Lupaka Gold’s (TSX-V: LPK) Invicta Gold Project is on the brink of production, set to become Peru’s next producing gold mine.
However, everything is not going to plan…for the better.
What has been quietly observed is that (1) the grades are coming in higher than the PEA and (2) the company is already making plans to increase production above the PEA throughout rate of 350 tpd. All this means higher levels of production and cash flow once the actual mining commences later this year.
Recent underground sampling of mineralization is revealing an asset that offers more than originally outlined in the company’s April 2018 Preliminary Economic Assessment (“PEA”) which gives investors additional upside for any increases in mine output, improvement of grade and additional ounces to the overall resource.
The April 2018 PEA for the Invicta Mine outlined a mineral resource of 3 million tonnes of Indicated Mineral Resources at 5.78 grams per tonne (“g/t”) gold equivalent (“AuEq”) ounces using a 3.5-g/t cut-off grade (“COG”), and 600,000 tonnes of Inferred Mineral Resources at 5.49 g/t AuEq.
Within that resource the Company has a PEA that outlines an initial 6-year mine life that will produce produce a total of 669,813 tonnes of mineralized material processing 350 tonnes per day (“tpd”) at an average grade of 8.6 g/t Au-Eq. Lupaka’s grades included estimated metallurgical recoveries, and the true grade will likely be even higher than 8.5 g/t AuEq.
Just to highlight, with an all in sustaining cost (“ASIC”) of $575 per gold ounce equivalent, Lupaka Gold will be one of the lowest cost junior producers.
Source: AuCu Consulting, Ron Stewart (@RonStew12139302)
As part of the development work to put Invicta into production, Lupaka has been conducting channel sampling every 5 metres on all workings during development.
The results have demonstrated continuity of the high grade mineralization and additional potential that the Aetnea vein hosts.
In March 2018, the company released preliminary sample results:
In June, Lupaka released further results from a underground sampling program on the newly developed 3430 production sublevel.
The company provided additional results in July:
In addition to the sampling, development and rehabilitation of the Invicta mine has provided ~6,500 tonnes of mineralized material from the 3400 Level and when sampled on surface returned an average grade of 7.21 g/t AuEq.
Grade consistency is always a problem with mining. However, it is appearing that the Invicta PEA outlined a muted gold grade on a smaller area of the known mineralization which does not highlight the potential for higher grade zones and the prospectivity of the area.
Higher grades could improve the bottom line as mining proceeds through the Aetnea vein and into the other zones around the current area of operational focus.
Past exploration at the Invicta mine property indicates that the property has considerable potential for mineral resource expansion through exploration.
Structural studies, geophysical and geochemical work conducted to date strongly suggest the potential for mineral resource expansion along existing mineralized structures.
Past sampling around Invicta revealed the exploration potential with many areas reporting grades greater than 6 g/t AuEq. mine
All in all, the focus on a smaller area for the PEA and initial mine plan reveals that the company’s plan has been to bring production online with a well defined resource with the Aetnea vein through underground mining with minimal capital expenditures, rather than trying to finance and build a large scale operation off the back.
With the commencement of limited toll mining in September, and the beginning of full scale production hopefully in October, Lupaka will have the necessary cash flow to conduct exploration and prove up more ounces in the ground and significantly alter the assumptions of the April 2018 PEA to extend the life of mine.
The next milestone is the final mining exploitation licence, which requires an inspection by the Peruvian Ministry of Mines and Energy.
The inspection will be performed before the end of October and upon receipt of the exploitation licence, the company will have the go ahead to produce at a rate of 400 tonnes per day, or 12,000 tonnes per month.
However, with the permit to operate at 400 tpd, the company could see its potential production increase by 14% from the 350 tpd production assumption outlined in the PEA, boosting the project’s cash flow.
