Eagle Gold eyes April construction start

Victoria Gold Corp. appears to be well on its way to building a mine at the Eagle Gold Project in central Yukon Territory by 2015, with construction startup tentatively scheduled for April.

Eagle Gold is the most advanced new project in the region and is on track to become the largest gold mine in Yukon history. With estimated employment of 350-400 people, the mine also is expected to make a significant contribution to the territory's economy.

Victoria aims to produce 207,000 ounces of gold during the first full year of operation in 2015, average 212,000 oz gold annually at a cost of US$542/oz during the first five years and average 192,000 oz gold per year at a cost of US$614 per oz over the 12-year life of the mine.

Based on a positive feasibility study, the company is projecting C$260 million in annual cash flow over the first five years of production at a gold price of US$1,700/oz.

The Eagle Gold deposit hosts probable reserves of 2.3 million oz of gold contained in 92 million metric tons of ore with a grade of 0.78 grams per metric ton gold, as outlined in a recent NI 43-101-compliant feasibility study of the project. Thanks to substantial growth through exploration during the past three years, Eagle Gold's NI 43-101 mineral resource is currently estimated at 222 million metric tons averaging 0.68 g/t gold, containing 4.9 million ounces of gold in the indicated category inclusive of probable reserves, and a further 78 million metric tons averaging 0.60 g/t gold, containing 1.5 million ounces of gold in the inferred category.

The deposit is located on the 650-square-kilometer (251 square miles) Dublin Gulch claim block some 85 kilometers (53 miles) by road; north-northeast of the village of Mayo within the mineral rich Selwyn Basin of Yukon Territory.

In addition to the Eagle Gold deposit, Dublin Gulch hosts the Mar tungsten deposit and a 21-kilometer- (13 miles) long belt of multi-element mineralization known as the Potato Hills Trend. Within this belt, Victoria has identified several new gold and silver zones with significant mineral potential.

More deposits nearby?

In 2012 Victoria focused on moving the Eagle Gold project towards production while exploring and expanding the mineral inventory of the entire claim block.

In October, Victoria reported drill and surface sampling results on the Olive target, one of several areas of significant mineralization centrally located along the Potato Hills Trend.

The company completed 11 diamond drill holes for 2,996 meters in a program that targeted extensions of mineralization identified during previous drilling programs and reconnaissance surface sampling.

Assay results have been received for six of the 11 holes and continue to show significant gold grades and intersection widths.

These include 6.4 meters of 3.12 g/t gold starting at a depth of 124.60 meters in hole DG12-530C and 1.43 meters of 8.09 g/t gold starting at 87.86 meters within 10.1 meters of 2.56 g/t gold starting at 84.03 meters in hole DG12-529C.

Victoria said some of the Olive target mineralization likely will be amenable to heap leaching and may be accretive to the near‐by, proposed Eagle Gold Mine. Metallurgical work on the Olive samples is ongoing.

"Olive is shaping up to be a meaningful complement to the proposed Eagle Gold Mine, which is set to begin construction in 2013 and production in 2015," said Victoria President and CEO John McConnell.

The Olive target is located 2.5 kilometers (1.5 miles) northeast of the Eagle Gold deposit and is the site of several historically exploited high‐grade sulfide veins.

The Olive area was mined on a small scale from shallow shafts and adits at the turn of the last century and placer mining in creeks draining the area indicate gold‐bearing host rocks.

The Olive vein system is located near the top of Olive gulch and consists of gold‐bearing quartz‐scorodite‐arsenopyrite vein material.

A 200-meter trench excavated and sampled in 1991 exposed a zone of quartz and quartz‐arsenopyrite veins hosted in the Dublin Gulch granodiorite that averaged 1.2 g/t gold over 97.6 meters.

Diamond drill hole 91‐012C collared in the trench intersected 89.9 meters grading 1.08 g/t gold and drilling by Victoria in 2010 verified the gold mineralization (DG10‐384C: 20.3 meters grading 1.93 g/t gold (from 18.1 meters to 38.4 meters) plus 41.1 meters grading 0.96 g/t gold (from 49.1 meters to 90.2 meters).

Subsequent drilling in 2011 continued to intersect mineralization (22.8 meters averaging 0.72 g/t gold; hole DG11‐466C).

