Saturday 22nd October 2016

Resource Clips

Economy of size

Deer Horn Metals reaches PEA with B.C. gold, silver and tellurium

by Greg Klein

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It would be a small mine but a nano-cap company has big hopes for a gold-silver-tellurium project in west-central British Columbia. On March 13 Deer Horn Metals TSXV:DHM released a preliminary economic assessment for a 74,000-tonne-per-annum operation that would run six months a year. The modest size offers a number of advantages in permitting, financing and garnering community support, the company believes.

Deer Horn Metals hits PEA with B.C. gold, silver and tellurium

Deer Horn Metals based its PEA on about 450 metres of a
2.4-kilometre vein system 36 klicks south of the Huckleberry mine.

The Deer Horn project’s base case, using three-year metal price trailing averages and a 5% discount rate, estimates a net present value of $39.5 million and a 32% internal rate of return. Initial capital costs are projected at $27.8 million with payback in 2.4 years. Over a 14-year lifespan the open pit would produce an estimated total of 67,000 ounces gold, 2.11 million ounces silver and 63,000 kilograms tellurium.

The project would include a conventional flotation mill producing a combined gold-silver-tellurium concentrate.

Apart from the base case, the PEA offers separate numbers projected on recent metal prices, resulting in a $49.3-million NPV, 38% IRR and a 2.2-year payback.

The rugged region makes infrastructure an obvious challenge. The capex includes the cost of upgrading an eight-kilometre road from the mine site to a lake. From there, barge traffic would connect with other roads, including a route to Imperial Metals’ TSX:III Huckleberry mine.

The report is based on an April 2012 resource update that used a cutoff of 1 gram per tonne gold, showing:

  • an indicated category of 414,000 tonnes averaging 5.12 g/t gold, 157.5 g/t silver and 160 g/t tellurium for 68,000 ounces gold, 2.1 million ounces silver and 66,000 kilograms tellurium
  • an inferred category of 197,000 tonnes averaging 5.04 g/t gold, 146.5 g/t silver and 137 g/t tellurium for 32,000 ounces gold, 930,000 ounces silver and 27,000 kilograms tellurium.

The update marked the first such 43-101 resource “as far as we know,” Deer Horn chairman Tony Fogarassy tells ResourceClips. “If there’s a company out there with a tellurium resource estimate, we haven’t seen it.”

Eastmain Resources TSX:ER, for example, has been reporting tellurium drill results from its Clearwater (Eau Claire) property in Quebec’s James Bay region. But that project’s October 2012 resource update limited itself to gold.

As for the tellurium market, “an oversupply has existed from late 2011 but it’s expected to get more balanced by the end of this year,” Fogarassy says. “That projection was made about a year ago by First Solar [FSLR ], a multi-billion-dollar manufacturer of solar panels, which are an important use for tellurium…. By the time we could build a mine we’d anticipate the tellurium market to improve.”

He adds, “It’s a very specific element that’s used in phase change technology [for CDs and DVDs], computer chips and appliances, as well as the solar panel sector.”

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