Positive PEA a first step for Richmont in multi-phased Island mine expansion

VANCOUVER (miningweekly.com) – Boutique gold producer Richmont Mines has published a positive preliminary economic assessment (PEA) examining an expansion case for the flagship Island gold mine, in Ontario, that will push output 22% higher at low cash cost and generate a robust cash flow stream.

The Toronto-based miner said on Monday the study outlined an increase in mine and mill productivity to 1 100 t/d, at a capital cost of C$28.2-million.

The company advised that the ramp-up to 1 100 t/d is already under way, and the operation is expected to hit the target run rate later in 2018.

"The strong outcome of the expansion case PEA represents a key milestone and the next step in our phased approach to unlock the full potential of the Island gold mine. With minimal capital we are positioning the mine as a low cost operation that is anticipated to generate strong cash flow streams after funding all project and sustaining capital," stated CEO Renaud Adams.

Importantly, the PEA incorporates only 24% of the current inferred resources as of December 2016, which excludes more than 750 000 inferred-resource-ounces and does not take into consideration the most recent drilling success laterally to the east and at depth below the 1 000 m level. These excluded ounces will eventually be considered in a potential Phase 2 expansion, as Richmont continue to grow the resource inventory through its strategic drilling programmes.

The operation is expected to produce an average of 125 000 oz of gold a year, excluding the 2017 and 2018 ramp-up period, or 115 000 oz over the eight-year period considered in the PEA.

The PEA envisions the Island gold mine to have a low industry cost profile over the PEA period, including cash costs of about $456/oz, all-in sustaining costs (AISC) of about $620/oz, and all-in costs, which includes all project and sustaining capital, of about $675/oz.

Based on a spot gold price of $1 260/oz and a Canadian dollar to greenback conversion rate of 1.35:1, the expansion case PEA calculated an after-tax net present value of C$452-million.

"The PEA represents only the first step in a disciplined multi-phased strategy that will continue to build on our successful track record of growing production and reducing costs as we execute on our vision to position the Island Gold Mine as a world class, low-cost gold producer with additional production growth over a minimum mine life in excess of ten years," Adams added.

Richmont has set itself the target of producing between 110 000 oz and 120 000 oz of gold this year.