Market Update: Deer Horn Metals Releases PEA for BC Property

On Wednesday, Deer Horn Metals (TSXV:DHM) released the results of a NI 43-101 preliminary economic assessment (PEA) for its British Columbia-based gold–silver-tellurium Deer Horn project.

Deer Horn was originally staked in 1943 after the discovery of a large tungsten showing, and the company holds a report from 1959 that discusses the tungsten resource in detail. While tungsten exploration, along with gold and silver exploration, occurred in several spurts from the 1940s to 1990, the property’s tellurium potential was not examined until Golden Odyssey Mining (now Deer Horn) undertook drill and surface exploration in 2009. Now, Deer Horn believes the property hosts the first — and only — NI 43-101 tellurium resource ever reported. Notably, it is also one of the few significant tellurium discoveries not in Asia.

The PEA notes that Deer Horn’s mine life will be 14 years, with average mine, process and general and administrative operating costs coming to $61 per metric ton (MT) during that time. Also over that 14-year period, open-pit mining and a conventional flotation mill will produce 74,000 MT of gold-silver-tellurium concentrate per year. That will yield an estimated 67,000 ounces of gold, 2.11 million ounces of silver and 63,000 kilograms of tellurium over the mine’s total lifespan.

The initial cost for the project will be $27.8 million, and a base case economic evaluation indicates a payback period of 2.4 years, with a 32-percent pre-tax internal rate of return giving it a net present value of $39.5 million at a discount rate of 5 percent.

Prospects for the project look bright. The company is pleased with the results and believes they will give the project the momentum it needs to reach the next stage of development. Tyrone Docherty, president and CEO of Deer Horn, commented that the next step will be to undertake more infill and step-out drilling in aid of completing a preliminary feasibility study and permit application for mine development. “At that point,” he said in the company’s press release, “we will have successfully taken the Deer Horn project to financeable reserve status.”

While challenges exist, the company has indicated that it is ready to handle them. In an interview with Resource Clips, Tony Fogarassy, chairman of Deer Horn, noted that since “[t]here’s always engineering risks when working in a mountainous area in winter,” the board has opted to save time and money by operating the project only six months of the year. In addition, the small size of the mine has produced a “positive reaction” from two First Nations groups.

And, as Docherty said in a March 14 phone call with Tellurium Investing News, the 2.4-year payback period means the company “doesn’t have to worry about capex at all” and there is “a lot of value still to come.”

Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.

Editorial Disclosure: Deer Horn Metals is a client of the Investing News Network. This article is not paid-for content.