The Hammond Reef deposit is a high tonnage, low grade gold deposit that is primarily hosted in variably sheared and altered granitoid rocks. Gold mineralization is typically associated with fine grained pyrite mineralization that is often associated with fractures, veinlets and veins filled with various combinations of chlorite, calcite and quartz.
Resource sharing agreements with local First Nations are in place and the project has received environmental approval from both federal and provincial governments. In January 2020, the Company exercised its right of first refusal to repurchase a 2% NSR royalty on the Hammond Reef project from Kinross Gold Corporation for $12.0 million. The property remains subject to a 2% NSR royalty held by Osisko Royalties.
A positive internal technical study at Hammond Reef was completed by the Company in 2020, which resulted in the declaration of the first mineral reserves for the project at the end of 2020. As of December 31, 2021, open pit probable mineral reserves are estimated at 3.3 million ounces of gold (123.5 million tonnes grading 0.84 g/t gold). In addition, the project contains 0.8 million ounces of measured mineral resources (47.1 million tonnes grading 0.54 g/t gold) and 1.5 million ounces of indicated mineral resources (86.3 million tonnes grading 0.53 g/t gold).
If approved for development in the future, mining activities are expected to be carried out in two open pits and the plant will utilize a conventional milling process with a design capacity of 30,000 tpd, and an average recovery of 89.1%. Tailings will be contained in a conventional tailings storage facility.
Average annual gold production is expected to be approximately 272,000 ounces at average total cash costs of $748 per ounce and average AISC of $806 per ounce. Initial capital costs are approximately $1.0 billion. Total sustaining capital and closure costs are approximately $112 million and $47 million, respectively.
Using a gold price of $1,550 per ounce, and a C$/US$ foreign exchange rate assumption of 1.30, the Hammond Reef project has an after-tax IRR of 9.8% and an after-tax NPV (at a 5% discount rate) of approximately $245 million.
The Company requires additional federal and provincial permits to begin construction activities and with a 2.5-year construction timeline, the Hammond Reef project could potentially be ready for production in 2027. At this time, the project has not been approved by Agnico Eagle for development.
The 32,136-hectare property is in the Thunder Bay Mining District, within Treaty 3 lands, the traditional territory of the Anishinaabe people. It is also located within an area recognized by the Métis Nation of Ontario as Region 1 traditional harvesting territory. Agreements with First Nations, the Métis Nation of Ontario and trap-line, bait fishing, and tourism agreements are in place. Ongoing community engagement with the town of Atikokan and Aboriginal groups is a priority to maintain positive relationships in the area.
An Amended Environmental Assessment was submitted in January 2018 and the project subsequently received environmental approval from both Federal and Provincial agencies.
Studies will continue in 2022 to optimize the project and further advance the final permits required for construction and operation.