ASSET SUMMARY

Operator Gold Mountain Mining Corp. (TSXV: GMTN, OTCQB: GMTNF, FRA: 5XFA). Ore to be trucked and processed at New Gold Inc.’s (TSX, NYSE American: NGD) New Afton processing plant under a long-term ore purchase agreement.
Location British Columbia, Canada
Stage Production
Commodity
Gold, Silver
Terms 2% Net Smelter Return Royalty, calculated as the gross metal revenues realized less certain allowable deductions. The Royalty covers all 16,716 hectares of mining leases and mineral claims as outlined in Gold Mountain’s PEA, titled “Updated Preliminary Economic Assessment on the Elk Gold Project”, dated June 21, 2021 and available on SEDAR at www.sedar.com.
Acquisition Date
September 28, 2021
Acquisition Price
US$10 million in cash, 1,659,304 common shares of Star Royalties, and 829,652 warrants of Star Royalties (exercisable for a period of 24 months from the closing date at an exercise price of C$0.70).

ELK GOLD PROPERTY AND ROYALTY AREA LOCATION

 

HIGHLIGHTS

  • Producing, high-margin gold mine in Canada: Gold Mountain recently commenced operations at Elk Gold and expects first revenue generation in Q4 2021. Royalty revenue is expected to increase and average US$2 million per annum post-year 3 based on prevailing gold prices.
  • Strong operating team: Proven and highly capable team at Gold Mountain with long-term third-party ore purchase and fixed-price mining contract agreements.
  • Expansion potential: Current PEA outlines production increasing from 19 kozpa to 65 kozpa (year 4) with a further expansion target to 100 kozpa. 
  • Significant exploration upside: Gold Mountain is targeting to expand its high-grade mineral resource to over 1 million ounces from its current mineral resource estimate. Gold Mountain’s recent Phase 1 drill program increased Elk Gold’s mineral resource estimate by 49% with all 41 drill holes intercepting significant mineralization.

 

 

ASSET DESCRIPTION

Elk Gold, a past-producing gold mine and Gold Mountain’s flagship asset, is located in south-central British Columbia, Canada, approximately 325 km northeast of Vancouver and 55 km west of Okanagan Lake, midway between the cities of Merritt and West Kelowna. Given its proximity to skilled labour, no site camp is required.

Gold Mountain released the results of its updated PEA on May 27, 2021 that incorporated the increased mineral resource estimate announced on May 14, 2021, the ore purchase agreement with New Gold announced on January 26, 2021, and the mining services contract with Nhwelmen-Lake announced on January 19, 2021. New Gold is an intermediate mining company with a market capitalization of C$1 billion, and Nhwelmen-Lake is a construction and mining services contractor 51% owned by Nlaka’pamux Nation Tribal Council and 49% owned by Lake Excavating, operator of similar projects including at Teck Resources Limited’s (TSX: TECK.A and TECK.B, NYSE: TECK) Highland Valley Copper Mine and New Gold’s New Afton Mine.

The PEA outlines an 11-year combined open pit and underground operation with an initial capital cost of approximately C$9 million and an after-tax NPV5 of C$231 million using a long-term US$1,600/oz gold price. As per the PEA, Elk Gold is expected to produce approximately 19 koz in years 1-3 from an open pit-only operation and then expand production to 65 koz in years 4-11 with the expansion of the open pits and addition of an underground operation, for total life-of-mine production of 525 koz at an all-in sustaining cost of US$554/oz. The underground component currently accounts for roughly 18% of the total measured and indicated contained gold equivalent ounces. Following revenue generation, Gold Mountain will apply for an Environmental Assessment certificate and any other required permits to expand production starting in year 4. Gold Mountain’s ore purchase agreement with New Gold allows Gold Mountain to both operate and scale mine operations without the need for an on-site mill. Under this agreement, Gold Mountain will deliver to New Gold 70,000 tonnes per annum in years 1-3 and then up to 350,000 tonnes per annum in years 4-11 with the ore being processed at the New Afton processing facility 133 km from Elk Gold. The metal payable split from the ore purchase agreement is 89% to Gold Mountain and 11% to New Gold. Elk Gold’s life-of-mine processed gold grade is estimated in the PEA to be 6.98 g/t with a 92% gold recovery.

 
 

ELK GOLD:  SIWASH NORTH MINERAL RESOURCE ESTIMATE

     Source: Gold Mountain disclosures.

Notes:

  1. CIM definitions were followed for classification of Mineral Resources.
  2. Mineral Resources are not Mineral Reserves and have not demonstrated economic viability.
  3. Results are presented in-situ and undiluted.
  4. Mineral resources are reported at a cut-off grade of 0.3 g/t Au for pit-constrained resources and 3.0 g/t for underground resources.
  5. The number of tonnes and metal ounces are rounded to the nearest thousand.
  6. The Resource Estimate includes both gold and silver assays. The formula used to combine the metals is: AuEq = ((Au_Cap*55.81*0.96) + (Ag_Cap*0.76*0.86))/(55.81*0.96).
  7. The Resource Estimate is effective as of May 1, 2021.

 

ELK GOLD:  PEA PRODUCTION AND GRADES

     Source: Gold Mountain disclosures.