Bluestone Resources (TSXV: BSR) is on the cusp of delivering what the company believes may be one of the world’s most profitable new gold mines.
The recent completion of a robust Feasibility Study for the Cerro Blanco mine has boosted the company’s confidence that the Guatemalan project can not only be a game changer for the company, but the country and local stakeholders as well.
Bluestone’s president and CEO, Jack Lundin, says the Feasibility Study highlights some of the best economics for a gold project seen in recent studies and is a major milestone on the path to the development of the Cerro Blanco mine, providing a blueprint for the detailed engineering phase and construction of the project.
“The development of the project is expected to provide substantial economic benefits to Guatemala, both locally and at a national level. A priority will be to continue to train and develop skills of the local workforce, which is in line with the company’s philosophy of creating shared benefits,” Mr Lundin said.
Feasibility Study highlights
The base case was completed at a gold price of US$1,600/oz and a silver price of US$20/oz
Life of Mine (LOM) production of approximately 2.6M oz of gold and 10.6M oz of silver over an initial 14-year mine life.
- Peak production of 347,000 oz and average annual production of 241,000 oz of gold over the first ten years of operation
- Average life of mine AISC of US$629/oz (net of credits)
- Average annual free cash flow of US$228M per year during the first 10 years and life of mine total free cash flow of US$2.350B
- Net present value (NPV5%) of US$1.047B after tax
- After-tax internal rate of return (IRR) of 30%
- Initial capital of US$572M with an after-tax payback period of 2.2 years
- Proven and Probable Reserves of 2.8M oz of gold and 12.6M oz of silver (53.9M tonnes at 1.6 g/t Au and 7.3 g/t Ag)
At spot gold and silver prices (US$1,897/oz and US$23.94/oz), the NPV5% increases to US$1.563B and the IRR to 40% with a payback of 1.7 years.
“The study confirms Cerro Blanco as an exceptional open pit development opportunity,” said Mr Lundin.
“In the first four years of production, the mill feed grades will average 2.5 g/t gold and the open pit mine will produce approximately 300,000 oz of gold per year.
“With all-in sustaining costs at US$629/oz and over 2.6M oz to be produced over the life of the mine, the low-cost, robust nature of the deposit will generate significant free cash flow, making Cerro Blanco a rare development opportunity in the gold space today.”
The Feasibility Study evaluated recovery of gold and silver from an open pit operation and a 4.0 Mtpa conventional process plant that will include crushing, grinding, and agitated leaching followed by a carbon-in-pulp recovery process to produce doré bars.
Sustainable focus
While the Feasibility Study numbers add up to a highly profitable development, just as importantly for Bluestone Resources is the fact that sustainable environmental management has been at the forefront of the design of the project, notably, the Feasibility Study includes the utilization of a modern dry stack filtered tailings facility and water treatment plant to ensure responsible development of natural resources.
The development of Cerro Blanco will provide significant new employment and training opportunities for the local population.
“Our corporate strategy aligns with our philosophy of responsible development prioritizing local training and hiring to maximize opportunities and benefits for our local stakeholders,” Mr Lundin said.
“Advancing the Cerro Blanco Project represents a tremendous opportunity to our many stakeholder groups, including the local Guatemalan communities, government partners, and our shareholders.”
Mr Lundin said Bluestone has already identified a number of clear benefits for Guatemala and the local communities.
“We have a commitment to responsible development and creating shared value, and prioritizing sustainable development, with both a social and environmental focus.”
The benefits of Bluestone’s development at Cerro Blanco include:
- Training and developing of a local workforce
- Building local supplier capacity and businesses to support operations
- Direct employment of 1,100+ people during construction
- Direct employment of ~500 people during operations
- US$300M in economic contributions through taxes and royalties
- US$160M in annual contributions to the Guatemalan economy and total contributions of US$1.8B billion
Project background
Cerro Blanco is located less than 10km from the Pan-American Highway, near the town of Mita, within the state of Jutiapa, Guatemala.
Bluestone Resources acquired Cerro Blanco from Goldcorp in May 2017. The project was originally permitted as an underground mine. Bluestone completed additional engineering and optimization work that significantly enhanced the understanding of the project and led to the strategic decision to pivot to an open pit early last year. This change in development strategy tripled the value of the NPV of the project and outlined an asset capable of producing over 300,000 oz of gold per year.
The historical investment that previous operators made included the construction of two underground declines from surface; three kilometres of underground development; two alimak vent raises; significant dewatering infrastructure, and an operating water treatment facility.
“The pivot to surface mining is a culmination of our increased understanding of the geology and grade distribution that will realize the full potential of the Cerro Blanco deposit. The inverted wedge shape of the ore body with its upper half forming the Cerro Blanco hill lends itself to surface mining with a low strip ratio,” said Mr Lundin.
The next steps in the lead-up to a Final Investment Decision (FID) include receiving permitting amendments from the Guatemalan authorities, detailed engineering, and a broader project financing package. Construction of initial offsite infrastructure has already begun, with a new bridge and powerline underway.
Geothermal potential
The acquisition of Cerro Blanco included a highly valuable, proposed geothermal energy development project.
Approximately US$60M has been invested exploring and advancing the Mita Geothermal project, which is adjacent to the Cerro Blanco. This includes the drilling of eighteen geothermal wells.
The Company has completed a scoping study that incorporates a review of the historical data and testwork completed on the project. An updated reservoir calculation was completed that estimated a reserve capacity of over 20MW. The scoping study focused on several different sizing scenarios, ranging from 5MW to 20MW.
While more test work is required on the geothermal resource, studies suggest there may be sufficient pressure and entropy at exploitable levels to support the fully licenced capacity of 50MW.
Bluestone Resources is currently evaluating various options to advance the geothermal assets.
To find out more, visit https://bluestoneresources.ca/.
