Chesapeake Gold (CKG) - Economics Becoming Clearer as Tests Show

Chesapeake Gold Corp. is a Canadian exploration and development company focused on the advancement of its precious metal deposits in North and Central America. The company’s flagship Metates project is a 100%-owned gold and silver project located 175 km northeast of the city of Mazatlán in Durango state, Mexico.

The mineral resource estimate of the Metates project boasts 19.8 million ounces of contained gold and 542.0 million ounces of contained silver in the measured and indicated category with 640,000 ounces of contained gold and 18.0 million ounces of contained silver in the inferred category. The project is envisioned to be a low-cost and scalable sulphide heap leach operation, of which the company released a preliminary economic assessment (PEA) in the middle of 2021. The PEA has highlights including a pre-tax NPV of CAD$ 1.43 billion and an internal rate of return (IRR) of 35%. The project’s initial capital cost (CAPEX) is estimated to be CAD$ 359 million, with a payback period of 2.5 years.  

Chesapeake Gold Corp. on the 13th of September 2022 released an update to the metallurgical study it had commenced in May 2021. The metallurgical test work is aimed at better understanding the oxidation rate of the Metates project’s mineralisation as well as investigating various ways to increase the efficiency of the process.

The metallurgical test work the company is conducting will enable it to progress the Metates project to a pre-feasibility study (PFS). The pre-feasibility study will aim to enable further studies which will enable the company to access debt financing.

Metates Project and Sulphide Heap Lech Technology

The Metates project of the company is a 100%-owned land package located 175 km northeast of Mazatlán in Durango state. The project holds a NI 43-101 compliant resource estimate which boasts a total resource of more than 20 million ounces of gold and more than 550 million ounces of silver.

The company in early 2021 acquired Alderley Gold Corp., a private British Columbia mining technology company. The acquisition enabled the company to access the innovative Sulphide Heap Lech Technology, which can transform the Metates Project into a low capital cost, sulphide heap leach project.

Alan Pangbourne the CEO and President of Chesapeake Gold Corp. explains the impact of the acquired Sulphide Heap Lech Technology previously held by Alderley Gold Corp. as follows:

“a concept that would allow us to oxidise the sulphides, which is the reason why the gold is known as refractory; because it's locked in those sulphides. Once you oxidise them, you effectively release that gold and silver to then be leached with cyanide and lime, as everybody else does in a heap leach when it's an oxide ore body.”

The reason the company is pursuing the oxidation of the sulphides present in the mineralisation is that the innovative process provides various advantages including 90% less power consumption than a traditional autoclave process as well as 90% less water consumption at a tenth of a traditional autoclave plant’s capital cost (CAPEX)

Pangbourne explains that the company is underway with various metallurgical tests to optimise the sulphide oxidation and leaching process. The impact of the technology on the gold refractory industry is, according to Pangbourne, envisioned to be substantial, enabling various projects which were uneconomical due to capital costs to be viable.

“The size of the prize is huge, not just for Metates, but probably for the gold refractory industry as a whole. To give you an idea, Metates is over 20 million ounces of gold and 550 million ounces of silver in resource in the ground. We know where the elephant is: the question has always been, is there an economic, financeable, deliverable project there? The previous management looked at all the autoclaves, which wasn't economical because of the capital cost being USD$ 3.5 billion. We put out a PEA just over a year ago that showed the capital cost of USD$ 360 million.”

Metates project metallurgical test work

Chesapeake Gold Corp. on the 13th of September 2022 released an update to the metallurgical study it had commenced in May 2021. The metallurgical test work is aimed at better understanding the oxidation rate of the Metates project’s mineralisation as well as investigating various ways to increase the efficiency of the process.

The envisioned process, enabled by the Sulphide Heap Lech Technology, consists of an oxidation step in which the pyrite of the gold/silver mineralisation is oxidised to iron oxide. The oxidation frees the sulphide of the mineralisation as well as releases the gold and silver mineralisation. The second step is the standard heap leaching of the material. Pangbourne explains that the metallurgical test work done by the company enabled it to oxidise 30% of the sulphides present in the mineralisation and as such can be seen as a good first step.

“Firstly, oxidising the sulphide means that the pyrite, fool's gold, which is where the gold is inside, will change from pyrite to rust, effectively, or iron oxide. It is not dissimilar to your car rusting - that's iron going to iron oxide. Pyrite will do the same thing. It is a relatively straight line, at least for the first 128 days, and we managed to oxidise 30% of the sulphide in the entire sample. Thus, not only 30% of the rocks oxidised, everything that had sulphides in it oxidised to a degree, and we got 30% of those rocks oxidised.”

