Kerr Mines targets 2020 production at Copperstone

Kerr Mines (TSX: KER; US-OTC: KERMF) expects to start mining and stockpiling mineralized material from its Copperstone gold project in Arizona in the fourth quarter of this year with production starting in the first quarter of 2020, CEO Claudio Ciavarella says.

The fully permitted project is the underground extension of the same orebody that Cyprus Amax mined as an open pit between 1987 and 1993, and which produced 500,000 oz. gold.

Kerr Mines picked up the project in 2014 through an all-share merger with American Bonanza Gold, which had developed two declines in the bottom of the pit and about 4 km of underground access and mined 163,000 tonnes of ore between January 2012 and July 2013.

Given the project's existing infrastructure and historic underground mining, in addition to an exploration drift Kerr Mines developed in the summer of 2017, the project can be put into production fairly easily, Ciavarella says.

A prefeasibility study estimated initial capital costs of US$22.7 million to build a mine capable of initially producing at a rate of 38,000 oz. gold annually for 4.5 years.

Currently, the orebody has a known horizontal strike length of over 1,500 metres and extends 110 metres beneath the historic open pit, which bottomed at 150 metres.

A tunnel at Kerr Mines' Copperstone gold project in Arizona. Credit: Kerr Mines.

Within this area, measured and indicated resources stand at 1,240 million tonnes grading 7.63 grams gold per tonne for 276,000 oz. contained gold. Another 734,100 tonnes at 6.81 grams gold for 145,700 oz. contained gold lie in the inferred category.

Ciavarella wants to concentrate his efforts this year on a 15,000-metre underground drill program to expand the known resources and ideally extend the mine life by an additional three or four years.

The resource expansion drilling will take place entirely from existing underground access and will affect an area of 500 metres of strike length and 200 metres of elevation, about one-third of the current resource strike length.

An updated resource and reserve estimate should be completed before the end of the year.

In addition to the drill program, Kerr Mines will be validating the 95% recoveries it achieved during its engineering study in late-2017 and early-2018.

"The metallurgical work that was previously done was based on a flotation circuit and got 85% recoveries, while we determined with minor modifications we could increase recoveries to 95% - a major increase," Ciavarella says.

The company recently received an air permit from the State of Arizona that gives it permission to build the whole ore leach and SART gold processing systems.

The air permit allows the company to modify processing from flotation to whole ore leach. "It's tank leaching, where you're leaching the gold out of the rock primarily through the use of consumables and reagents," he explains. "The leaching process that we want to use is actually what was used by the original miner - Cypress Minerals back in the 1980s and early 1990s."

In addition, Kerr is evaluating whether it should incorporate a SART circuit to the planned gold processing plant. The Sulfidization-Acidification-Recycle-Thickening circuits can trim operating costs by reducing the consumption of reagents and can add revenue from the recovery of copper from gold ore.

Once the SART assessments are complete, the company can move into detailed engineering focused on the leach plant design and construction, Ciavarella says.

Then it's on to financing, which he says shouldn't be problematic because initial capital costs are so low.

"Capex is roughly $25 million so we can move into production with a four and a half year mine life, but obviously we want a larger mine life ahead of us and we believe there's upside."

The company expects to continue exploration drilling from underground once the mine is in production and producing cash flow.

Copperstone is located in LaPaz County within the Walker Lane mineral belt where it intersects gold provinces in Southern California and Western Arizona.

Over the last year, Kerr Mines has been trading within a range of 11 ? and 25 ?. The junior has 277 million shares for a market cap of $39 million.