Kaminak Gold Corporation says a new study shows its Coffee Gold project south of Dawson City would be profitable at current gold prices.
It would take just two years to pay back the $317-million capital cost of building the gold mine, according to a new feasibility study released last week.
The project is also expected to create 480 “permanent, high paying jobs,” the report says.
“This feasibility study firmly establishes the Coffee Project as one of the world’s best undeveloped gold projects by value and margin that works in the current gold-price environment,” said Kaminak CEO Eira Thomas in a news release.
The Coffee mine is expected to last for 10 years, with an average annual gold production of 180,000 ounces.
The full capital cost throughout the life of the mine is estimated at $478 million, and the project is expected to generate $2 billion in gross revenue for the Yukon.
The report assumed a gold price of US$1,150 an ounce and an exchange rate of 78 American cents to the Canadian dollar. The current price of gold is just below US$1,100 an ounce, but the current exchange rate is just 70 American cents to the Canadian dollar. That low rate is a boon to Canadian companies.
“This is a project that works at today’s pricing environment,” Thomas told the News. “(This) was a very important milestone for our company.”
The proposed Coffee site consists of four open pits – the Supremo, the Latte, the Kona and the Double Double. The company has also found several other deposits that it continues to explore.
“We’ve made 11 separate discoveries, and we’re now running out of coffee names,” Thomas joked. She said if some of those other discoveries are mined, the project could last longer than 10 years. “We have high hopes for many of those. There’s significant resource expansion potential – there’s a good chance that we’re going to add some ounces into the mine plan.”
The site would be accessed by a 214-kilometre gravel road that would connect to the North Klondike Highway near Dawson. Much of that road already exists and simply needs upgrades.
The project is to be a heap-leach mine, meaning the ore would be irrigated with a solution to dissolve out the gold. The gold would be formed into bars on-site, which could then be flown out and delivered directly to customers.
Kaminak estimates that construction would take 18 months, and hopes to begin construction in 2018. The project would be powered by on-site diesel generators, with the possibility of switching to liquefied natural gas as diesel prices rise.
The report estimates that 225 people would be working at the site at any given time during peak operation, and employees would generally work two-week-on, two-week-off shifts.
The Coffee project was staked by Yukon prospector Shawn Ryan, who discovered the White Gold district in 2009. Drilling began at Coffee in 2010, and Kaminak released a preliminary economic assessment in June 2014.
According to the new report, Kaminak had $28 million in financing as of Sept. 30, 2015, which will allow it to move into the mine permitting stage. The company plans to submit a project proposal to the Yukon Environmental and Socio-economic Assessment Board in the middle of 2016, and expects to apply for quartz mining and water licences following the YESAB review.
Thomas said the company is currently working with First Nation partners and regulators to ensure there are “no surprises” in the application once it’s submitted.
Samson Hartland, executive director of the Yukon Chamber of Mines, said Kaminak’s track record with First Nations is part of why it’s done so well.
“First Nations engagement and relations are the key to successful projects,” he said. “The proof is in the pudding with a company like Kaminak.”
Hartland said he hopes Kaminak will get a “fair and efficient review.” He pointed to the territory’s mine licensing improvement initiative and to Bill S-6, which made controversial changes to the Yukon Environmental and Socio-economic Assessment Act, as examples of how the Yukon is improving its regulatory environment for mining companies.
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