Vanstar Mining Resources (VSR.V) has released the results of an updated resource calculation on the Nelligan project where IAMgold (IMG.TO, IAG) owns 75% and is carrying Vanstar to production. Despite completing just over 22,000 meters of additional drilling, the resource grew by 63% and now contains 2 million ounces in the indicated resource category and an additional 3.2 million ounces of gold in the inferred resources.
The grade is lower. At a 0.35 g/t cutoff grade, the resource has an average grade of 0.85 g/t in the indicated and 0.88 g/t in the inferred resource category. But as you can see below, even if you would use a higher cutoff grade of 0.5 g/t gold, the resource would still host 1.7 million ounces in the indicated category and 2.8 million ounces in the inferred resource category for a combined 4.5 million ounces (but the strip ratio would obviously increase).
In our November report, we anticipated the updated resource would come in at around 4.5-5 million ounces. Reporting a total of 5.2 million ounces with almost 40% of the total resources in the indicated category is a clear ‘beat’. And to make it even better, there appears to be plenty of low-hanging fruit to rapidly reach the 6 million ounce mark without too much additional drilling.
As you can see above, there are certain mineralized blocks directly adjacent to the pit outline while there are additional holes further to the west which did contain mineralization but are too far away from the pit shell to be included in an in-pit resource. Drilling the edges of the system while also completing a few deeper holes could be a very efficient way to add even more ounces.
With a total resource of in excess of 5 million ounces and a clear path towards the 6 million ounce mark, IAMgold will likely have the Nelligan project pretty high on its list of priorities once the Coté Lake project construction has been completed and the mine has reached commercial production. And then the underlying question obviously remained unchanged: does IAMgold really want to carry Vanstar all the way towards production (as per the joint venture agreement, IAMgold has to fund 100% of the initial capex and Vanstar will only have to repay IAMgold using 80% of its attributable cash flows).
Disclosure: The author has a long position in Vanstar Mining. Vanstar is a sponsor of the website. Please read our disclaimer.
