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New PEA Boasts Strong Economics for Gold Project

Jeff Nielson Jeff Nielson, Stockhouse
0 Comments| November 16, 2018

Click to enlargeWhile precious metals markets languish, many experienced mining investors are now taking a closer look at gold mining companies. To new mining investors, this may seem like a disconnect.

The reality is that the gold sector is more than simply overdue for its next rally. The depressed conditions that have persisted since 2011 are getting increasingly similar to pre-2000 – just before gold began an epic bull market run that extended for more than a decade.

For mining investors looking for a strong project (and excellent value proposition), TriStar Gold Inc. (TSX: V.TSG, OTCQB: TSGZF, Forum) is a name in the news. TSG has been rapidly advancing its Castelo de Sonhos Project in Brazil. What’s new is that on November 16, 2018, the Company released its first preliminary economic assessment (PEA) for this Project.

There are several highlights from this report that will catch the eye of investors:

  • IRR of 51% (pre-tax)
  • Projected 160,000 ounces Au production per year over first 4 years
  • Cash costs of US$660 per ounce
  • NPV of US$319 million (pre-tax, 5% discount rate)

The PEA is based upon life-of-mine recoverable ounces of 1.1 million ounces of gold. However, Stockhouse investors who have been following coverage of this Company will expect that number to rise over time. In Stockhouse’s most recent feature on TriStar (September 18, 2018), readers were alerted to the growth in resources at Castelo de Sonhos with TSG’s latest resource estimate.

Indicated: 0.7 million ounces @ 1.2 g/t Au
Inferred: 1.3 million ounces @ 1.0 g/t Au

In that article, CEO Nick Appleyard noted that this represents “over 600% growth in mineral resources over the last 2 years.” Fast development and efficient development, with these ounces-in-the-ground identified at a discovery cost of US$4.75 per ounce. In previous conversations with Stockhouse Editorial, management has made it clear that they see considerable additional potential to add to this multi-million ounce deposit — either by expanding the currently defined resource or establishing additional mineralized zones.

This leads back to the economics from the PEA. The report estimates initial capital costs to go to production of US$184 million. The life of mine is projected to be 9.4 years, but (as previously noted) this would be expected to rise as TSG continues to advance exploration at Castelo de Sonhos.

CEO Appleyard framed this news for mining investors:

“With payback in less than 2 years and average production of nearly 160,000 ounces per year for the first 4 years, the remarkable potential of this project is coming into focus. We still have drilling to do aimed at increasing the mineral resource still further, which we intend to carry out in 2019.”

For investors looking even further back in this story, the current management team in place inspires confidence. Originally approached by the former management team to invest in this Company, Nick Appleyard (and team) took a hard look at Castelo de Sonhos.

(click to enlarge)

After carefully reviewing all the data available, this group was so enthused that not only did they commit $1.3 million of their own capital, they pushed hard to take over the reins on operations.

That enthusiasm was based upon a new geological model that the current management team developed for Castelo de Sonhos. Since that time (December 2015), the Company has delivered.

Management promised resource growth. Investors got a 600% increase in two years.
Management promised to undertake a PEA to demonstrate the potential for commercial mining operations. That report has now also been delivered.

It is still speculative as to when the Next Rally for the gold sector will commence. For this reason, mining investors will gravitate toward projects (and companies) that provide the fewest question marks in terms of operations.

For both current shareholders and new investors looking at TriStar Gold, this is a Company that already has a track record for answering operational questions – and eliminating question marks. With a current market cap of only $25 million, TSG offers one more enticement: great value.

FULL DISCLOSURE: TriStar Gold Inc. is a paid client of Stockhouse Publishing.


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