US Gold Corp. has announced the results of a preliminary economic assessment (PEA) for its 100%-owned El Gallo project in Sinaloa state, Mexico. At base case prices of $18/oz for silver and $1,000/oz for gold, the PEA projects average annual production of 5 million oz of silver and 50,245 oz of gold over a mine life of six years. Cash costs per silver ounce net of a byproduct credit for gold are estimated at $5.90/oz. Initial capital requirements, including a 20% contingency, are estimated at $149 million. The company notes the PEA includes inferred resources, and there is no certainty the economics projected by the PEA will be realized.
However, US Gold Chairman and CEO Rob McEwen said the recent discovery of six new veins and extensions of known resources offers good potential to further expand the size of the project. Nine drills are currently operating at El Gallo to update the current resource and move the project through to feasibility by year-end 2011.
The El Gallo feasibility work includes additional metallurgical test work, geo-technical and infill drilling, mine design, production scheduling, process engineering, and detailed pre-production capital and operating costs. Baseline environmental studies have been initiated, and permitting for full mine operations is scheduled to be completed concurrently with the feasibility study. The project is currently estimated to reach commercial production in early 2014.