http://www.theaureport.com/pub/na/16301?utm_source=delivra&utm_medium=email&utm_campaign=TMR+10-14-14

Probe Mines Limited (PRB:TSX.V) is working on a PEA for Borden to give us a sense of the economics, something I will be watching closely. Arguably, the best gold discovery in Canada during the past decade was the Éléonore deposit made by Virginia Mines Inc. (VGQ:TSX) that Goldcorp Inc. (G:TSX; GG:NYSE) bought for $750M. In a feasibility study published earlier this year, Goldcorp revealed that this project at $1,300/oz gold will have an after-tax internal rate of return (IRR) of only 3% and a marginal net present value (NPV) even though it's producing 400,000 oz per year. At that price, it would take 8 years out of a 10-year mine life to achieve payback of a capital cost of nearly $2B. So there is a lot of concern about the viability of new gold mines. One difference is that Éléonore is in central Quebec and has infrastructure challenges, whereas Probe's Borden deposit is in Ontario next to a highway where infrastructure is already available.

Probe has shown 1.6 million ounces (1.6 Moz) of high grade and 2.3 Moz of open-pittable low grade with more exploration potential. Probe needs to acquire some key surrounding ground. The market has been waiting for this deal to get done so that it has 100% ownership of the existing deposit and can start chasing the deposit down plunge. In light of weak gold prices, the PEA will focus on a 3,000 tonne per day (3,000 tpd) underground mining scenario that targets the higher-grade gold. Investors get exposure to potential cash flow from gold that can be mined profitability at prevailing weak prices and an option on the impact of a higher real gold price moving the open-pittable resource into the money.

TMR: Probe just did a $26M funding. How is it planning to use that money?

JK: A sign of the strength of this story is that even though we are in a very dismal financing market, Probe was able to raise $26M of flow-through money. By definition it has to be spent on exploration. But it still has about $20M of hard dollars left for land acquisition and the new money will be used to delineate the deposit and explore the East Limb project, which could open a whole new area.