Chesapeake says Metates PEA boasts NPV of $1.1 billion
(Kitco News) - Chesapeake Gold (TSXV: CKG) today reported positive results of the preliminary economic assessment ("PEA") for the Phase 1 mine plan of the Metates open pit heap leach gold-silver project in Durango, Mexico.
According to a press-release, the project’s pre-tax NPV is C$1.43 billion (US$1.14 billion) and IRR is 35% at $1,600 per ounce gold and $22 per ounce silver at a 5% discount rate, over a 31-year mine life ("LOM").
The PEA envisages an average annual production of over 110,000 ounces of gold and 2.5 million ounces of silver during the first 15 years, with all-in sustaining cost of $748 per gold ounce and LOM low stripping ratio of 2.2:1.
An average annual pre-tax free cash flow is $113 million in the first 15 years, and cumulatively $2.7 billion LOM. The PEA contemplates an initial capital cost of $359 million, including $64 million in contingency costs. Payback is 2.5 years.
The company said that Metates is scalable operation and that Phase 1 15,000 tpd mine is expandable to 30,000 tpd, to bring production forward and reduce the 31-year LOM. The PEA only focuses on the higher-grade intrusive hosted portion of the Metates orebody, which represents less than 20% of the total mineral resource.
The company added that the PEA demonstrates strong financial performance and rapid capital payback developing Metates as a sulphide heap leach operation with excellent upside optionality. The site's simplified process flowsheet, compact footprint and proximity to key infrastructure contribute to the project's low initial capital cost.
Chesapeake's flagship asset is the Metates project located in Durango State, Mexico. Metates hosts one of the largest undeveloped gold-silver-zinc deposits in the Americas with over 20 million ounces of gold and over 550 million ounces of silver. Chesapeake also has developed an organic pipeline of satellite exploration properties strategically located near Metates. In addition, the company owns 74% of Gunpoint Exploration which owns the Talapoosa gold project in Nevada.