Report: Falco Resources – Reviewing the Preliminary Economic Assessment

Preliminary Economic Assessments exist in all shapes and forms and definitely haven’t been created equal. When we first talked to the Falco Resources Ltd. (TSXV:FPC) management team, it became quite obvious the new management team (ex-Osisko people) wanted to advance this project as fast as possible, but they also wanted to make sure the market wasn’t disappointed with the PEA. An updated resource estimate in January revealed a bump in the total resources to 6.6M gold-equivalent ounces, and we were already looking forward to see the economics of the Horne 5 project.

Falco’s PEA might not be the shiniest or most appealing PEA, but it’s a robust PEA that will hold up, even at a gold price of $1000/oz. And keep in mind the after-tax NPV increases to C$800M when using the current gold price.

Additionally, the Horne 5 mine will be a low-cost asset with a relatively long mine life (which could still be expanded with additional resources from for instance the Western Extension and the results from the regional exploration program), and as it’s located in a safe region, it might be an asset that could appeal to almost any mid-tier to senior mining company looking for new. The mining sector still is in a full ‘flight to safety’ mode, and the senior producers are trying to find large assets in First Tier mining jurisdictions such as Canada. The amount of projects that could produce in excess of 200,000 ounces of gold per year can be counted on one hand, so Falco Resources is very likely already popping up on several radar screens.

We told you before CEO Luc Lessard is determined to build the Horne 5 mine, and we have very little doubt he will be able to do so. The permitting process should be pretty straightforward (Falco thinks it will need 18 months to permit the Horne 5 mine, but we’d like to point out the similar permitting process for Canadian Malartic took just 14 months), and with Osisko Gold Royalties as its main financial backer, we’re also quite confident there will be an acceptable solution on the table to fund the C$905M initial capex. With gold trading at $1325/oz, the fun times have barely started.

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