Pure Gold Initiates Definitive Feasibility Study on Madsen Gold Project

Pure Gold Mining Inc. is pleased to announce that it has commenced a Definitive Feasibility Study (“DFS”) on its 100% owned Madsen Gold Project with the objective of making a positive production decision by Q4 2018.  

The DFS, based on a mineral resource supported by approximately 1.1 million metres of diamond drilling with an overall average drill spacing of 6.3 metres in high grade zones, will determine the optimum mine plan, underground mining methods and mining rate, while leveraging the existing mine infrastructure and 36 years of continuous past production history.

Concurrent with the DFS, exploration drilling will continue to be focused on delineating near surface mining shapes and delivering new zones to expand the overall mineral resource along the Madsen Mine trend.  In addition, project financing discussions will be initiated with select lenders.

The Company’s recent Preliminary Economic Assessment (“PEA”) outlines a very low capital intensity project and the modest capital hurdle and high margins of Madsen set it apart from any other near term producer in the gold space today.  Expected to refine the PEA assumptions the DFS is a key milestone in the Company’s goal of rapidly advancing the Madsen Gold Project to become Ontario’s next gold mine.

Key Development and Exploration Program Plan Highlights

• complete a definitive feasibility study to provide an economic assessment of the Madsen Gold Project, including mine, process, and infrastructure design, putting the project firmly on the path to a production decision in the shortest timeline possible;
• complete rehabilitation of Two Level from the Madsen ramp and drive an exploration drift to allow for infill drilling of initial stope shapes;
• 5,000 metres of resource definition drilling from the Madsen ramp and new exploration drift, designed to infill and confirm upper portions of the current mineral resource;
• advance the ramp approximately 300 metres to provide access to new mineralization;
• drift along the mineralized structure, with both lateral and vertical development designed to demonstrate continuity;
• an underground chip sampling program to improve geologic understanding and demonstrate continuity and thickness of mineralized zones;
• extraction of a 7,200 tonne bulk sample to validate the resource model, provide material for metallurgical testwork, and provide pre-production mineralized inventory;
• 28,000 metres of exploration drilling from surface with the goal of identifying and extending new zones of gold mineralization close to existing mine infrastructure, including up-dip of the 8 Zone and down dip of Russet South;
• continue baseline environmental work and file all necessary applications to modernize mine permits; and
• release an initial mineral resource estimate for Madsen’s satellite deposits in the fourth quarter of 2017.

“With the recent completion of a significantly expanded mineral resource, and a positive Preliminary Economic Assessment outlining a robust 14-year underground mining operation with highly attractive economics, we are aggressively pressing ahead to advance Madsen towards production” stated Darin Labrenz, President and CEO of Pure Gold. “There remains today a scarcity of near-term, high grade, quality gold projects in friendly jurisdictions and Madsen is extremely well placed with existing infrastructure including a mill, tailings facility and underground development.  Our calendar 2018 exploration and development plan will continue to de-risk the project and bring Madsen one step closer to becoming Ontario’s next gold mine.”  

2018 Development and Exploration Program

Given the positive results delivered in the recent PEA, Pure Gold has contracted and engaged JDS Energy and Mining Inc. (JDS) to lead and complete a Definitive Feasibility Study on the Madsen Gold Project.  Project partners include Nordmin Engineering Ltd., Knight Piésold, and MineFill Services.  The PEA (see news release September 14, 2017) outlined a robust 14-year underground mining operation, with base case parameters of US$1,275/oz and an exchange rate (C$ to US$) of 0.80:

• Pre-tax NPV_5% and IRR of $365 million and 54% respectively with a 2.7 year payback of initial capital;
• After-tax NPV_5% and IRR of $ 258 million and 47 % respectively with a 2.8 year payback of initial capital;
• Mine life of 14 years with a 12 month pre-production period;
• Life of mine (“LOM”) diluted head grade of 10.3 g/t gold;
• Average annual gold production in years 3 through 9 of approximately 75,500 ounces, with peak annual production of approximately 85,000  ounces;
• LOM direct operating cash cost(1) is estimated at US$595 per ounce of gold recovered;
• LOM operating cash cost(1) plus sustaining cost is estimated at US$714 per ounce of gold recovered;
• Pre-production capital cost estimated at $50.9 million which includes a 15% contingency; and
• LOM sustaining capital costs estimated at $134.7 million which includes a 5% contingency.

(1) Cash cost includes mining cost, mine-level G&A, mill and refining cost

The DFS commenced with a kick-off meeting at site in December 2017 and will begin with trade-off studies to better define project concepts as outlined in the PEA. Trade-off studies will aim to optimize the components of a mine plan, including the mining rate, mining methodology, and mine development options.  The DFS, a key milestone in the development of a new mining operation at Madsen, will be based on an updated mineral resource estimate incorporating all diamond drilling completed since April 11, 2017 and is scheduled for completion in Q3 2018.

To support the DFS initiatives and promote further resource expansion, Pure Gold is currently rehabilitating Two Level from the Madsen Ramp, and will drive a 50 metre exploration drift in the hanging wall of near surface gold mineralization to allow for infill definition drilling.  This underground drilling will commence in January 2018 with approximately 5,000 metres of drilling to be conducted from the newly developed drift.

Following the infill drilling, Pure Gold will drive the Madsen Ramp to Three Level and will develop along the mineralized structure of one of the near surface planned stopes.   The development will allow for close spaced chip sampling to establish geologic and grade continuity and for validation of the current resource model.  The development will include approximately 7,200 tonnes of mineralized material which will provide an opportunity for additional metallurgical testing and will be retained as pre-production mineral inventory.  Recent drilling in the area of the proposed bulk sample includes³:

• 15.4 g/t gold over 4.0 metres from hole PGU-0024;
• 35.5 g/t gold over 1.5 metres from hole PGU-0027;
• 19.4 g/t gold over 9.8 metres from hole PGU-0028; and
• 13.7 g/t gold over 6.8 metres from hole PGU-0033.

In addition to the underground drilling, the 2018 exploration program includes 28,000 metres of surface diamond focused on resource expansion and discovery.  A key component of the surface drilling program will be to target the Russet South – 8 Zone corridor with the goal of expanding known mineralization up dip from the 8 Zone and down dip from Russet South, as well as testing the 1.6 kilometre gap between the two gold deposits.  The 8 Zone, containing an indicated resource of 253,000 ounces at a grade of 20.8 g/t gold in 379,000 tonnes, and a further inferred resource of 74,000 ounces at 16.3 g/t gold in 142,000 tonnes, is a high grade component of the Madsen Mineral Resource and remains open for expansion.  Russet South, located near surface, shares similar characteristics to the 8 Zone and is scheduled for a first-time mineral resource estimate in Q4 2017.

Exploration at site is ongoing, with two rigs currently active on surface.  A planned break will commence in mid-December with drilling from both surface and underground set to resume in mid-January.

Pure Gold will also continue ongoing environmental baseline studies to support permitting activities and will file a new project definition for the Madsen Gold Project in early 2018.  This Project Definition will outline the operational components of a new Madsen mining operation with a goal of modernizing existing permits for production.

Source: http://puregoldmining.ca/