM gold project,which is contiguous and even bigger than Pretium's Snowfield. KSMholds 38 million ounces gold @ 0.55 g/t and 10 billion poundscopper @ 0.21 percent in resources. Though KSM as a whole iswithout a doubt Seabridge's chief focus, it also recently said itwould start to explore for a high grade core, the type which hasbeen found at other similar mega deposits such as Bingham Canyonand Grasberg.
To test the high-grade theory Seabridge is drilling11 deep holes at KSM. Or there is Lumina Copper (TSX: LCC) and its billion-tonne TacaTaca copper-gold porphyry in Chile where it has started toemphasize a near surface high grade zone. This might, Luminareasons, make a fair starter pit, which could then, presumably,accelerate cash flow and pay back on capital costs were the projectto be built. Similarly Exeter Resource (TSX and Amex: XRA) is alsolooking at initially mining a gold ‘rich' oxide cap atrelatively low capital cost at its massive Caspiche gold/copperporphyry project in Chile's Maricunga region.
In going after grade the hope for juniors, in some of these cases,is that banks and markets will be more liable to bite on a smaller- if potentially tastier - morsel. As well, in a junior gold marketwhere a million or two ounces gold in resources seems increasinglycommon, grade looks to be an important way to differentiate oneselffrom the competition. One risk in sacrificing size for grade,however, is that a junior may diminish its chances for takeover bymaking a project seem less sensible for intermediates or majors.Big producers may be hungry for growth, but they are also pickyeaters. It has proven a difficult palate for juniors to please. SUBSCRIBE to Mineweb.com's free daily newsletter now.
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