Tristar Gold Project In Brazil Offers ‘Simplicity And Potential Scale’

In this exclusive interview, Maurice Jackson of Proven and Probable sits down with Nick Appleyard the CEO of Tristar Gold discuss the value proposition on their flagship Castelo De Sonhos Gold Project located in Para State, Brazil. This is the most comprehensive interview to date on Tristar Gold. Castelo de Sonhos offers simplicity and potential scale for speculators.


Video length: 00:36:30

 

Transcript
 

Maurice Jackson: Joining us for a conversation is Nick Appleyard, the president, director and CEO of TriStar Gold Inc. (TSG:TSX.V). Glad to have you discuss the value proposition before us, TriStar Gold, which is focused on developing gold and delivering value. Before we delve into project specifics, Mr. Appleyard, please introduce us to TriStar Gold and the opportunity you present to the market.

Nick Appleyard: TriStar Gold [has] a project called Castelo de Sonhos, which is reasonably early stage. We've got a scoping study we published last year—great results—and now we've just financed through the end of feasibility, which we're starting now. This is what we're here to talk about, and that's what's going to show the value to our shareholders, de-risk and move this very exciting project forward through the feasibility and into production in the next few years.

Maurice Jackson: TriStar Gold's projects portfolio is located in the Para state of Brazil. Take us there, and provide us with some historical context on the region.

Nick Appleyard: Para state is one of the major mining locations within Brazil. There are two states in Brazil, Minas Gerais and Para, that receive 80% of the mining investment into Brazil. The government of Para has said its goal is to become the main source or main recipient of mining investment in Brazil, so it is a very pro-mining state. The area that TriStar Gold is in has a history of logging, informal mining, agriculture, and it's now being developed for soybeans, so the infrastructure is going into the soybean industry. That's sort of what's been opening this part of Paraa up. It's a mining area, but it's now getting the infrastructure coming in through the agriculture, which makes it a real win-win for us.

Maurice Jackson: That certainly will help out with the capital expenditures as we delve into that later. Why does TriStar Gold have full confidence that they have the next great discovery in Para?

Nick Appleyard: I think we already have the discovery, and I think what gives us the confidence is a word I'll probably repeat a few times through the interview is, it's simple. We have a very shallow ore body. We only drill 120-meter-deep holes. We have very simple metallurgy. We have very simple geology, simple open pits, a simple processing technique, no deleterious materials on the environmental side, so we have a simple tailings facility. As a mine developer, historically over the last 20–25 years, I know that mining projects get complex and as they get complex, they get expensive and difficult. The simpler I can keep it the better. I think that's what makes this project so special, the simplicity and the potential scale that it already has.

Maurice Jackson: Let's visit your project portfolio. Take us to your flagship, Castelo de Sonhos project, and share with us the project highlights and geology.

Nick Appleyard: Castelo de Sonhos, if you're interested—in English that's the castle of dreams. It is an ancient paleoplacer deposit. That means that the gold was effectively being shed from a mountain range with primary gold deposits in it, being poured in, then deposited in a large alluvial fan, and then buried for effectively 2.1 billion years.

What that means to us, and what we like about that, and what that really signifies to our shareholders, is this alluvial fan is huge. The plateau that we're developing is about 9 kilometers across and the conglomerates go edge to edge, and we haven't really found the limits of it yet.

Also, what that means to us is what I referred to earlier. It's simple because that gold had been winnowed down from primary deposits. All of the sulfides, all of the minerals the gold may have been tied up with, have been weathered away. We are left with sand and gold, and quartz cobbles in the conglomerate, and almost nothing else. It really makes it a deposit where it's simple to understand the geology, very predictable.

And it has the scale. The scale, again, is easy to predict, because we know if gold is in a stream at one point, it's going to be in that stream 500 meters downstream as well. It almost cannot be, because the laws of gravity require that it will be there. It becomes very predictable. I think that's what we really like about this. The geology is very well understood. That understanding allows us to understand the scale of this property.

Maurice Jackson: Sticking with geology, you have a tremendous amount of exposure to outcrops. How does that fit into the narrative?

Nick Appleyard: What that allows us to do is focus for the next 10-plus years on shallow, open pits. We don't have to worry about the underground side of the mine. There are two deposits around the world that are analogous to Castelo de Sonhos: Tarkwa in Ghana, Jacobina in Brazil. Both of them are very, very similar geologically. Both of them started as open-pit mines, and then developed into open pits and underground mines as they grew in time and age.

We haven’t even touched on the underground potential at Castelo de Sonhos yet, because we have at least 10 years in front of us to evaluate the shallow open pit, which is the cream. That's the bit we're after now. Having something like 16–19 kilometers of conglomerate that outcrops the surface with gold in it that we can identify, gives us a long horizon to look at with just the open pit technology.

Maurice Jackson: TriStar Gold has completed a PEA (preliminary economic assessment). When was the PEA completed? And please walk us through some of the numbers.

Nick Appleyard: We published our PEA in November 2018. It was a very successful one for us. Again, we focus on shallow, open-pit material. Also, being a smaller company, we have the opportunity with a deposit like this to go for a larger-scale mine, with a higher capex and a higher net present value (NPV), or a smaller scale with a lower capex and a higher rate of return. Due to the market, when we're looking at $1,250 gold and lack of liquidity in the market, we chose to go for a smaller, higher return project.

With that, we ended up with a PEA that produced 1.1 million ounces of gold at a base price of $1,250/ounce. With that was add an IRR (internal rate of return) pre-tax of 51% rate of return, or post-tax 43% rate of return, and an NPV of $320 million nearly. Initial capex is only $184 million and we get payback in less than two years. It's an astounding property from that point of view.

Maurice Jackson: The PEA was completed using a responsible, conservative number of a $1,250 gold price. How do the economics change at $1,500 gold price?

Nick Appleyard: That's interesting. I've had a look at that recently and we are, by nature I think, a very conservative group. We have never looked that high. The highest we've looked at was about $1,400, and at that $1,400, our post-tax IRR jumps into the mid-50s and our NPV is around $400 million. At $1,500, it would be even better, but then you would also see other moving parts within the deposit, as we would change to a larger-scale mine. I think that does show—I'd like to also reiterate this—we are a conservative group. When we looked at $1,250 gold, the highest we took our sensitivity test checks to was $1,400.

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Disclosure: I do not own shares in this company nor was I compensated for this post.

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