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Thursday, Jul 25, 2024
Mugglehead Magazine
Alternative investment news based in Vancouver, B.C.

Analysis

Calibre Mining Nicaraguan operations thrive with hub-and-spoke model: Raymond James

A centralized trucking control system and the presence of excellent infrastructure within the country contribute to the efficiency of its operations

Calibre Mining operations thrive with hub-and-spoke model and robust road infrastructure: Raymond James
Limon Mine and Mill. Photo by Calibre Mining

According to recent visitors from the analysis firm Raymond James Ltd, Calibre Mining Corp.’s (TSX: CXB) Nicaraguan operations are successful by following a hub-and-spoke model supported by strong road infrastructure.

Analysts Farooq Hamed and Judith Elliott saw three key takeaways during their visit to Calibre’s mining operations in Nicaragua including a well-supported hub and spoke operating model, a good potential to grow its reserves and mine life and a strong social license in the country.

Analysts commented that its hub and spoke model is working well in the country with the two mills supported by multiple ore sources, a centralized trucking control system and excellent in-country infrastructure.

Calibre Mining operations thrive with hub-and-spoke model and robust road infrastructureRaymond James

Graph via Calibre Mining.

The hub and spoke model for operations in Nicaragua is proving successful, as two mills are supported by multiple ore sources, including El Limon (comprising of several deposits), Pavon, Libertad and Eastern Borosi.

The introduction of a centralized trucking control system and the presence of excellent infrastructure within the country, such as roads and electricity, further contribute to the efficiency of these operations. Calibre’s Nicaraguan operations are well-equipped to generate annual free cash flow because of its current reserve life of approximately four years.

Analysts also noted Calibre’s strong social license to operate with local and national governments.

“During our government visit, the Minister of Energy and Mines suggested that the government will support Calibre’s needs in-country and saw Calibre as a positive influence when it comes to safe and sustainable mining practices that could be passed on to the local artisanal miners,” wrote the analysts.

Calibre has been able to increase the reserve and resource base since taking over the assets, which is crucial given a reserve life of approximately four years, rising to six years according to its Indicated resources.

The firm maintains its Outperform rating and target price of C$1.50/sh. Its target price is calculated using a blend of factors, including a 0.5x multiple of our estimated Net Asset Value per Share (NAVPS) and 5x our estimated Next Twelve Months’ Cash Flow per Share (NTM CFPS). For more details, please refer to our analysis.

Read more: Calibre Mining’s execution has been very strong in Nicaragua: VIII Eight Capital

Read more: Calibre Mining well-positioned to continue organic growth through gold grade increases: Cormark Securities

Since acquiring the assets in 2019, Calibre has made significant strides in expanding the reserve base in Nicaragua, increasing it from approximately 2.2 million tonnes at 4.25 grams per tonne to roughly 6.3 million tonnes at 5.37 grams per tonne presently.

“From our tour, we believe Calibre has a good target pipeline to continue to grow the reserve/ resource base,” wrote the analysts.

In 2023, Calibre approved a budget of $20 million for exploration in Nicaragua, with a planned 60,000-meter drill program. The primary focus will be on key areas such as the Panteon VTEM corridor to the North of the Panteon deposit at Limon, the Hagie cross structure connecting Panteon and Santa Pancha at Limon and Veta Azul at Libertad.

Additionally, initial drilling is scheduled for the recently permitted Buena Vista and La Fortuna concessions near Limon and Libertad, respectively.

Read more: Calibre Mining expands high-grade gold discoveries at Panteon North

Read more: Calibre Mining builds strong foundation for continued success in Nicaragua: Canaccord Genuity

El Limon mines around 2,500 tons per day

The Limon complex consists of a central mill that has the capacity to process 1,500 tons per day ( around 500,000 tons per annum), with open pit and underground mines located approximately 2 to 10 kilometres away from the mill. The operation mines around 2,500 tons per day from both open pit and underground sources, with approximately 1,500 tons per day processed at the Limon mill and around 1,000 tons per day transported to the Libertad mill located approximately 300 kilometres away.

The overall probable reserves of Limon, which include open pit (OP), underground (UG), and stockpile (minimal), are estimated to be approximately 3.7 million tons at a grade of 5.5 grams per ton. At the current mining rates, these reserves can support a mine life of just over 4 years.

Additionally, the complex has combined indicated resources (excluding tailings) of approximately 6 million tons at a grade of approximately 5.2 grams per ton (RJL calculation), which could potentially support an additional 2.5 years.

Calibre Mining has made significant investments in exploration, and as a result, they have developed a strong pipeline of exploration targets at Limon that could extend the mine life of the complex.

Read more: Calibre Mining reports high-grade ore from Pavon central mine

Read more: Calibre Mining broke gold production records with 10% increase in 2022

The Libertad site comprises both underground and open-pit mines, along with a mill facility that boasts an installed capacity of approximately 6,000 tons per day (2.2 million tons per annum).

Although limited reserves are remaining at Libertad, the mill has assumed a critical role within Calibre’s hub and spoke model, as it processes ore sourced from satellites such as Limon, Pavon, and Eastern Borosi, slated for later in 2023. With consideration of current mining and milling rates at Libertad and its surrounding satellite deposits, we predict a reserve lifespan of 2-3 years.

The company has identified several promising exploration prospects at their targets. These include the Panteon VTEM/Hagie Cross Structure, where a follow-up on the 2022 drill program along the Panteon VTEM anomaly and newly intercepted NW-SE Hagie vein holds the potential for delivering new mineable resources in the short term.

Another area of interest is Panteon North at Limon, where follow-up work on the successful 2022 drill program that found 323koz at 10+g/t with infill and testing down dip extension also holds potential for short-term mineable resources.

Calibre also plans to drill test beneath high-grade surface samples collected from outcrop and artisanal mining shafts at Veta Azul in Libertad, which may yield short-term new mineable resources for OP operations. Lastly, resource definition and conversion infill drilling at Blag and East Dome 43-101 resources are planned at EBP to upgrade the current resource and add potential mineable ounces to the EBP mine plan.

 

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