TSX-V-listed Pure Gold is working on completing a project finance package for its Madsen Red Lake gold project, in Ontario, Canada, with a production decision to be made before the end of this quarter.

It undertook a $36-million equity raise two weeks ago and is sourcing debt financing for the balance of the $72-million capital required for the project’s development.

CEO Darin Labrenz tells Mining Weekly Online that the company targeted around 70% debt and 30% equity when it introduced the project to stakeholders.

With the $47-million equity raise, the equity component has been satisfied.

South African gold miner AngloGold Ashanti is contributing $5-million to the capital raising, giving it a 14% shareholding in Pure Gold.

Labrenz says AngloGold has been supportive from the get-go of the Madsen project.

Meanwhile, the significant infrastructure already in place at Madsen has helped Pure Gold save on its projected initial capital expenditure (capex) of C$95-million, or $72-million, and ensured a short construction time of 13 months.

Labrenz explains that C$17-million will be spent on replacing the existing ball mill to increase throughput capacity to 800 t/d, as well as installing a new gravity circuit and an intensive leach system.

Further, C$31-million will go towards pre-production underground mine development, effectively pushing the ramp system down and creating access.

Other initial capex projects will include a water treatment plant for ammonia and metals and improvements to electrical infrastructure.

“While we have not started construction, we have done work on the existing underground ramp and we are working on pre-construction activities to get ready for the start of construction,” said Labrenz.

An independent feasibility study on Madsen outlined a 12.2-year, high-grade, 800 t/d underground mining operation.

The project has probable mineral reserves of 3.1-million tonnes, grading 9 g/t gold, containing one-million ounces of gold. The mine is expected to produce 125 000 oz/y at peak production, with average gold production in years three to seven estimated at 102 000 oz/y.

Meanwhile, a phased exploration programme around Madsen is focusing on the Wedge, Fork and Russet South deposits, with the aim of growing the project’s mineral resource.

“What we have seen at Wedge to date, I anticipate that it is a surface extension of the Madsen mineral system. We are encouraged by the continuity we see there.”

Relating to permits, Labrenz says the company is permitted as a miner in Ontario, on the back of the prior granted mining permit to the previous owner, but the company is working on the required documents to amend those permits.

He says there are three key permits that need amendment, namely the closure plan associated with the project and two environmental compliance approvals – one for air and noise and one for mill and mill effluent.

Labrenz says the prevailing gold price of $1 400/oz bodes well for the company, as it modelled the project economics at a price of $1 275/oz.

“We are encouraged by the movement of gold over the last few months and looking at the world economy right now, it certainly seems like the gold price could move even higher.”