Pure Gold Mining Inc (CVE:PGM) (LON:PUR) (OTCMKTS:LRTNF) put out more good news from its Madsen Mine project in Red Lake, Ontario where it believes it has identified a brand new expansive gold target and increased the current drill program to 20,000 metres (m). 

Madsen is a high-grade gold property, which spans over 4,600 hectares and houses two former mines. First gold production is earmarked for late next year and construction has begun but exploration continues.

READ: Pure Gold Mining’s latest drilling at Wedge Zone further underlines strong potential of Madsen mine project

In a statement on Wednesday, the firm noted that one target area that has received very little previous exploration is the altered structure that links the so-called high grade 8 Zone, which lies below 1,000 metres depth and the up-dip continuation at Russet South.

This area has a known dip length of 1,500 metres and stretches over seven km, the firm noted.

A new drill hole targeting the midpoint between these two widely separated zones has hit a 10 metre wide, gold-bearing zone, at 2.2 g/t gold over 10.4 metres, including an intercept of 4.9 g/t gold over 2.1 metres within ultramafic rocks of the Balmer assemblage, Pure Gold reported.

“This result is more than just another gold bearing intercept at Madsen. It establishes a vital mineralized pierce point into an expansive gap, highlighting the potential for a new gold corridor that stretches from the outcropping Russet South zones to the deeper high grade 8 Zone, and demonstrates the tremendous prospectivity of this setting,” the company said in a statement.

The 8 Zone itself already boasts some of the highest grades ever drilled at Madsen including 466.0 g/t over 4.3 metres, including a whopping 3,262.5 g/t of the yellow metal over 0.6 metres. And it has an indicated resource of 20.5 g/t gold for 301,000 ounces, and an inferred resource grading 12.4 g/t gold for 80,000 ounces.

“Madsen continues to be a dynamic project with resource and production potential well beyond the feasibility base case,” said Darin Labrenz, the CEO of Pure Gold.

“Outside of the feasibility mine plan we have made multiple discoveries and established new mineral resources within a system that keeps expanding along strike.

“This latest drilling represents a sea change in exploration prospectivity, establishing the tremendous potential of a brand new mineralized corridor that is anchored by the high grade 8 Zone at depth and the outcropping Fork and Russet South zones at surface.”

A feasibility study for Madsen, released in February, using a base case of US$1,275 for gold outlined a robust 12-year, high grade, 800-tonne per day (tpd) underground mining operation.

Low capital costs

Initial capital costs are low based on probable reserves of 1mln ounces at an impressive 9 g/t (grams per ton) gold. Madsen is the highest-grade underground development project in Canada and ranks 11th out of 132 projects globally.

The project’s pre-tax net present value (NPV) was pegged at C$353 million, with a pre-tax IRR (internal rate of return – the higher the IRR figure, basically the higher the cashflow to investors) of 43%, based on gold price of US$1,275.

The after-tax NPV is C$247 million based on gold at US$1,275, while the after-tax IRR was put at 36% at the same gold price.

Pure Gold shares gained 3.4% at $0.60 in afternoon trade in Toronto.In London, its shares closed Wednesday unchanged at 37p.

 — Adds Canadian share price —

Contact the author at giles@proactiveinvestors.com