Strong PEA Results at Chesapeake Gold’s Metates ProjectBy Lorenzo Núñez | Tue, 07/27/2021 - 09:34
Chesapeake Gold reported positive results of the Preliminary Economic Assessment (PEA) for the Phase 1 mine plan of the Metates gold-silver project in Durango, Mexico. Phase 1 evaluates the initial development of Metates as a low cost, scalable heap-leach operation. The PEA demonstrates robust project economics with optionality for expansion into a significantly larger operation.
The PEA demonstrates strong financial performance and rapid capital payback developing Metates as a sulphide heap leach operation, as reported by the company’s press release. The site’s simplified process flowsheet, compact footprint and proximity to key infrastructure contribute to the project’s low initial capital cost. The PEA forecasts early cash flow generation which supports future expansions that can be developed by the company. Excellent upside optionality exists to scale up future production to potentially take advantage of the entire resource.
The highlights the first PEA phase was a compelling project economics, with a Pre-tax Net Present Value of US$1.14 billion and 35 percent discount rate at US$1,600 per ounce gold and US$22 per ounce silver at a 5 percent discount rate, over a 31-year mine life (LOM). In addition, production metrics were set at an average annual production of over 110,000 ounces of gold and 2.5 million ounces of silver during the first 15 years. All-in sustaining cost of US$748 per gold ounce with a low stripping ratio of 2.2:1. Significant cash flow was also identified in this phase, with an average annual pre-tax free cash flow of US$113 million in the first 15 years, and cumulatively US$2.7 billion LOM. The PEA also contemplates an initial capital cost of US$359 million, including US$64 million in contingency costs, with a payback of two and a half years.
Alan Pangbourne, CEO stated, “the Metates PEA is a key milestone towards Chesapeake’s larger vision of becoming a mid-tier gold and silver producer. I would like to thank our technical team for the progress to date. We look forward to providing additional updates as we continue to de-risk and develop Metates.” Randy Reifel, Chairman added, “this PEA demonstrates Metates as large, scalable Tier 1 project with excellent economics. I believe the revised approach to Metates is a potential “game changer” for Metates and the gold mining industry at large. Alan has the track record to build Chesapeake into an innovative, successful gold producer in the coming decade”.
The Metates project is considered one of the largest and undeveloped gold and silver deposits in the world. Metates is wholly owned by Chesapeake and its proven and probable reserves are 18 Moz of gold, more than 500 Moz of silver, and more than 4 billion pounds of zinc, as reported by MBN.