Galway Metals’ (TSX: GWM) new drill results from its Clarence Stream gold project in New Brunswick may boost a plan to link three small pits into one, according to Laurentian Bank.
“The bulk of these assays are from outside of the current pit shells, so there is good potential for the resource base to grow,” Jacques Wortman, a mining analyst for Laurentian, wrote in a note on Tuesday. “The assay results from between the north and middle pits support the thesis that they may connect and become a single pit.”
However, the analysis of the project 70 km south of Fredericton increased estimated construction costs and delayed development by two years to reflect inflation and the slower pace of exploration after Galway suspended drilling in December to save money.
Based on a comparison with Marathon Gold’s (TSX: MOZ) development of the Valentine Lake project in Newfoundland, Laurentian raised Clarence Stream’s capital cost estimate to $500 million from $475 million; and its underground operation – with construction starting in the third year – to $170 million from $150 million.
The estimated delay to complete the project now in 2027 also considers the drilling, resource estimate, economic studies, permits and financing to be done, the bank said. It lowered its forecast of a net present value with a 10% discount rate to $162 million from $198 million at a discount rate of 10.5%.
Laurentian is keeping a buy rating on the stock but cut its target price to $3.50 per share from $4.35. It notes the stock trades at a price to net asset value ratio of less than most of its peers.
Galway found gold mineralization at depths ranging from 16 metres to 112 metres, according to assays from 19 holes reported on Tuesday. They expand the North zone at Clarence Stream.
“Gold mineralization is present outside the current resource model and pit limits of the three pits planned in the North zone,” Galway said in a news release. “The intercepts received are encouraging and additional drilling is now warranted in order to confirm if the pits could be combined.”
Drill hole GWM22CS-390 cut 9 metres grading 4.3 grams gold per tonne from 35 metres down hole including 0.5 metres grading 57.3 grams. Drill hole GWM22CS-378 returned 5 metres grading 6.1 grams from 54 metres depth including 1 metre grading 16.6 grams.
The North zone has three pits separated by gaps of 90 metres and 230 metres. Hole 390 is in the 230-metre gap between the proposed north and middle pits. Hole 378 is located on the edge of the resource, 40 metres northwest of previously-reported hole AD 17-127 that cut 10.2 metres grading 14.6 grams gold.
“All zones at Clarence Stream remain open for significant expansion,” Galway president and CEO Robert Hinchcliffe said in the release. “In addition to the North zone, obvious expansion opportunities exist at the much larger SW zone, its adjacent Triangle area, the South zone and at Oak Bay and Lily Hill.”
Clarence has 12.1 million tonnes grading 2.3 grams gold per tonne for 886,000 oz. contained gold and inferred resources of 11.8 million tonnes grading 1.9 grams gold for 731,000 oz., according to a report last April.
