All the stars seem to be lining up for a small Vancouver junior miner with a small but high-quality gold property in the Yukon.
With gold prices inching up – and gold mining stock with it – Kaminak Gold Corp. (TSX-V: KAM:) delivered a feasibility study January 7 on its Coffee Gold project in the Yukon that demonstrates the mine not only works at current gold prices, but would be paid for in just two years.
Kaminak’s stock was up more than 3% to $0.95 in mid-day trading January 7 following the release of the feasibility study.
A small, high-quality gold deposit, the Coffee mine would have a low capital cost of just $317 million (including a $26 million contingency) and an internal rate of return of 37%, based on gold prices of US$1,150 per ounce. The all-in sustaining costs are pegged at US$550 per ounce.
The company estimates gold production of 1.9 million ounces over the life of the mine.
The project has attracted mining magnates Ross Beaty and Lukas Lundin, each of whom have a 9% stake in the project. It has also earned the plaudits of analysts and newsletter writers like Brent Cook of Exploration Insights and Rick Rule, CEO of Sprott US Holdings Inc., who appear to be as impressed with the company’s pedigree as its ore quality.
The company is led by CEO Eira Thomas, who co-founded Stornoway Ventures Ltd. – now Stornoway Diamond Corp. (TSX:SWY) – which Thomas led as CEO until 2008. She also served as Stornoway’s executive chairwoman and is a director and co-founder of Lucara Diamond Corp. (TSX:LUC).
Last year, Cook told BNN that Kaminak was “one of the few good projects out there that offers a relatively low capex to build.”
The Coffee deposit is close to the surface and would be easy to process using heap leaching, which lowers the capital costs by eliminating the need for a mill.
“The great thing about this project is that it’s simple, it’s high margin, it’s located in Canada and it represents a good value even in today’s gold price environment,” Thomas told Business in Vancouver.
According to the new feasibility study, the mine would have a life of 10 years, with annual production of 200,000 ounces for five years. The company expects further exploration in the area could extend the mine’s life past 10 years.
The company has agreements with local First Nations and, unlike many other projects in the Yukon or northern B.C., the Coffee deposit has relatively good access to road and river transportation.
The construction of a 37-kilometre road and upgrading of another 214 kilometres of existing road are the project’s biggest infrastructure costs.
Despite a prolonged bear market for mining, the project is well-financed, with $28 million in cash on hand. The company expects permitting to take about two years and plans to be in production by 2019’s fourth quarter.
