Sabina Gold & Silver (TSX:SBB) released a feasibility study for its Back River gold project in Nunavut on Wednesday, basing it on a relatively conservative gold price of $1,200 per ounce and a Canadian exchange rate of $0.87.
A mineral resource estimate done for Back River last October points to measured and indicated reserves of 5.3 million ounces at 5.7 g/t gold, plus an additional 1.9-million-ounce inferred resource at 7.4 g/t gold. That's a total of over 7 million ounces. According to the feasibility study, the project has the potential to produce an average of 350,000 ounces of gold per year over a 10-year mine life; output should average 413,000 ounces of gold during the first four years of production. Meanwhile, Back River's post-tax IRR clocks in at 21.7 percent, and it has a post-tax NPV of $535 million. The project is expected to generate life-of-mine, post-tax net cash flow of $914 million on gross revenues of $4.5 billion with a 2.2-year payback period. All in all, the numbers in the feasibility study have improved in various ways compared to a 2013 prefeasibility study. Expanding, Bruce McLeod, president and CEO of Sabina, said during a conference call, "when compared to our previous studies, the feasibility provides for improved economics, even using the lower gold price." He added, "we've also benchmarked the study against relevant northern mining operations and projects and believe that this is a sound feasibility that demonstrates the potential of Back River to be a significant Canadian gold producer." Money matters But while the Back River feasibility study offers strong economic results, initial capex of C$695 million is a little steep. As the company states in Wednesday's release, "financing such a project in current market conditions would be challenging."