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Talapoosa will require an initial capital cost of just $51.2 million, and using a relatively conservative base-case gold price of $1,150 per ounce for and a silver price of $16 per ounce, the project would see an after-tax net present value of $136 million and a 39-percent internal rate of return.
Currently, Gunpoint Exploration (TSXV:GUN) owns Talapoosa, but Timberline acquired an option to purchase 100 percent of the property back in March. Under the terms of the agreement, Timberline can acquire the project at any time within 30 months of March 2015 for US$10 million, with Gunpoint retaining a 1-percent net smelter royalty on the project. Timberline may purchase the royalty at any time for US$3 million.
“We are extremely pleased to have achieved this important milestone just a short month after having acquired the Talapoosa option,” said Timberline President and CEO Kiran Patankar in a statement. “Our technical team capitalized on a well-defined mineral resource that had undergone extensive historic engineering and permitting work to deliver a high quality PEA ahead of schedule.”
According to the PEA, Talapoosa will require an initial capital cost of just $51.2 million, and using a relatively conservative base-case gold price of $1,150 per ounce and a silver price of $16 per ounce, the project would see an after-tax net present value (NPV) of $136 million and a 39-percent internal rate of return (IRR). Looking at the upside case for the project (gold price of $1,300, silver price of $17.50) the numbers shift to a $188-million NPV and a 52.6-percent IRR.
The study considers an open-pit mine and 10,460-ton-per-day heap-leach operation at Talapoosa. Estimated annual production is set at 55,000 ounces of gold and 679,000 ounces of silver over an 11-year mine life.
The project features a low strip ratio of 1.47 to 1, and with low total all-in costs of $682 per ounce of gold (net of silver), Monday’s release states that operating costs at Talapoosa are “among the lowest per-ounce costs when compared with other gold development projects.”
For Patankar, it was important that the development scenario fit within the scope of a previously permitted operation. “As a partially permitted project in a low-risk, pro-mining jurisdiction with estimated average annual gold production of 55,000 oz, all-in sustaining cash costs of $599/oz of gold (net of silver), initial capital costs of $51 million, and potentially significant opportunities for future optimization and resource expansion, we believe Talapoosa is in the top quartile of North American gold development projects,” he said.
Miramar Mining obtained permits for the process back in 1997, including a plan of operations that was approved by the US Bureau of Land Management. Property development and permit acquisition firm Enviroscientists believes that the plan will remain in valid standing since the PEA contemplates an operation that is consistent with historic plans, but Timberline notes that it will need to reapply for state permits, with several permits requiring updates.
In terms of what’s next, Patankar said in Monday’s release that Timberline is aiming to complete a prefeasibility study for the Talapoosa project in the first quarter of 2016. The company will also continue to optimize Talapoosa through step-out and infill drilling to upgrade current resources at the project, and will complete additional metallurgical testwork and other optimization measures.
Development at Talapoosa could be interesting to keep an eye on. Shares of Timberline dipped 1.32 percent, to $0.75, on the TSX Venture Exchange on high trading volume, shares of the company gained almost 15 percent to trade at $0.70 on the NYSE MKT.
For its part, Gunpoint Exploration gained 12.5 percent on the TSXV to hit $0.18. Trading volume was 24 times the daily average for the company.
Securities Disclosure: I, Teresa Matich, hold no direct investment interest in any company mentioned in this article.
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