Tuesday 25th October 2016

Resource Clips

Levon Resources issues Mexico PEA

Resource Clips - essential news on junior gold mining and junior silver miningLevon Resources Ltd TSXV:LVN announced the completion of a preliminary economic assessment for its Cordero project in Chihuahua State, Mexico. The PEA projects a 15-year mine life for the first four stages of open-pit mining, with an internal rate of return of 19.5%. Capital costs are estimated at $646.8 million, operating costs at $13.82 per tonne, with a 5.5-year base-case payback. The estimate projects potential metal production over the 15 years of 131.16 million ounces silver, 190,000 ounces gold, 1.37 billion pounds of zinc and 1.03 billion pounds of lead. Cordero is calculated to have a pre-tax NPV of $652.6 million at a 5% discount rate.

The Cordero project has indicated resources of 164.8 million tonnes grading 22.55 g/t silver, 0.078 g/t gold, 0.41% zinc and 0.25% lead. It has inferred resources of 49 million tonnes grading 21.88 g/t silver, 0.037 g/t gold, 0.40% zinc and 0.29% lead.

President/CEO Ron Tremblay tells ResourceClips.com, “We started on the project three years ago. When we started, nobody had recognized the bulk-tonnage potential of the project. Vic Chevillon, my VP Exploration, had looked at projects like [Goldcorp's TSX:G] Peñasquito, so we recognized certain key rock types that the previous people never recognized. We started drilling, and of course we’ve come up with a rather large resource.

We have roads, transportation: anything that we need to build a mine is certainly there—Ron Tremblay

“The project is wide open—we haven’t finished drilling it off—and normally you would drill it off, then come up with the economics. But we felt we needed to start looking at them. Originally, we were just doing it for internal use, but the market was requesting it, so it became something that we would publish. So we ended up working on a smaller pit design for the time being to give us an idea of where we’re at in the first stages. We’ve just started our Phase 4, 130,000-metre drill program, so there’s an awful lot more drilling to do before we’re ever going to be in a position to actually figure out how big this thing is going to be. But we needed to put something together to show the market, investors and institutions that, yes, the economics are there, and this is what they look like for the first four stages. Ultimately, we’ll be looking at a much larger pit and a much larger mill, but we’re very happy with the way it’s come together.

“We should be having an updated resource calculation coming up in the not too distant future, which will give a better idea of where the latest round of drilling has taken us to,” Tremblay continues. “Bearing in mind that a lot of that drilling is delineation drilling—we’re trying to find the edges of the deposit—so obviously not a lot of the holes are going to hit. There will be some expansion, but we don’t know how much until we do it.

“We’re also working on the outlying exploration up in Porfida Norte—another belt 10 kilometres to the north. Some news on that should be coming out shortly. We also have the Perla area to the south. We’ve been doing some initial work down there with sampling, etc. There’s going to be more geophysics, more engineering, more drilling, and we’re just going to continue to build and expand the project.

“We’re not a mining company; we’re an exploration company. We believe that there will be enough interest out there, and certainly there has been so far. We’ve signed a number of confidentiality agreements, and all we can say is that we have quite a number of large companies that have a keen interest in our project. So we see the indications out there. We’re capable of bringing in the right people to continue to expand the project, but we don’t think ultimately that we’re going to be the ones running the mine. We think that it’s the type of thing that a major mining company probably might end up taking over.

“The infrastructure is fantastic. A lot of that will be in the PEA when it comes out—we have 45 days to have the actual document out. We have power; we have water; we have a good area for the tailings. We have roads, transportation: anything that we need to build a mine is certainly there. So from an infrastructure standpoint we’re in very good shape. We’re close to a good-sized city, Parral, which is only 35 kilometres away, and we’re only 10 kilometres off the main north-south highway. So we have good access, and we have all of the necessary ingredients to build a project without any extraordinary expenses.”

Levon is well-funded moving forward, Tremblay reports. “We’ve got just over $60 million in the bank. The program that we’re working on—the Phase 4 program—that’s a $25-million budgeted program that will probably take us sometime into 2013. So we’re in good shape. We’ve got lots of money for what we need to do, and I think we’ll be moving forward very nicely from here.

“If you look at the NPV for the base case, after taxes you’re looking at about $5 per share value, so obviously we’re undervalued,” Tremblay concludes. “We’ve just put out the news, and it takes the market and analysts time to digest this. They’ll start giving their opinion to the public, and we should start to grow. Also, we’re expecting to be upgrading our listing to the senior board—probably within two weeks. All these things will help us.”

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Ron Tremblay

by Ted Niles

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