PolarX Ltd (ASX:PXX) has released a positive scoping study that outlines a viable production profile and confirms the economic potential of its Alaska Range Copper-Gold Project in Alaska, USA.
The Alaska Range project is made up of two key deposits — the Caribou Dome volcanogenic massive sulphide (VMS) copper deposit and the Zackly copper-gold-silver skarn deposit.
Speaking to the study’s release, PolarX said: “The scoping study process has provided comfort that a combined mining operation could potentially be economic at this interim stage.
“It has also provided a sharp focus on resource expansion in the knowledge that adding additional resources from drilling could substantially enhance those potential returns further.”
At a glance
PolarX’s scoping study is based on three key reports: the 2017 Caribou Dome mineral resource estimate, an updated mineral resource estimate for Zackly and new metallurgical test-work across both deposits.
The study presents several key findings, but the most important are:
- Sequential mining — starting at Zackly and followed by Caribou Dome — using one modifiable plant is feasible.
- Mining should start underground at Zackly, and mining at Caribou Dome would begin as a shallow, high-grade open pit, prior to underground mining.
- Relatively fast capital recoupment is possible and could accommodate a short mine life.
- Modest resource extensions at either deposit could significantly enhance projected economic returns.
- Potential remains to improve copper recovery at Caribou Dome and gold recovery at Zackly with further metallurgical test-work.
- Revenue from copper contributes more than gold at the assumed commodity prices.
Thanks to this, PolarX believes further investment into extension drilling at both deposits is fully justified.
Field team on-site at Alaska Range.
Production profile
PolarX’s study revolves around a sequential mining model, meaning production will kick off with ore from the Zackly deposit before work moves to Caribou Dome.
Underground mining at Zackly will contribute more tonnes to the production profile — improving the project’s net present value — and it has a higher-confidence mineral resource classification, meaning it’s the ideal candidate to commence operations.
As such, PolarX will build its processing plant at Zackly, but make it modifiable so it can treat ore from Caribou Dome down the line.
The mining schedule commences at Zackly in year 0 while the plant is being constructed. Meanwhile, the Caribou Dome open pit is forecast to begin production early in year 4, with underground production slated to kick off mid-year.
The mining schedule supports a processing capacity of 600,000 tonnes per annum for six and a half years.
What about economics?
For starters, the Alaska Range project's initial and sustaining capital costs round out to US$172.2 million, with US$105 million of that dedicated to project capex.
Underground mining at Zackly is projected to cost US$29.9 million overall, breaking down to roughly US$12.6 per ore tonne.
Over at Caribou Dome, the collective underground and open pit operation should set the company back $30.3 million. Underground mining will cost roughly US$26.6 per ore tonne, while open pit mining clocks in at US$12.6 per ore tonne.
Looking at the key financial metrics, the company expects the Alaska Range Project to make US$812 million in revenue and deliver a 40% operating margin.
Net cash flow is expected to hit US$322 million, with operating costs set at US$1.89 per pound.
Average annual free cash flow is forecast to reach US$37 million, while the project hosts a US$72 million pre-tax net present value (NPV) with a 7% discount and a 26% internal rate of return.
PolarX is looking at a 2.25-year payback period over the initial 6.5-year life of mine.
To support its ambitions, PolarX believes it will need roughly US$111 million in pre-production funding.
A combination of equity and debt financing is likely to provide the cash injection, sourced from existing shareholders, new equity investors and debt providers from Australia and overseas and/or potential streaming of the metals produced.
Looking ahead
PolarX’s study demonstrates there’s scope to improve the NPV through resource extension drilling at Caribou Dome and Zackly.
For example, a modest 300,000-tonne (14%) increase in the material mined at Zackly at the same grades could yield a $31 million (43%) increase in the projected pre-tax NPV.
Similarly, a 500,000-tonne increase in material mined at both Zackly and Caribou Dome could yield a $52.5 million increase in the pre-tax NPV metrics.
As such, planning is underway for resource extension programs, while further metallurgical test-work is on the cards in the hopes of delivering better copper recovery and concentrate grade, particularly for Caribou Dome, and better gold recovery for Zackly.
Equipment set up at Alaska Range.
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