Today's Update SPROTTThe cordilleras of the SW USA and northern Mexico have multiple world class CRD-style deposits, think Bingham Canyon (CRD discoveries led to the source porphyry), Penasquito and the Fresnillo district.
I-80’s latest Ruby Hill drilling at Hilltop is truly spectacular with average hit 9.6m @30.1g/t spot AuEq (Au-PbAg-Zn 41-29-23-8%, respectively), one of the largest, and highest grade new discoveries to date.
Even more impressive, this comes on the same day as Paycore’s 14.8m @19.0g/t AuEq (38-25-2-18 Au-Ag-Pb-Zn), at FAD, located 1.5km to the south of Hilltop. While mantos and CRD chimneys are common in the area, these require structures that have been elusive to find, all the more under cover. Thus, working in reverse, if I80 have clipped a new structure, the potential is for a string of pearls to evolve along it.
Whilst more speculative, given similar styles to the south at the FAD/Paycore deposit, the blue sky here is potential for multiple centres / heat sources / deposit clusters along such a trend, albeit it is too early to conclude without more drilling.
What’s clear is that this is a prolific system, potentially based on multiple events as district scale fluid-flow feeding Carlin-style, CRD, and possible porphyry source mineralization overprints earlier base metal systems. While we go into potential base metal economics later in this note, we maintain our base case estimates today, which focus on ramp up of I-80’s high grade gold sulphides, and reiterate our BUY rating and our C$4.75/sh PT based on 0.60xNAV5%-1700.
The upcoming Granite Creek MRE update (including SCPe 500-1,000koz from the new South Pacific Zone) and Ruby Hill MRE update (we expect grade to increase to ~7-8g/t from current ~6.0g/t) are major value creators for I-80 before yearend, while the major proof of concept re-rate in our view will be cash flow positive production from Granite Creek in SCPe 2H23.
The new learning is that the Ruby Hill Mill is of increased value given i) low capex gold oxides that can add 50-60kozpa, and ii) conversion to base metal flotation to process Blackjack and the potentially world class Hilltop.
Figure 1. Ruby Hill ‘Hilltop’ (A) plan map and (B) long-section showing yesterday’s results Source: I-80 Gold 15 November 2022 Page 2 ‘Hilltop’ 10m @ 78g/t AuEq in new CRD ‘jewel box’ could keep growing Highlights from follow-up drilling on recent polymetallic CRD ‘Hilltop Zone’ discovery, 400m SW of polymetallic Blackjack Zone at Ruby Hill include 10m @ 78g/t AuEq, 18.3m @ 26g/t AuEq, 20.8m @ 15.2g/t AuEq, and 0.6m @ 95g/t AuEq at spot (Au-Pb-Ag-Zn 41-29-23-8) and from ‘Hilltop Upper’. Additional ‘Hilltop Lower’ drilling hit 14.6m @ 26g/t AuEq.
The current Upper and Lower Horizon drill program has been expanded, with assays pending. Work is progressing for both an updated Ruby Hill mineral resource estimate (gold and polymetallic zones) and an initial economic study (gold only). On the teach-in call, I-80 highlighted regional magnetic survey results that suggests potential for a porphyry source at depth, and indicated that it is targeting a maiden resource for the polymetallic skarn Blackjack deposit at Ruby Hill in 1H23.
Our view: potential world class discovery; Ruby Hill Mill is a major opportunity We think today’s drilling is world class; the discovery of a high grade ‘jewel box’ is material in itself, but could get more exciting if this is part of a ‘string of high grade CRD pearls’
. Yesterday’s excellent results at Paycore’s FAD, located 1.5km is supportive of this. Big picture, this also highlights that the geological outperformance at Ruby Hill opens up low capital growth avenues for I-80 without detracting from the overall high-grade hub and spoke gold strategy. While there are no shortage of peers making sulphide discoveries in Nevada, there is a shortage of mills, making this discovery all the more material to I-80 than peers.
Wrapping some too-early numbers around today’s drilling and last weeks’ Ruby Hill CIL Mill refurb study (initially for gold oxides and then for base metal flotation), we estimate that at 200ktpa, in line with the recent Ruby Hill contemplated mill capacity for base metal flotation, yesterday’s average grades at spot could, assuming 70-80% pay-ability per metal and 70-80% recovery, yield an impressive US$990/t of payable*recoverable (70-80% payable and 70-80% recoverable) revenue per tonne of ore, driving AuEq payable 110kozpa production and US$106m FCF pa at conservative US$160/t mining costs.
Whilst grades like this may not continue in the long-term, even small tonnages could pay off capex (study estimated ~US$60m for plant conversion to flotation) in less than a year, highlighting the value of these high grade CRD discoveries.
Ultimately, further drilling is needed to substantiate size and reserve grade but the potential here is no less than a game changer, even for a company with a 15Moz Nevada resource base.
Why we like I-80
Among highest grade open pit and underground development assets in US
One of only three companies with refractory sulphide processing facilities in Nevada
Ramping up underground methodically with US$109m of cash to support
Opportunity to consolidate Nevada and western US gold projects Catalysts
2H22: Updated Granite Creek MRE, Lone Tree restart study 1H23: Updated Ruby Hill MRE including maiden resource for Blackjack 2023: Cash flow positive inflection at Granite Creek, Ruby Hill F