Currently, shares in Lupaka gold are trading near year-lows which discounts a years’ worth of work and development that has improved access to the mine, defined a PEA, divestment of non primary assets, cash flow from initial toll mining and on the cusp of full scale mining.
The company laid out a plan to bring into production the Invicta mine with a small area of operational focus and a humble gold grade in comparison to recent sampling.
The plan is working and it is starting to reveal that there is more to the story than initially outlined…a good thing for investors.
*The author of this article was compensated for the creation of this article in cash. The author picked up shares in the public market, ranging from prices of 14 cents to 20 cents over the past year. This article is meant to serve informational and marketing purposes only and not a technical report and does not constitute a buy recommendation. As always, please do your own diligence.
*The Mineral Resource Statement for the Invicta Project is tabulated to a cut-off grade of 3.0 g/t Au-Eq. Cut-off grades are based on a price of US$1,250 per ounce of gold, US$17.00 per ounce of silver, US$3.00 per pound of copper, US$1.05 per pound of lead and US$1.20 per pound of zinc. The equivalent gold calculation assumes mill recoveries of 85 percent for gold, 80 percent for silver, 82 percent for copper and lead and 77 percent for zinc
MiningFeeds previously wrote about Bonterra Resources (TSX-V: BTR) and its Gladiator Gold Project in Quebec. The company has steadily advanced through an extensive resource development program expand and define its geological resource model for an updated 43-101 Mineral Resource technical report that will likely prove to be significantly larger than its dated 2012 resource estimate.
In 2012, using a 4 g/t Au cut-off grade and comprised of approximately 15,600 meters of drilling, the Gladiator Gold Deposit contained an inferred resource of 905,000 tonnes, grading 9.37 g/t Au for 273,000 ounces of gold. On average, 90% of operating mines have a grade of less than 8 g/t gold. This ranks Gladiator in the top 10% of the world, when discussing the grade nature of the mineralization. The company has invested significantly since 2015 to expand this resource in the Abitibi Gold Belt, known as one of the world’s most prolific gold belts.
Bonterra has continued to drive shareholder value over the past three years by focusing on putting shareholder dollars in the ground and completing over 100,000 meters since 2016, most recently by continuing drilling through an infill/definition winter camp drill program. Bonterra’s share performance has beat Gold, TSX Venture Index, TSX Index and even the GDXJ Index, which tracks all miners:
Drilling has delivered recent headlines such as:
This work is part of the company’s 70,000-metre drill program planned for 2018 and has consistently intersected gold mineralization in every hole, and is clearly proving up the company’s deposit in Quebec. There will be more results for an updated resource
Dale Ginn, VP Exploration for Bonterra Resources, stated:
“Initial results from the winter drilling campaign continue to highlight the predictability of the mineralized zones and the validity of the geological model. The positive results from the large diameter drilling will contribute to the success of the preliminary metallurgical work at the deposit. Bonterra continues to successfully execute its aggressive resource development program with seven active drills on site, and five drills at work on the Gladiator Gold Deposit.”
The company is clearly improving its confidence in the resource, and highlighting to the market how predictable the zones have become for targeting drilling to intersect gold mineralization. Another important milestone was to demonstrate that the resource they are drilling has the potential to be economic, which they have done with a recent press release that states the mineralization found at Gladiator is 99% recoverable. By industry standards, their rock is as clean as it gets, and indicates the quality of the deposit in regards to extraction of the gold, and how they stand well above their peers in regards to metallurgical extraction.
Peter Ball, the vice president of operations for Bonterra recently gave an interview to outline these results.
The market is slowly realizing the robust nature of the project, and potential economic nature of the rock when highlighting the high grade resource and metallurgical recovery.
Bonterra is likely pushing towards to a significant re-rate upwards to align with other more advanced peers, and thus the current valuation of the share price represents an opportunity for investors.
Bonterra Resources Inc. (TSX-V: BTR, OTCQX: BONXF, FSE: 9BR1)
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|Lincoln Minerals Limited