The best results of the 2012 surface sampling program include 189.5 g/t gold, 64.0 g/t gold and 11.5 g/t gold (all grab samples) from arsenopyrite and scorodite‐arsenopyrite veins in trench OLTR‐09.

The 2012 program adds to the historical work and indicates that the Olive area has the potential to become Victoria's next significant resource.

"The Olive and Shamrock targets could be two more Eagle-size deposits," Victoria Senior Project Geologist Joanna Ettlinger told Mining News during a visit to the Eagle Gold Project in August.

"Because we already will have the crusher and leach pad, it doesn't need to be another 6 million ounces to be worth exploiting," Ettlinger explained.

Building a mine

For 2013, the company plans to narrow its focus to concentrate exclusively on advancing Eagle Gold.

Victoria intends to build a conventional open pit, three-stage crush, in-valley leach operation with a production rate of about 29,500 metric tons per day. Gold extraction will utilize sodium cyanide heap leaching technology.

The Eagle Gold Mine will produce 92 million metric tons of ore and 132 million metric tons of waste rock over an 11-year active mining phase, plus an additional year of gold recovery.

The project has excellent infrastructure including year-round road access, commercial grid power 25 kilometers (16 miles) from site and an airstrip 80 kilometers (50 miles) south of the project. In addition, the company has constructed a 100-person, all-season camp at the Eagle Gold project site.

A feasibility study, completed in 2012, targets initial production as early as the fourth quarter of 2014 and full production in 2015. The 20-month construction phase set to begin this spring will require initial capital and pre-strip costs estimated at C$430 million.

A major hurdle for Victoria will be raising capital to fund construction of the proposed mine. However, the junior has more than a few financial resources on which to draw for funds.

The initial CAPEX (including pre-stripping) for the Eagle Gold project is C$399.7 million, while life-of-mine sustaining capital costs are C$132.9 million, and closure costs (net of salvage value) are C$64.2 million. Based on US$1,325-per-ounce gold, the project has a pretax net present value of US$380.8 million (at a 5 percent discount rate), a 24.1 percent internal rate of return and a payback period of 3.1 years.

Victoria is 55 percent owned by institutions and counts senior mining company Kinross Gold Corp. among its major investors.

To raise capital, Victoria has embarked on a program of selling some of its assets, primarily in Nevada. The junior currently has about C$40 million in working capital and could raise another $20 million from proceeds of additional asset sales.

In November, Victoria reported the sale of its Big Springs Property, located in Elko County, Nev., for US$6 million to MRG Copper LLC, a U.S. subsidiary of Big Springs Project Pty Ltd., which is concurrently being acquired by Kimberley Rare Earths Ltd. The deal is expected to close in February.

"This latest transaction further demonstrates our adherence to two of our core goals. Namely, to minimize share dilution by realizing cash through non-core asset sales and to remain focused on the construction of the company's flagship Eagle Gold Mine," McConnell said, after announcing the sale.

Victoria also plans to borrow C$210 million to C$260 million in debt financing for the Eagle Gold project from a syndicate of banks on the strength of the project's feasibility study, which was recently reviewed and approved by an independent engineering firm.

"We're fairly confident (the syndicate) will step up with about C$210 million in project debt financing," McConnell told reporters in December.

Alternative sources of financing include Victoria's royalty stream from the company's interests in producing assets, other forms of debt, a joint venture partner and issuing additional equity.

The Eagle Gold Project is tracking well through the environmental assessment process.

The junior has signed a comprehensive cooperation and benefits agreement with the local First Nation of the Nacho Nyak Dun. The Eagle Gold deposit is situated on land with the traditional territory of the Nacho Nyak Dun.

The project is currently being assessed under the Yukon Environmental and Socio-Economic Assessment Act by the Executive Committee of the Yukon Environmental and Socio-Economic Assessment Board. Additionally, a Water Use License and Quartz Mining License are required.

In September, Victoria reported the completion of the Draft Screening Report for the Eagle Gold project by YESAB. The regulatory body's delivery of the document is a significant milestone because it moves the project closer to finalization of an environmental assessment that is required under Yukon law.

In the screening report, the YESAB panel wrote: "As a result of this assessment, the executive committee recommends to the decision bodies that the Eagle Gold Project be allowed to proceed without a review, subject to terms and conditions identified in this report."

To begin construction, Victoria will need the Quartz Mining License, which can be issued within a matter of days following a positive YESAA Decision Document, which is expected in February or March.