The Mexican State of Guerrero has been recently under the spotlight due to the grievous situation with the disappearance of the 43 students, but it is also globally known as a World Class mining area.
Newstrike Capital Inc. (TSXV:NES) is a gold and silver exploration company, with 89,000 hectares (240,300 acres), located strategically in the prolific Guerrero Gold Belt (GGB) mining district in Mexico.
The GGB is an emerging mining camp hosting over 31 million ounces of gold (all categories) and includes Goldcorp’s producing Los Filos mine and Torex Gold’s El Limon/Guajes project currently under construction and slated for production in 2015. Newstrike’s management and directors have direct experience exploring in the GGB, co-discovering Goldcorp’s and Torex Gold’s deposits in the area.
Newstrike’s flagship Ana Paula project features a high-grade, near surface deposit with significant underground potential. A recent preliminary economic assessment done on the project contemplates an all-in sustaining cost of $567 per ounce of gold, with an average annual production estimated at 116,000 ounces of gold and 239,000 ounces of silver, with life-of-mine average head grades of 2.24 grams per tonne of gold and 6.89 grams per tonne of silver. Ana Paula also features a low strip ratio of 2.6 to 1 of waste to mineralized material.
In addition to the economic deposit, Newstrike has substantial land holdings surrounding Ana Paula and has identified numerous priority targets through geophysics, ZTEM surveys and surface sampling.
Preliminary Economic Assessment for Ana Paula contemplates an all-in sustaining cost of $567 per ounce of gold, with an after-tax IRR of 32.8 percent and a 2.4 year payback period
Current resource estimate of 1.9 million ounces gold (pit-constrained) with significant potential for additional gold ounces at increased gold prices.
Ownership of substantial land holdings surrounding Ana Paula with significant exploration potential
Management and directors co-discovered Goldcorp’s and Torex Gold’s significant discoveries in the Guerrero Gold Belt
Oaxaca projects provide exposure to another important, established silver-gold mining district
Noteable shareholders include Lukas Lundin
Advancing Ana Paula to pre-feasibility in 2015
Ana Paula Mine
Newstrike CEO Richard Whittall stated that Ana Paula could be “one of the best development-stage gold projects in Mexico.”
Located in the Guerrero Gold Belt in Mexico, Newstrike’s 100 percent owned flagship Ana Paula project is a development stage gold property originally acquired from Goldcorp (TSX:G) in June 2010.
In September 2014, Newstrike released a preliminary economic assessment (PEA) for Ana Paula with strong returns and robust economics at a base case of $1,300 gold. Given its high grades, low strip ratio and simple processing Ana Paula drives good economics even in a lower gold price environment and provides leverage to the gold price should the metal move higher in the future.
Highlights of the PEA based on a $1300 base case price for gold include:
- After-tax Net Present Value (NPV) of $232.1 million
- After-tax IRR of 32.8% with a 2.4 year payback period
- Initial capital costs of $163.9 million
- All-in sustaining costs of $567 per ounce of gold, $526 per ounce Net of By-Product credits
- 8.2 year life of mine
Preliminary Economic Assessment
Contributing to those low operating costs is the straightforward approach Newstrike will take towards developing Ana Paula – the project will be developed as a 6,000 tonne per day open pit mine using conventional milling and flotation concentration. The company is considering future underground potential for Ana Paula as well given the ~3 Million ounces Au outside the pit shell.
Average annual production is estimated at 116,000 ounces of gold and 239,000 ounces of silver, with life-of-mine average head grades of 2.24 grams per tonne of gold and 6.89 grams per tonne of silver. The project features a low strip ratio of just 2.6 to 1 of waste to mineralized material, which will further support the economics of the mine.
Ana Paula Mine is easily accessible by major highway and is a 4 hour drive south west of Mexico City – close to key water, power and transportation infrastructure. Furthermore, the area is already a well-established mining district, with Goldcorp’s (TSX:G,NYSE:GG) Los Filos mine and Torex Gold’s (TSX:TSG) El Limon/Guajes mine (currently under construction) both nearby. These operations demonstrate the existence of a clear regulatory due process in the area and is positive for the advancement of the Ana Paula project.
Significant Underground Potential
Newstrike continues to evaluate the “significant underground potential” for Ana Paula.Results from a 2013 deep drill program confirmed the presence of high-grade mineralization just below the surface and extending to approximately 700 meters deep. The Company returned many strong drill results at depth and continued drilling is expected in 2015.
Newstrike has completed approximately 230 drill holes at Ana Paula and is now preparing a pre-feasibility study for mid-2015.
Surrounding Ana Paula is Newstrike’s Aurea Norte exploration property, which covers the northwest extension of the Guerrero Gold Belt. In October 2013, Newstrike identified fifteen high priority drill targets through a ZTEM airborne geophysical survey, with seven targets coinciding with anomalous surface gold geochemistry. Outcrop chip samples have been taken from surface at Aurea Norte, with the best sample returning 16.7 grams per tonne of gold. Newstrike drilled 5,000 meters in late 2013 to test a selection of those anomalies with assays from the campaign showing encouraging results. Further drilling is anticipated in 2015.
Contiguous with the Aurea Norte property to the north, Newstrike’s wholly owned Aurea Sur exploration property consists of four claims covering ~ 21,742 hectares.
Aurea Sur is a greenfield property in the early stages of exploration. However, Newstrike has found what it considers to be encouraging results. Geological fieldwork including surface sampling commenced on the property in 2004 and 3,886 metres of drill core was completed in total for 10 drill holes that tested four distinct areas of the property.
Exploration efforts are currently focused on Aurea Norte. However, Newstrike is using results from its most recent drill program to plan future exploration work in Aurea Sur.
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