Wyoming’s first hard rock mine in a century is all but shovel ready and may be sitting on a pile of gold much larger than what’s so far been showcased for investors.
The CK Gold project, 20 miles west of Cheyenne past Curt Gowdy State Park, also could be worth a lot more than previously estimated because of an explosion in the value of gold.
It’s more than doubled since about a year ago.
Chairman of the U.S. Gold Corp. board, Luke Norman, told investors this past week that the company now believes its project is sitting on top of a secondary layer of ore that is significantly larger than estimated before.
“So, we’re going to try and harness some additional ounces here in the new year, post the definitive feasibility study, because they add so much additional value to the net present value,” he said.
“When you’re dealing with a 10-year mine life, but you’re building under SK1300 — a 60-year mining operation, milling operation — every 100,000 ounces (of gold) you add is probably $100 million or more added to the net present value,” he said.
SK1300 is a U.S. Securities and Exchange Commission rule that requires mining companies to provide detailed standardized disclosures about their mineral resources and reserves.
The intent is to create a more consistent, transparent and reliable framework for investors.
The existing reserve that has so far been studied is just shy of 1.7 million gold-equivalent ounces, Norman said.
The term “gold equivalents” is used in the industry to show the gold and other valuable ores in a project, like copper and silver, equal that many ounces of gold.
“We’re hitting full steam ahead into a production scenario where we expect to produce 110,000 ounces a year over a 10-year period,” he said.
But the company believes there will be close to another 1 million ounces or so once that secondary horizon is better understood.
“And there is southeast extension to the deposit,” he added. “So, wonderful deposit to have and to be harnessing.”
Gold Has Exploded
A pre-feasibility study was completed last February for the CK Gold project when gold was selling on the spot market for around $2,100 per ounce and copper was $4.10.
Since then, gold prices as of Friday were just over $4,600 an ounce, which means feasibility for the project has only become better.
A definitive feasibility study is expected soon based around some of the same assumptions as the pre-feasibility study, including overall gold production of around 750,000 ounces of gold equivalent.
The equivalents are composed of 70% gold, 30% copper values, Norman said.
“So, this project is far from a marginal asset,” he said. “Final numbers will be out here in the new year.”
At Friday’s price per ounce, that puts the 750,000-ounce gold equivalent value at about $3.4 billion.
Costs for the project remain low, thanks to several factors.
“It’s a surface deposit,” Norman said. “While the grade isn’t extraordinary, again, having it at the surface, very low strip, and then the location of this deposit relative to the township of Cheyenne.”
The site is also near the Interstate 80 corridor and railway transportation.
“(I-80) is the major corridor between San Francisco, but it runs through Reno, Nevada, Elko, Nevada, and Salt Lake City — three major mining hubs,” he said. “It’s twinned by Union Pacific rail, so logistically bringing equipment in here as we go into construction now is going to be remarkably easy."
Temporary housing for mine workers won’t be required, Norman added, thanks to being near an active employment base in Cheyenne.
“We’re not dealing with a project that’s sitting up in Alaska or in the high mountains in the Andes,” he said. “And again, we’re only an hour and a half away from a major international airport.”
Shovel Ready, Permits In Hand
The project will rely on a simple mining method, and power costs have already been locked in at 7.6 cents per kilowatt hour.
CK Gold has all the permits it needs to begin construction and operation.
“We are a fully permitted, shovel-ready operation,” Norman said. “The only thing we’re missing now is that somewhere between $350 and $400 million that I estimate it’s going to take to build this.”
Advanced engineering is also complete for the project.
An aggregate market study has also already been done on the waste material for the development, which Norman said puts the value at $12 per ton of rock.
“There’s 40 million tons of it sitting there, having been harvested for free, postproduction,” he said. “So that’s something else, another variable that will be brought into the company later on.”
U.S. Gold Corp CEO George Bee has told Cowboy State Daily previously that the company intends to hire an initial 231 people to build the mine, after which it will employ 255 people for the mine’s 10-year lifespan.
Construction won’t begin until the project is fully capitalized.
With indirect jobs included, the mine will support around 500 jobs in all, breathing new life into the ghost town of Hecla, where the remains of the old Copper King mine are still visible.
At the town’s peak, 800 people lived there, mining out high-quality ore until the surface deposits ran out.
No Smelting On Site
The pre-feasibility study, meanwhile, helped further optimize its project for better, more cost-efficient recoveries, according to the company.
No smelting is planned in Wyoming, so there will be no emissions on site.
The purified ore will be sent elsewhere for that step, likely to either Quebec or Salt Lake City, depending on where the best price is available. Water will also be recycled and conserved on site, to lower the water demand for the project.
Interest in the CK Gold project has been high, Norman said, adding he doesn’t believe the company’s share price yet reflects its true value.
“We’re one of the only permanent projects, shovel-ready projects out there in North America,” he said. “I think we’ve got a lot of upside. So, there will be some revalue markers on their way, and we’re looking forward to them."
Renée Jean can be reached at renee@cowboystatedaily.com.
