Integra Resources (ITR) - NEW Approach with Notably Improved Economics

Integra Resources Corp. is a development-stage mining company focused on the exploration, de-risking and advancement of its DeLamar gold-silver project. The DeLamar gold-silver project is located approximately 160 km from the city of Boise in Idaho, and includes the past-producing DeLamar gold mine. The project was previously owned by Kinross Gold Corp. and produced approximately 1.6 million ounces of gold and 100 million ounces of silver until being placed in care and maintenance in 1998.

Matthew Gordon spoke with George Salamis, the President and CEO of Integra Resources (TSX-V:ITR) to discuss the company’s DeLamar gold-silver project.

Company Overview

The project consists of a 5,300-acre land package which consists of patented and unpatented claims. The project further has a leased land package of 4,100 acres with approximately 1,575 historic drill holes and 145,940 m of drilling conducted on the property in the past.

Integra Resources Corp. published a pre-feasibility study (PFS) of the project in early 2022 which was not met favourably by the investor community. The PFS showed a two stage development strategy consisting of a heap leaching operation for the first from which it planned to construct a 6,000 metric tons per day (mtpd) mill in the second stage of development to process non-oxide ore.  

The company has announced, following the publishing of the PFS, that it will follow a simplified development strategy for the project. The development strategy entails the company advancing the project as a simple, low-cost heap leach operation. The heap leach operation will be able to deliver an average of 136,000 ounces of gold equivalent (AuEq) per year and further shows a 17% reduction in the project’s all-in sustaining cost (AISC) to USD$ 813 per ounce as well as a 10% reduction in initial capital costs (CAPEX).  

The company believes that advancing the heap leach stage of the project as a stand-alone mining operation also offers a lower cost, as well as a lower risk option for the company and its shareholders to reach production. The standalone heap leaching operation shows strong economics and possesses a rapid payback period.

DeLamar Project

The DeLamar project of the company is a 100%-owned 5,300-acres land package which the company acquired from Kinross Gold Corporation in November 2017.

The project includes the past-producing DeLamar mine, which has over 100 years of production history including open-pit and underground mining operations. The mine produced approximately 1.6 million ounces of gold and 100 million ounces of silver throughout its operational history.

The mineralisation of the project is dominantly oxidised ore showing recovery rates of between 85% to 95% for gold and 70% to 80% for silver. Integra Resources Corp believes that the mine has remained relatively unknown since it was put in Care and maintenance in 1998., due to the low metal prices of the time. The project also enjoys all-season road access, grid power, a lined water treatment pond, a workshop, and an office building from its past operations.

Pre-feasibility study and simplified strategy document

The company published a pre-feasibility study (PFS) of the DeLamar project in early 2022, which the market did not react kindly to, due to according to the company the high inflationary environment of the time. George Salamis the President and CEO of the company explains the situation as follows.

“…essentially, what happened was we put out a PFS during the peak of inflation, the very first study of the year by a pre-development company, and we took our licks for it. I felt that a lot of the investing public didn't quite understand the measure of inflation that occurred in this study and we're confused.”

The PEA was showed a two-phase development strategy consisting of a heap leaching operation for the first year which would process oxide and mixed ore from both the DeLamar and Florida Mountain deposits of the project from which it planned to construct a 6,000 metric tons per day (mtpd) mill in the second stage of development to process non-oxide ore.

The reaction of the investor market to the published PFS led the company to reassess the DeLamar project, from which it decided to follow a simpler development strategy for the project. Salamis explains that the core of the project is the heap leach operation and that by pursuing it as a standalone operation, the project is severely de-risked.

“The core of the project really is the heap leach. It's the financial engine of the project, relative to everything else. It accounted for three-quarters of the Net Present Value of the project at the end of the day. We have taken the decision now before we start permitting, before we stick a shovel in the ground, to focus just on the heap leach because it is that financial engine.”

He further states that the possibility of the milling circuit may be investigated at a later stage.

“We can always look at Mill expansions later on, once the project is up and running, and cash flowing and doing all of those great things.”

