Treasury Moves Toward Feasibility in Ontario
By Greg Klein
It began as a case of fragmented ownership, explains Treasury Metals President/CEO Martin Walter. Teck Resources made the discovery in the early 1990s while exploring Ontario’s Kenora Mining District. Corona Gold came in as a JV partner. Then Laramide Resources staked the down-dip portion of the project. “Corona Gold and Laramide decided to put both parts of the project together, and that’s what constitutes Treasury Metals today,” Walter says. And, as if completing an Old Testament genealogy, Treasury begat Goliath.
The Goliath Gold Project, that is. Once the properties were assembled into a single 49-square-kilometre entity, Treasury began drilling in earnest. A resource estimate came out in 2009 and a PEA in 2010. An updated resource is scheduled for November with full feasibility to follow.
Despite a mining history dating to the 19th century, the Kenora Mining District remains underexplored, the company maintains. Walter calls the local infrastructure “perfect—probably among the best in the world.”
Goliath’s 2009 43-101 estimated 3.4 million tonnes grading 2.5 grams per tonne for 270,000 gold ounces indicated and 10.6 million tonnes grading 2.7 g/t for 930,000 ounces inferred.
Based on that resource and a gold price of $1,200 per ounce, the July 2010 PEA projected a combined open-pit/underground operation with an initial CAPEX of $76 million, an after-tax net present value at 5% of $91 million and a 43% internal rate of return.
Goliath assays released August 26 included 8.1 g/t gold over 6.4 metres (including 11.6 g/t over 4.4 metres), 3.1 g/t over 13.4 metres (including 6.2 g/t over 3.7 metres), 2.3 g/t over 13.5 metres (including 4.4 g/t over 3.6 metres) and 2.9 g/t over 10.5 metres (including 8.2 g/t over 2.6 metres). On August 30 Treasury released one additional result: 22.3 g/t over 6 metres.
“We still have two machines turning on site,” Walter reports. “We started off talking about a program of 20,000 metres. But the results have been so encouraging, our knowledge of the deposit has increased so much and the targeting is getting much better, so we’re starting to really understand the geometry of the ore body. Because of that, the program has just been ongoing. Now we’re touching 45,000 to 50,000 metres. There was some drilling late last year too, so we’ll have something like 60,000 or 65,000 metres to add to the resource.”
The updated estimate is scheduled for early November, with feasibility beginning late this year or 1Q 2012.
Walter also hopes to get an advance exploration permit by January. “When Teck had the project they actually put a portal and a decline into the footwall of the project, down to 75 metres. We need to get that permit, reopen the decline and extend it down to 400 metres. That’s going to be a big part of next year.”
Last July the company finished a heli-borne EM survey over Goliath and Goldcliff, Treasury’s early-stage project 40 kilometres away. “We’re expecting those results to come in very shortly,” Walter says. “That will further drive exploration on both properties.”
Everything is looking positive and, as long as we keep up the good work, we’ll make that decision in the next eight to 12 months. And yes, the plan is to put it into production ourselves —Martin Walter
Although Goliath is the company’s flagship, negotiations are underway to pick up another gold property that’s closer to production. Pico Machay in Peru could open as early as late 2012. A simple open-pit dump-leach operation, it would require a very low CAPEX of $15 million to $20 million, Walter says. Once in production, it’s projected to produce 50,000 gold ounces a year. Negotiations with Pan American Silver Corp include Treasury issuing Pan Am 11.5 million common shares, paying US$21 million and turning over Treasury’s 3% NSR from Goldgroup’s Cerro Colorado Gold Project in Mexico.
In early August, Treasury filed a preliminary prospectus for a $16-million share offering to help finance the deal. On August 31, the two parties extended the closing date to September 21, their second extension since July 31.
Pico Machay became Pan Am property in 2009 when the company bought Aquiline Resources. Walter, Treasury chairman Marc Henderson and CFO Dennis Gibson are all former Aquiline alumni—hence their interest.
“Over the past six to eight years we’ve been involved in all the drilling, all the metallurgy and all the engineering work that has been completed on that project. So we know it very, very well,” Walter says.
Pico Machay has a 2011 resource estimate of 10.6 million tonnes grading 0.78 g/t for 270,000 gold ounces measured and indicated and 23.9 million tonnes grading 0.58 g/t for 450,000 ounces inferred.
“We want to put that into production and use the cash flow to further the development of Goliath,” Walter says.
As for Peru’s mining outlook, “I think it’s business as usual. The new government [of President Ollanta Humala] has given out positive signs that the mining industry will continue as it did under the previous government. There may be some minor changes, but nothing earth shattering.”
Back to Goliath, “We’re still probably about eight to 12 months from a production decision,” Walter says. “Everything is looking positive and, as long as we keep up the good work, we’ll make that decision in the next eight to 12 months. And yes, the plan is to put it into production ourselves.”
At press time Treasury had 47.71 million shares trading at $1.11 each for a $53.9 million market cap. About 54% of shares are held by retail, 35% by institutions and 11% by management. Top shareholders are Laramide and Corona with 11% each.