Pure Gold Mining Inc (CVE:PGM) (LON:PUR) has told investors that the current gold price augurs well for the financials of its Madsen mine in Ontario, which is on track to start producing in the fourth quarter this year.

The combination of the firmer gold price and a falling Canadian dollar is materially positive for the project, which will be Canada’s next large scale producer, the group said Monday.

READ: Pure Gold Mining just months away from first gold at Madsen; updates on pandemic measures

In its 2019 feasibility study for the project, gold was put at US$1,275 an ounce, which, when factoring in the exchange rate, represents C$1,700 an ounce

As of May 7 this year, with gold at C$2,400 per ounce, the mine would generate an additional C$679 million in revenue over the base case of the feasibility, Pure Gold said.

Madsen is the highest-grade underground development project in Canada and ranks 11th out of 132 projects globally. Last year, the pre-tax net present value (NPV) was pegged at C$353 million, with a pre-tax IRR of 43%, based on a gold price of US$1,275.

“We are not just building an integrated mining operation. We are building a fully-funded, long-life growth company uniquely positioned in the Red Lake camp, one of the world’s largest gold-producing districts,” Darin Labrenz, Pure Gold’s chief executive said in a statement.

He noted that the 47 square kilometre (km) property boasted a proven, large high-grade gold system, with the same geology, grade and endowment potential as Evolution’s Red Lake mine just 15 km away

“Our future cash flow will fund our aggressive gold growth plans, and there is no more important time to be building a gold mine,” Labrenz added.

Pure Gold said it continues to complete construction while ensuring the health and safety of workers and contractors amid the coronavirus (COVID-10) pandemic and this month aims to begin drilling in a bid to convert resources to reserves and increasing resources from new high-grade discoveries at surface and at depth.

Detailed engineering at the process plant is now 95% complete, while 60 new employees, have been hired, most of whom are Red Lake residents.

Substantial progress has been made on refurbishing the semi-autogenous grinding (SAG) mill, it said, while pre-production underground ramp development as part of the test mining program was initiated ahead of the feasibility schedule and continues to progress apace.

The firm has now completed 1,000 metres of development, up from 740 metres.

“Subject to continued monitoring of the COVID-19 pandemic, we intend to resume our 2020 drill program in late-May with the goals of converting resources to reserves and increasing resources from new high-grade discoveries at surface and at depth,” the firm said

“Initial drilling from new underground access will focus on the growth of mineral reserves in areas targeted for 2020 and 2021 production. We will then focus on increasing resources outside of the initial mine footprint,” it added.

Shares in London ticked up over 14% to 55.62p.

—Updates for share price—

Contact the author at giles@proactiveinvestors.com