The Blackwater Gold Project is located in British Columbia, Canada, 446 km northeast of Vancouver. Blackwater is an epithermal gold-silver deposit hosted in felsic volcanic rocks with pervasive stockwork veins and disseminated sulphide mineralization, situated in the Nechako Plateau, part of the Intermontane Belt. The area was first prospected in 1973 and limited exploration was carried out until 1994. New Gold’s purchase of Richfield in 2011 resulted in comprehensive drilling, metallurgical test work, and engineering culminating in a feasibility study in 2013 and technical report the following year. The project was subsequently acquired by Artemis Gold in 2020.
Blackwater is planned to be as a single pit, mined as a conventional shovel and truck operation. The Reserve pit is fairly large, with a mill throughput expected to reach steady state of 15 Mtpa by Year 3 and further expansion to 25 Mtpa in Year 7. The project has a projected mine life of 15 years plus two years of stockpile processing to produce 7.5 Moz gold and 40.4 Moz silver from 334 Mt ore. Strip ratio is favourable, at just 2:1, waste to ore. LOM average annual gold equivalents are 469 koz, with steady state open pit ore from Y4 to Y13 averaging in excess of 500 koz per year. Per the Technical Report, the project has a pre-tax cashflow of C$7,870 M and pre-tax NPV5% of C$5,132 M.
| Tonnes (Mt) | Au (g/t) | Ag (g/t) | AuEq (g/t) | Au (Moz) | Ag (Moz) | AuEq (Moz) | |
|---|---|---|---|---|---|---|---|
| Reserve | 334.3 | 0.75 | 5.8 | 0.78 | 8.0 | 62.2 | 8.4 |
| M+I | 13.0 | 0.44 | 7.1 | 0.48 | 3.7 | 60.2 | 4.0 |
| Inferred | 16.9 | 0.45 | 12.8 | 0.53 | 0.2 | 7.0 | 0.3 |
500 koz is the holy grail of gold mines, Tier 1, world class. It is difficult to resist gold fever and we all desperately want to believe that we have the next gold rush in front of our eyes. Allow the dust to settle however, and some key risks begin to emerge. Firstly, the discounted and undiscounted cashflow figures presented in the Technical Report do not include the C$730 M to C$750 M initial CAPEX and C$250 M closure cost. Applying these costs slashes pre-tax cashflow by C$1 B and NPV reduces to C$2.5 B when discounted 10%. Contingencies and payments to indigenous groups were mentioned but have not been detailed. Bear in mind, the contingency range for PFS ranges from 15% to 25% recommended by the AusIMM and 15% to 30% recommended by the SME. Mining Momentum would be hardly surprised if the project experiences a C$500 M overrun. Also mentioned is the hedge program, of which Forward Sales Agreements apply to 190 koz and Zero Cost Collars apply to 30 koz at the start of mine life; the financial implications of the hedge program were not explained in the Technical Report. Debt servicing risks also become ever more important in the current climate. Also noteworthy is that the financial model uses an elevated gold price of US$2,000/oz in Year 1 which reduces to the long term gold price of US$1,800/oz in Year 5. This has a positive impact on project economics and is fairly uncommon practice. The C$37 M salvage credit is also not likely to be realized, although its impact to NPV is relatively small at the end of mine life.
Financial modelling aside, Mining Momentum sees geological risk. Without evaluating the block model in depth, based on visual observation of figures contained in the Technical Report, several potential concerns and risks emerged. Firstly, certain areas of mineralization appear visually unnatural. Without the data to confirm in 3D, Mining Momentum cannot be certain, but there appears to be areas where high grade material appears to be poorly supported by drilling. There also appears to be artifacts and nuggets that carry grade. Mining Momentum considers these to be of potential geological risk. In any case, assuming the model is correct, attempting to mine nuggets of grade and grade control during mining will be exceedingly difficult, leading to dilution and potential sterilization of ore. Mining Momentum stresses the importance of matching geological modelling with smallest mineable unit. Mining Momentum urges caution on grade and contained metal, which in our opinion, may experience 10% to 20% downside risk. Another item mentioned briefly is Acid Rock Drainage. Two thirds of the waste mined is Potentially Acid Generating. This could result in increased operational complexity and reduced efficiency and potentially increased mitigation costs.
In conclusion, Mining Momentum sees aspects of the project that act as downside risks if not properly mitigated. These risks are by no means fatal, they simply introduce variance. Especially with bullish metal prices, Blackwater carries a lot of promise. Economic inputs are conservative and current metal prices offer plenty of margin. Mining Momentum simply urges caution and to temper expectations, as they may exceed what the deposit has to offer. Blackwater has a lot to offer, just more work remains to be done to harness its full potential!
The information presented above does not constitute investment advice. This is a summary from the NI 43-101 Technical Report effective February 21, 2024 (INSERT), with commentary from the author. Statements above do not represent the views of Artemis Gold. If any discrepancies arise, the information contained within the NI 43-101 are official and final. For latest depletion data, please refer to the AIF update.