Black Cat’s sweet Coyote Scoping Study makes it three for three gold winners in its inventory
Most junior ASX resource companies will be perfectly happy having a single, low-cost yet high-return project with a quick turnaround time, but as its latest Scoping Study shows, Black Cat has three of them.
Following on the heels of the recent – and incredibly attractive – Restart Study for the Paulsens Gold Operations and an updated PFS confirming that its original Kal East gold project remains an attractive development in its own right, the company has now unveiled an equally compelling Scoping Study for its Coyote Gold Operation.
The study highlights the potential of initial open pit and underground mining operations at Coyote to achieve a mine production target of 200,000oz of gold at an average grade of 3.6 grams per tonne (g/t) gold in the first five years of mine life.
Black Cat Syndicate (ASX:BC8) expects the operation to recover 44,000oz of gold per annum with peak production of about 55,000ozpa in years three and four at a low all-in sustaining cost of $1,586/oz, which ranks it in the lower third of Australian gold producers.
This will deliver revenue of $565m and an after-tax operating cashflow of $175.7m while development risks are low with pre-production capital estimated at a very palatable $80m that may be funded partly or completely by cashflow generated from Paulsens.
Internal rate of return – a measure of a project’s profitability – is estimated at a very attractive 60% using a gold price of $2,900/oz.
Restarting operations at the previously producing mine is also expected to be rapid with first gold forecast to be poured just seven months from starting refurbishment of the process facility.
“Like Paulsens, Coyote has established infrastructure that allows a low risk restart with a short timeframe to recommencing operations,” managing director Gareth Solly said.
“From only 5 months of drilling since acquisition we have defined a 5-year mine life at a sustained processing rate 25% higher than previous operations. Known mineralisation outside the current Coyote Central Resource, proximal to proposed underground development, will be targeted in future drill programs.
“The processing rate in the Study is conservative and is limited by the throughput capacity of the CIL circuit. Debottlenecking the CIL circuit would enable the mill to process up to 700tktpa and expedite cashflow from stockpiles generated in years 1 and 2 of mining, containing over 45koz.
“Future studies will refine processing facility design and mining schedules to optimise cashflow.”
He added that further near mine and regional discovery drilling could sustain and even increase processing rates, noting that additional targeted drilling will be carried out as the company progresses towards a more detailed restart study.
“Once Paulsens is in operation, focus will shift to potentially sequentially developing Coyote and then Kal East. Our intention is to partially or fully fund future development with cashflow generated from Paulsens.”
As an indicator of the potential to deliver both increased mine life and production, Black Cat noted that resources not considered by the Scoping Study totalled 2.4Mt grading 4.8g/t gold for about 372,000oz of contained gold.
This includes 78,000t at 5g/t gold, or 12,500oz of contained gold, located within the Coyote Central underground mine plan to limit reliance on Inferred Resources.
All these resources may be included in future studies once through conversion, or inclusion of additional Indicated Resources.
Whilst this is intriguing in its own right, it is not all that is present at the Coyote Gold Operation.
There is also significant potential to grow additional Resources at Coyote Central and Bald Hill through discovery and extensional drilling, with mineralisation identified at depth below the current mine design, with all lodes remaining open.
Additionally, a number of early-stage targets have been identified through reprocessing of geophysical data, soil sampling and acquisition.
On the production front, the company noted that while the refurbished and expanded processing facility will include installation of its 700,000tpa Outokumpu mill, the Scoping Study uses the existing CIL circuit which limits throughput to 500,000tpa.
As noted by Solly, debottlenecking could allow the project to reach the full 700,000tpa processing capacity, which would expedite cashflow.
Conservative plans to fill the spare processing capacity include increasing mine development rates as well as discovering and upgrading Resources with ongoing drilling.
Owning the only gold processing facility within a 200km radius also opens up strategic regional opportunities
While scoping studies are preliminary technical and economic assessments of a project’s potential viability, they do provide a picture of what the company can expect in the future with more exploration and evaluation work to support the estimation of an Ore Reserve that will in turn form the basis for more detailed studies.
Importantly for Black Cat, the Scoping Study for Coyote underscores just what a wise decision it made when it acquired the project as part of a package from Northern Star Resources (ASX:NST) back in mid-2022.
This is especially true when you consider that said package included its stablemate Paulsens, for which a restart decision is imminent and likely given the stellar IRR of 75%, estimated revenue of $355.9m and after-tax operating cash flow of $81.2m from the recovery of 123,000oz of gold.
Both projects have existing processing facilities with supporting infrastructure, which is what allows for a quick restart, and would make great starter projects for any junior even if they were too small to fit Northern Star’s portfolio.
This article was developed in collaboration with Black Cat Syndicate, a Stockhead advertiser at the time of publishing.
This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.