Post by
TheRock07 on Sep 10, 2010 6:28am
V Lake Starter Pit
V Lake is slated for open pit mining.
Its my opinion that they would like to have 1.5 million oz in their 43-101 before proceeding to production.
Such a resource size would be capable of producing 100,000 oz per year for a considerable number of years.
This level of prodution is very attractive to suitors, as it is substantial enough to add a growth premium to their production profile.
However, given the high grades, VL might be placed into open pit production at lower levels, say 50,000 oz per year.
It is clear that the starter pit will begin in the high grade heart of gold which is a 200 metre (m) zone of continuous high grade mineralization (greater than 15 grams per tonne (g/t) gold in 15 drill holes that dips from near surface to a depth of 175m.
As I stated earlier, it doesnt take much tonnage at grades above 15 gms/ton to massively increase the gold estimate
A quick calculation shows at least 750,000 tons containing at least 300,000 oz of gold.
Imagine the economics of the starter open pit at these grades when typical open pit grades are less than 1.5 gms/ton.
Post-stripping, open pit mining costs tend to fall in the $20 to $30 per ton range.
The cost of mining is independent of grade , which means that cash costs will be inversely propotional to grade.
The POG is currently about $40 per gm and prelim VL mett studies show that at least 90 % of VL gold is recoverable ( recoveries are proportional to grade...another benefit of a higher grade ).
In other words, the starter pit will be grossing over $500 per ton mined, at a cash cost less than $30 per ton.
In standard terms, thats a cash cost of about $75 per oz.
If they can squeeze 200,000 oz out of this high grade pit ( it is still expanding ) ,then total cash flow would be in excess of $200 million..........plenty to quickly pay off construcion capex and flush the companies coffers.
Initial High-grading is typical of open pits , and obviously will be the case here.
The gist of these illustrative calculations is to show that VL's feasability study is going to have superb economic indices that will place it in the top 25 % of its class.
A scoping study ( PEA ) will likley be done, immediately after the 43-101 is released,as they already have estimates of mett parameters.
The IRR is likley going to be near 100 % , with payback in less than 2 years.
In other words, an asset worth owning .......and coveting.
Which is why we will be getting some early look-overs....