Advantages of the stand-alone heap leach operation

The stand-alone heap leach operation of the project shows various advantages above the previously deliberated operation. The advancement of the project offers a lower cost as well as lower risk for not only the company but also its shareholders.

The permitting of the heap leaching operation is also much easier according to the company due to less surface disturbance resulting from not having to construct large milling and tailings treatment facilities. The omission of the milling facilities also eliminates the production of acidic by-products due to the processing of sulphide containing ore, Salamis explains:

 “…the mill is designed to treat sulphide. When you treat sulphide, there's a component of potential acid generation which comes with that. If we're no longer contemplating milling … that makes our permitting iterations much, much easier.”

The water consumption of the project is also positively affected by the stand-alone heap leaching operation, as it uses approximately 60% less water than previously estimated. Salamis explains that the water usage of a project in the western US is an important factor for authorities and affects the permitting thereof:

“…we're talking about using about 60% less water. Water is a big, big thing in the context of US permitting. Water usage is huge in the western US and the permitting authorities want to know about that more than anything else. If we're now contemplating something that's going to use 60% less water, that makes permitting easier.”

 Stand-alone heap leach Economics

The pre-feasibility study of the standalone heap leaching operation shows a 17% reduction in the project’s all-in sustaining cost (AISC) to USD$ 813 per ounce as well as a 10% reduction in initial capital costs (CAPEX).

The revised PFS also highlights the production of 1 million ounces of gold equivalent in the lifespan of the operation with an after-tax net present value (NPV5%) of USD$ 435 million and an after-tax internal rate of return (IRR) of 43%. The PFS is calculated using a gold price of USD$ 1,900 per ounce and a silver price of USD$ 24.03 per ounce. The average production of the heap leaching operation is 136,000 ounces of gold equivalent per year.

The company is optimistic regarding its revised strategy with Salamis believing that the new economics will be seen favourably by the investor community:

“… that's a pretty significant drop down to $813 an ounce all-in sustaining. That's a great margin, doesn't matter what gold price you want to use in your price debt. So that provides surety of payback and it reduces the time to pay back all of those key things that financiers will look for.”

2022 strategy and future plans

Integra Resources Corp. plans on focussing its exploration initiatives in the foreseeable future on the identification of deposits that are heap-leachable. Salamis believes that the correct exploration direction to follow is to identify the oxide deposits in such a way adding value as well as lifespan to the project, he explains:

 “…what are the best ounces for us to find for now? The best and easiest ounces for us to find and add to future mine plans are the oxide heap leachable ounces. They're cheap, they're easy to find, and they're near the surface. We know of at least 3 areas where we've got something that looks like 0.5 million ounces to 1 million ounces of oxide heap leachable potential. Think about what that looks like when you start to add that on to 8-years of heap leach mine life. Now you're talking 10, 12 areas of potential heap leach production.”

The company plans to conduct between 15,000 m and 20,000 m of exploration drilling in the coming year, with its focus on provisional “low-hanging fruit”. The company further plans to continue advancing the permitting of the project. The company is currently underway with a baseline study which is aimed at supporting the company’s initiative to submit a plan of operations by the first half of 2023.

 The company estimates that the project permitting process will be approximately 3 years in total, Salamis explains that even though the project is now an easier operation from a permitting perspective, there still are certain works that need to be done in order to obtain the permitting of a project.

“The work that goes into permitting is the work that goes into permitting. So I would love to sit here and say we can shave, you know, half a year or a year off the permitting iteration but for now, let's just keep it at 3-years and I'm going to be conservative in saying so.”

Integra Resources Corp. believes that through the publishing of its new development strategy it will clearly show the upside potential and optionality of the DeLamar project to the investor community. Salamis believes that the project remains an attractive investment with the company focused to show this, he states:

“It hasn't gone anywhere. We haven't lost any value on the optionality, on the exploration upside. It's still there, it's not going anywhere and we'll continue to make it bigger as we march through permitting.”

To find out more, go to the Integra Resources website