Gran Colombia Gold (TSX: GCM) announced Tuesday that it has completed an updated mineral resource estimate for its Marmato project. As well, the company has received results of a preliminary economic assessment (PEA) for the project, focused on the Zona Baja mining operations.
Gran Colombia recently announced its intention to spin off the Marmato project into a separate listed company to generate funds for exploration and expansion plans. The underground gold mine, located in the Department of Caldas, Colombia, was acquired by Gran Colombia in 2011 through a merger with Medoro Resources.
A letter of intent was signed last week with Bluenose Gold (TSXV: BN.H) to dispose of certain mining assets at the project. These principally comprise the existing underground gold mine, including the right to mine in the lower portion of the Echandia license area, the existing 1,200 t/d processing plant and the area encompassing the Deep Zone mineralization, all located within the mining license area referred to as Zona Baja. Gran Colombia will retain its existing ownership of the mining licenses in the areas known as Zona Alta and Echandia.
The transaction with Bluenose and the equity private placement are expected to be completed in December. The company is also proceeding with a prefeasibility study, to be finalized by mid-2020.
The PEA foresees a total of 26.4Mt of mineralized material being processed over a 19-year mine life, resulting in a total of 2.2Moz of gold produced
The Marmato mine in Zona Baja will ultimately comprise two distinct operations, the existing Upper Zone operation and a new Deep Zone operation, which sits directly below the Upper Zone vein system.
With the PEA, the company has reached a point at which it could set a path to “significantly” expand mine production at Marmato, says executive chairman Serafino Iacono.
The Marmato PEA foresees a total of 26.4 million tonnes of mineralized material being processed over a 19-year mine life, resulting in a total of 2.2 million ounces of gold produced at an average life-of-mine total cash cost of $799 per ounce and an average AISC of $882 per ounce.
“The PEA charts a course whereby the immediate implementation of an optimized mine plan in the upper existing mine at Marmato, much like we did a few years ago at Segovia, will increase production and free cash flow starting in 2020,” Iacono added.
The Upper Zone is estimated to produce 5.5 million tonnes of mineralized material, primarily from the vein system, over a 16-year life with an average head grade of 3.8 g/t, resulting in total gold production of 600,000 ounces. The optimized mine plan would increase production at Upper Zone from the current 25,000 ounces per year to a range of between 35,000 and 40,000 ounces per year starting in 2020. Gran Colombia says it would need to invest $12 million over the next two years to accomplish the mine plan.
At the same time, the company will begin development and construction activities in the new Deep Zone, which should come on stream in 2023, further increasing total gold production to over 150,000 ounces annually from 2024 through 2027, and then averaging more than 100,000 ounces annually over the next nine years of operation. The initial capital cost, to be incurred between 2020 and 2022, required for the Deep Zone operation is estimated at $269 million.
At a 5% discount rate, the after-tax net present value of the life-of-mine free cash flow is $207 million. Before financing, the project has a 20% internal rate of return and payback by 2026.