New Found Gold (TSXV: NFG) has released the first economic assessment conducted for their flagship Queensway Gold project in Newfoundland. While the proposed operation is not large in size, the company appears to be rushing to enter the production phase of operations, with New Found claiming initial production is targeted for 2027.
The preliminary economic assessment established by New Found Gold is focused on the development of the AFZ Core, with the company proposing a phase approach to mining operations. The proposed open pit and underground mining operation collectively has a life of mine of 15 years, with mining to occur in three major phases, producing a total of 1.5 million ounces over that life of mine.
Phase one of the operation is expected to have annual production of 69,300 ounces, with production to come from a small open pit. The first phase is expected to operate for five years, using off site toll milling to process 700 tonnes of ore per day while the company works through the process of obtaining approvals for a larger operation on site.
The second phase of operation meanwhile involves the construction of a 7,000 tonne per day processing plant, with construction of the facility expected to begin in Year 3, with operations then commencing in Year 5, with the plant to then operate for a nine year period. The facility is expected to process ore from a larger open pit mine, and then will process low grade ore stockpiles for two years after mining has been completed. Gold production as a result will average 129,000 ounces over the nine year window.
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The final phase will then consist of underground mining, with construction of the underground mine slated to begin in Year 5. The operation is expected to produce high grade ore for years 6 through 10, with grade sequencing at the processing facility expected to be utilized to optimize economics. For the five years that underground operations are expected to contribute to the operation, gold production is expected to average 172,200 ounces a year.
The multi phase approach is expected to minimize the overall initial capital required, as well as the shareholder dilution needed to fund construction. Phase one has initial capital costs of $154.8 million, while capital costs for phase two total $442.2 million, with phase three having capital costs of $142.7 million. Sustaining capital over the life of mine meanwhile is estimated at $325 million.
All in sustaining costs meanwhile are expected to vary widely over the life of the mine as a result of the numerous phases being employed, with phase one expected to see an AISC of US$1,282 an ounce, while phase two has an AISC of US$1,090 over the first five years, and an AISC of US$1,206 over the total nine year window.
Over the entire life of mine, this complicated operation is expected to have cash costs of US$1,085 an ounce, while AISC is expected to average US$1,256 per ounce.
This results in an after-tax net present value of $743 million alongside an IRR of 56.3%, which is based on US$2,500 gold and a discount rate of 5%. The NPV meanwhile increases to $1.45 billion, while the IRR jumps to 197%, when using US$3,300 an ounce gold.
In terms of next steps, New Found Gold is planning to conduct a 70,000 metre drill program for further infill and definition drilling where initial mining is expected to occur. Engineering studies to support development are expected to occur, alongside environmental studies. An environmental assessment is expected to be delivered in the first half of 2025, followed by an updated resource estimate to support phase 1 operations in Q2 2026.
Early works programs are expected to begin next year, subject to project financing, with phase 1 construction occurring in the first quarter of 2027, followed by production being achieved in Q3 2027.
New Found Gold last traded at $2.24 on the TSX Venture.
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