Co.'s Heap-Leach Projects Have Strong Economics, M&A Appeal

Source: 3L Capital 01/21/2025

For this developer of two gold projects in the U.S., a strategic investment or takeout by a producer could happen near term, noted a 3L Capital report.

Liberty Gold Corp. (LGD:TSX; LGDTF:OTCQX) was highlighted by 3L Capital as a company under its coverage using the heap-leach methodology to extract precious metals from ore, the analysts noted in their Dec. 6 Heap Leach Primer. This document is the result of a weeks-long study of 35 technical reports from heap-leach and milling projects in various stages.

Liberty is “advancing low-capex, U.S. heap-leach projects with strong economics and mergers and acquisitions (M&A) appeal,” the analysts wrote. “We believe a strategic investment by a producer or M&A could be a near-term outcome. Finding a large-scale, open-pit oxide project in one of the best mining jurisdictions globally is rare.”

The Heap-Leaching Process

Heap leaching involves stacking ore on impermeable pads and irrigating it with a leaching solution for a period of time, the analysts explained. This dissolves the silver and/or gold into a liquid called the pregnant leach solution. Then, the metals are recovered via an additional process, such as activated carbon adsorption. With this, the pregnant leach solution is passed through tanks containing activated carbon that adsorbs the metals, and later, the carbon is stripped with a hot caustic solution. Next, electrowinning, using electric current to deposit the metals onto a negatively charged electrode, takes place.

An alternative to activated carbon adsorption is Merrill-Crowe, which involves removing the oxygen from the solution and adding zinc dust to cause the metals to precipitate. This typically is employed when recoverable silver content in the ore is greater than 10 grams per ton.

“[Heap-leach] projects are essential components of mining portfolios and serve as catalysts for growth,” 3L Capital wrote.

Assets at a Glance

The analysts reviewed Liberty’s two projects. On its flagship Black Pine in Idaho, the heap-leach developer released a prefeasibility study in Q4/14 outlining annual production of 135,000 ounces (135 Koz) of oxide gold over a 17-year mine life (183 Koz per annum in years one to five) with potential for further reserve growth and optimization. Economics were a US$552 million ($552M) net present value (NPV), a 32% internal rate of return, and a 3.3-year payback. Construction would take one year and cost US$327M.

Liberty potentially could enhance Black Pine in two ways, noted 3L. One is by heap-leaching the ore in the historical stockpile, containing 50–75 Koz of recoverable gold. The company plans to drill the pad to see if it would be economical to rehandle the material onto the new leach pad. If so, this could add low-cost ounces to the existing mine plan.

Also, Liberty could define additional higher-grade reserves and bolster the project’s economics in a number of ways. They include drilling, refining the stockpiling strategy, pursuing bulk material movement options such as conveyors and haul road layouts, and expanding leaching capacity possibly to 24,000,000 tons per year.

To deal with high carbonaceous material that could prevent gold recovery from solution with heap leaching, in the mine plan Liberty secluded areas containing it and classified it as waste.

Looking ahead, the company anticipates receiving all permits and being ready for construction between H2/28 and H1/29.

Regarding its other project, 3L wrote, Goldstrike in Utah, the 2018 preliminary economic assessment indicated a 7.5-year mine life producing 94.5 Koz of gold per year. Using a US$2,300 per ounce ($2,300/oz) gold price, 3L Capital estimated the project NPV discounted at 5% to be US$283M and the IRR to be 57%. It forecasted initial capex at US$152.3M.

“Project advancement is on hold until process water supply derisking is complete, although recently discovered antimony on surface could change that,” wrote the analysts.

Acquisition Data

3L Capital’s analysis determined that the average price paid per reserve ounce for producing heap-leach assets is mixed, but between 2020 and 2024 for developers, it ranged from US$130–223/oz.

“Achieving just half of the average takeout P:NAV multiples could deliver returns exceeding 150% for companies such as Liberty Gold,” the analysts purported.

The current consensus price (P):NAV for Liberty is 0.15x.

Upcoming Catalysts

Because Goldstrike is being delayed, all upcoming potential stock-moving events pertain to Black Pine. Investors can expect exploration and resource expansion drill results from the project on an ongoing basis, noted 3L.

Also, this year, the company will evaluate the economic viability of extracting ore from the historical stockpile and complete an updated resource estimate, likely in H2/25. A feasibility study is expected to follow in H2/26.

Heap-Leach v. Traditional Milling

Heap leaching has a number of advantages over conventional milling, the 3L Capital analysts wrote and presented them. Simpler infrastructure is one; the process employs leach pads instead of mills and tailings ponds. Less energy and water use is another. Heap leaching does not require energy intensive grinding and complex separation steps, for example. Overall, heap leaching has a smaller environmental footprint.

The result of these advantages is lower capex and opex with heap-leach operations. Capex is about 75% less than with conventional milling for equivalent throughput rates. The operating cost with heap leaching is from US$10–15 per ton processed; with milling it averages US$18 per ton processed at a 40,000 ton per day (40 Ktpd) operation and US$25 per ton processed at a 20 Ktpd operation.

“Our inflation-adjusted sampled data suggest the processing cost for a 20 Ktpd heap-leach operation should average US$3.87 per ton, less than half the US$9.92 per ton cost of an equivalent-sized milling operation,” 3L wrote.

The downsides of heap leaching compared to conventional milling include lower recovery rates, about 60–85% versus about 85–95%, respectively. Also, with heap leaching there is a time gap between leaching and metals recovery, of about 60–90 days, and this delays cash flow generation.

Factors that play a role in whether heap leaching is successful include grade, oxidation state, ore permeability, leach and recovery times, and power or water availability.

The analysts concluded that heap leaching is an ideal low-cost option for low-grade, near-surface and often oxidized ores and environmentally sensitive areas and for ores that are uneconomical to be processed with conventional milling, such as gravity, flotation and carbon-in-leach/carbon-in-pulp.

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Important Disclosures:

1. Liberty Gold Corp. is a billboard sponsor of Streetwise Reports and pays SWR a monthly sponsorship fee between US$3,000 and US$5,000.
2. Doresa Banning wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor.
3. This article does not constitute investment advice and is not a solicitation for any investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Each reader is encouraged to consult with his or her personal financial adviser and perform their own comprehensive investment research. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company.

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Disclosures for 3L Capital, January 6, 2025

3L Capital has prepared this report for informational purposes only. It is intended to provide general information and should not be interpreted as a solicitation to engage in securities transactions, a recommendation to buy or sell securities, or investment advice. The opinions expressed in this report reflect the author’s views as of the report’s date. It is strongly advised that recipients conduct their independent investigations and seek professional advice before making any investment decisions. While the information contained in this report is derived from sources believed to be reliable, its accuracy cannot be assured. It should be noted that 3L Capital, along with its affiliates and associates (collectively known as “3L Capital”), may have provided financial advisory and other services to the companies mentioned in this report in the past or may do so in the future. As a result of rendering such services, 3L Capital may receive financial and other incentives from these companies. 3L Capital employees and affiliates may hold positions in and may buy or sell securities of companies mentioned in this report. For a detailed discussion of company-specific risks, please refer to the “Risk Factors” segment in the company’s MD&A section.

( Companies Mentioned: LGD:TSX; LGDTF:OTCQX, )

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