Falco outlines $905M gold mine in Horne PEA

VANCOUVER — Falco Resources (TSXV: FPC; US-OTC: FPRGF) is hoping to have the historic Horne gold complex back in production by 2020. On May 9, the company released a preliminary economic assessment (PEA) on the Horne 5 deposit, which models a bulk-tonnage underground mine that would require $905 million in initial capital expenditures.

The study contemplates a 15,000-tonnes-per-day surface facility that would generate 236,000 oz. of gold annually at all-in sustaining costs of US$427 per oz., net of by-product credits. The US$1,250 per oz. base case features a U$667 million after-tax net present value (NPV) at a 5% discount rate, and a 16% internal rate of return (IRR).

The proposed 15,000 tonnes per day processing facility at Horne 5. Credit: Falco Resources.

The Horne 5 site is situated on an industrial park within the city of Rouyn-Noranda, Que., and development would be centralized on the former Quemont mine site. The company plans to build a semi-autogenous-ball milling-crushing (SABC) facility that would include a flotation-and-thickening section divided into three circuits dedicated to recovering copper, zinc and pyrite concentrates.

Horne 5 sits below the former producing Horne mine, which was operated by Noranda from 1926 to 1976. Credit: Falco Resources.

“As a mine builder I’d say the best place in the world to do the job is probably in the Abitibi and specifically in Rouyn-Noranda,” commented president and CEO Luc Lessard during a conference call.

“We have many experienced miners and construction staff in this area, and that goes for major equipment and suppliers as well. We plan to do the same exercise our team has done before, where we drive the bus and are in place to support the engineering firms,” he added.

The PEA proposes a 12-year mine life targeting 64 million tonnes of volcanic-massive sulfide (VMS) material with an average diluted grade of 2.6 grams gold equivalent per tonne for 4.8 million contained oz.

Payable life-of-mine gold recovery is expected to average 86.8%, while by-product metallurgical recoveries average 74% for copper, 67.3% for zinc and 74.9% for silver. Falco has analyzed copper and zinc concentrates and concluded they are “free of deleterious elements and are expected to be readily marketable to both smelters and traders.”

Horne 5 hosts 58.3 million indicated tonnes grading 1.82 grams gold per tonne, 15.60 grams silver per tonne, 0.2% copper and 1% zinc, or 2.86 equivalent grams gold for 5.36 million equivalent oz. gold. Inferred resources total 12.7 million tonnes averaging 2.10 grams gold, 26.26 grams silver, 0.2% copper and 0.6% zinc, or 3.08 equivalent grams gold for 1.25 million equivalent oz. gold.

The three-phase mine plan using the historic Quemont 2 shaft. Credit: Falco Resources.

“The project does work at lower gold prices if we’re looking at the current market environment,” noted CFO Vincent Metcalfe. “The Young-Davidson operation in Ontario is probably the most comparable mine to the Horne project due to a similar grade and depth profile. The major benefit at Horne is the higher density of the material compared to other deposits, and that’s a function of the VMS geology. The vertical nature of the ore body also limits dilution.”

Falco remains optimistic on exploration upside near the existing Horne 5 resource. On April 26, the company mobilized two drill rigs to the site to complete a 20,000-metre drill program. The first target will be the Horne 5 Western Extension, which Lessard said could add “between five to ten million tonnes of ore.”

Meanwhile, the company will also follow-up with 10,000 metres at the Quemont extension, where mineralization is hosted within massive, aphanitic lava flows of dacitic to rhyolitic composition. Historic work reportedly shows that the “major structural control appears to be fractures within a westerly plunging anticline.”

A drill rig at the Horne 5 deposit in Rouyn-Nouranda. Credit: Falco Resources

“During confirmation drilling we kicked up some good potential on the Quemont western plunge and so we’re looking to initiate a drilling program from underground after we finish de-watering,” Lessard said, adding that Falco will have the drill rigs active for the next four to five months.

Considering the infrastructure advantages Falco enjoys at Horne it isn’t surprising that the majority of capital expenditures are ear-marked for underground mining and processing facilities, which account for around $598 million. Finding that caliber of development capital in current markets won’t be easy, but the company has the advantage of some pretty major shareholders to help it along the way.

Lessard and his team built the Canadian Malartic gold mine alongside chairman Sean Roosen, who is also the current CEO at Falco’s largest shareholder, Osisko Gold Royalties (TSX: OR). Metcalfe also noted that the company will continue its relationship with the Quebec government.

“We have the same people, doing the same jobs, we did back when we delivered the Canadian Malartic economic studies in 2007 and 2008,” Roosen elaborated. “What they’ve outlined is a realistic plan that has very pragmatic numbers and mining methodologies. It’s a project that we believe has great support in the community and from the provincial government. The biggest challenge will clearly be the [development capital,] but we believe we’re well-suited to manage that.”

Falco has traded within a 52-week window of 20¢ and 61¢, and closed at 56¢ per share at the time of writing. The company maintains 111 million shares outstanding for a $63 million press-time market capitalization, and reported cash and equivalents of $3.9 million to end 2015.