The oxidation of the sulphide need not be 100% but must rather be localised to the areas where the gold and silver mineralisation is present. Pangbourne explains that the oxidation of pyrite occurs in the areas where the mineralisation is stressed. He uses the analogy of a car rusting, the areas where rusting (oxidation) occurs are usually the most stressed areas of the car.

“In Canada, we all drive around with salt on the roads, and we know very well where the car starts to rust first, and it always rusts where the steel of your car is most stressed. Where it's stressed is usually where it's been bent, welded, scratched, and the protective coating on the outside is gone, or it's very stressed. That is exactly the same: where the gold and silver are in the pyrite, it stresses it. Therefore, it oxidises first or rusts first where it is most stressed. It's like anything under stress; it gets annoyed.”

The second step of the gold and silver recovery process is the traditional heap leaching of the oxidised material. The test work shows that if the mineralisation can be oxidised, the heap leaching will be able to recover the gold and silver mineralisation.

“If I can oxidise it, which I can- I got 30% in 128 days - I can then get the gold and silver out. I got 60% of 50% of the total gold that was in the sample at the beginning before I oxidised it. This isn't an additive thing”

Pangbourne explains that the current recovery rates of 60% are initial and will be subject to various optimisation endeavours. The company however is pleased with its initial recovery rates, with Pangbourne explaining that the results serve as proof of concept.

“If there was 1g/t, which is about what our head grade is, in the rock before I did anything to it, by the time I've finished, I could recover 60% of that, so that is 0.6 g/t. If the silver grade was 14g/t, which is roughly what it was, by the time I got to the end of it I'd recovered half - 7g. That's what this means, and to everybody I've talked to, I've been saying the same thing: this is proof of concept.”

Financing the project and planned PFS

The metallurgical test work the company is conducting will enable it to progress the Metates project to a pre-feasibility study (PFS). The pre-feasibility study will serve to advance further studies which will enable the company to access debt financing, Pangbourne explains that the company has various studies that will need to be concluded before the Metates project will see production.

“To get it financed, to get a bank to give you the money, there's probably somewhere between a year and two years of work that has to happen: pre-feasibility, feasibility, permitting; you're not going to see a penny until you've done those. You can't do the pre-feasibility study until you've got sufficient backup to pass scrutiny from the banks, in particular, and their technical experts, to support the assumptions that are in that study. It just won't happen.”

Pangbourne explains to reach a PFS the various assumptions made in the project’s preliminary economic assessment (PEA) will need to be addressed. One of the project factors that need to be decided upon is the sourcing of power for the project. Pangbourne explains that even though the company assumed it would source power from a nearby substation, it is not confirmed as yet.  

“We assume there's a substation 30 km-40 km away that feeds another mine. We assume that we can get the power from there. We need to get rid of that 'assumed' word and actually know where, how much, and how we're going to get power to the site.”

The source of water for the processing facility also needs to be confirmed to enable future studies such as the PFS according to Pangbourne.

“There's a river at the bottom of the valley where we're putting the heap leach. To do that you've got to have water rights and transfer them up the hill so that the extraction point is somewhere else. We're working on understanding the process and starting that process to get water rights because of the PEA and the size we're starting at, we know roughly how much water we need. That's not going to change a lot. But by the time you get to the PFS, you want to be able to say, this is where it's coming from. This is how much we can get, and we've started the process, here's the overall water balance, and it's enough.”

Future

Chesapeake Gold Corp. plans to continue with its metallurgical test work in the future, with the company aiming to optimise the recovery process. The company is well financed sitting at a cash position of CAD$ 30 million, with Pangbourne stating that the company has in the last 18 months only spent CAD$ 5 million, but has been able to accomplish various milestones.

“We currently have CAD$ 30 million in the bank. When we started 18 months ago, we had CAD$ 35 million, so we've spent USD$ 5 million so far. In that time, we've done the met test work to get us to the point where we are today. We did a PEA, we did over 12,000 m of PQ drilling; we're not wasting money just on overheads. We're working consciously and economically on the things that matter that have to feed into that next step, which is the pre-feasibility study. The one thing that is critical today that we have to get is an appropriate level of metallurgical understanding beyond one test.”

The completion of the metallurgical studies will enable the company to reach the PFS stage of its project. Pangbourne explains that the company is already underway with environmental monitoring, which will enable it to incorporate the new data with previously conducted studies.

“When we get to PFS, the next thing in front of us is the permit application. I can't do the permit application for a PEA because I don't have enough data in it. We've restarted the environmental monitoring so that the environmental data is coming up to speed and we can tie it into the older data, to be able to use that with the PFS to do our permit application, which wasn't running before.”

To find out more, go to the Chesapeake Gold website