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Patagonia Gold (LON:PGD) will need to find more oxide ore to make its Cap-Oeste project in Argentina viable at the current gold price, a new study has indicated.
A recently completed pre-feasibility study showed the oxide ore at Cap-Oeste was very amenable to straightforward heap leaching, but there was not enough of it to warrant further development.
Current resources at Cap-Oeste are 269,000 oz of oxide material and 1.1mln oz of sulphide ore, mostly in the indicated category.
Patagonia’s plan was to develop Cap-Oeste in two stages with the oxide resources first and the deposit’s more plentiful but more complex sulphide ore in a second phase.
The company said it will now step up work elsewhere on the El Tranquilo licence, which contains Cap-Oeste and also the COSE and Monte Leon prospects.
In particular, test work will be carried out at COSE to evaluate the possibility of extracting the gold and silver through agglomeration of a gravity tails product for inclusion with the Cap-Oeste oxide ore.
Bill Humphries, Patagonia Gold’s chief executive, said: "The company continues to see a promising long term future for the Cap-Oeste project once conditions in mining markets have normalised.
“Meanwhile, we will continue to maximise free cash flow from our Lomada operations. We will also concentrate our exploration efforts on replacing reserves at Lomada and continue to grow our global resource."
Cantor Fitzgerald said the update was disappointing but there was some encouragement.
The PFS confirmed the oxide material is easy to crush to a size suitable for heap leaching with decent recoveries of 80% and 40% for gold and silver respectively.
The broker added the decision not plough ahead with significant capital expenditure until the project's economics improve is also sensible.
El Tranquillo is also a prospective property, said Cantor, and there is a good chance of adding the oxide resources required to unlock Cap-Oeste.
Cantor will adjust its forecasts, which included a contribution this year from Cap-Oeste, but as production from the Lomada mine underpins the current share price, its recommendation remains ‘buy'.
Shares fell 0.53p to 2.47p.