Nighthawk Gold (TSX: NHK) has updated the mineral resources for its Indin Lake gold property in the Northwest Territories, 200 km north of Yellowknife. The latest numbers incorporate two-thirds of the drill assays from the 2020 exploration program (due to a delay in result turn-around times) and also include adjustments to economic parameters.
Within the footprint of the Colomac Centre mineralized area at Indin Lake, there are now 17.9 million pit-constrained indicated tonnes at 1.62 grams gold per tonne that contain 930,000 gold oz. within three deposits. This represents a 71% increase in ounces when compared with the July 2020 resource that defined 9.9 million indicated open-pittable tonnes at 1.7 grams gold per tonne, for a total of 541,000 ounces.
Total Indin Lake indicated resources, which include both open pit and underground inventory for three deposits, stand at 38.7 million tonnes grading 1.81 grams gold, and contain 2.2 million gold ounces. This represents a 35% ounce increase over the July 2020 numbers, which outlined 5.9 million indicated tonnes at 2.01 grams gold, for a total of 1.7 million ounces.
Inferred resources are now estimated at 11.5 million tonnes at 2.13 grams gold, containing 786,100 oz. - the primary contributor to this category is an underground bulk mining portion of the Colomac deposit, with 9.5 million tonnes at 1.97 grams gold. These resources compare with 5.7 million inferred tonnes at 2.03 grams gold, totalling 372,500 oz. from July.
Open-pit cut-off grades are unchanged from July, at 0.6 grams gold per tonne. Cut-off grades for underground mining now range between 1.1 grams gold (for bulk mining) and 2 grams gold (for selective mining). The July resource used a 1.3 gram gold per tonne cut-off for underground resources.
According to Keyvan Salehi, Nighthawk's president and CEO, the company is "particularly excited with the 71% increase in indicated pit constrained resources in the 2021 MRE (mineral resource estimate)."
This year's exploration will focus on growing near-surface, pit-constrained resources at Colomac as well as on grassroots targets that could "contribute significantly to the near-surface resources proximal to the main Colomac deposit."
The five deposits within the Colomac Centre area all show potential for near-surface resource growth. In addition, the Cass zone within the Kim & Cass property added to the Colomac holdings in February that is 15 km southwest of Colomac includes a historic resource of 2.9 million tonnes grading 2.66 grams gold. This year's exploration program will focus on resource extensions along strike.
Nighthawk's eight near-surface greenfield targets include Laurie Lake and JPK along the Treasure Island - Laurie Lake corridor; four central targets around Colomac and the Albatross and Andy Lake targets in the southern portion of the project. Drilling is expected to start before the end of the first quarter.
The 899-sq.-km Indin Lake property is accessible by a winter road or through a chartered aircraft.
One of the deposits at Colomac produced 527,908 gold oz. between 1990 and 1997 from three open pits.
Tom Gallo of Canaccord Genuity has a speculative buy rating and $3.00 target price on Nighthawk's shares. (Over the last year, Nighthawk has traded in a range of 97 ? and $2.90 per share and at presstime was trading at $1.10 per share.)
Commenting on the resource growth in a research note to clients, Gallo noted that while on the one hand it "represents the largest global resource the company has announced for the project," the "grade year over year for the total resource has decreased."
"Due to its remote arctic location, we still believe an operation would need a resource grade of ~ 1.75-2.0 g/t to support the higher fixed operating costs associated with its location."
Gallo also noted that the constrained open-pit resource "has grown substantially, which we view as a positive."
"Last year's resource update (the first with any pit constraints) outlined a much smaller open pit scenario with a larger bulk underground component," adding, "we believe an open pit (at the grades represented here) will serve as the backbone for any potential future operating scenario."
The mining analyst also pointed out that there were assumption changes in the latest update.
"In addition to resource growth due to drilling in 2020, part of the growth in open pit resources is due to a change in assumptions," he wrote. "The company adjusted operating cost downwards and increased the gold price to US$1,650 per oz. from US$1,425 per oz. These changes have resulted in some of the underground resources moving into the open pit category. The underground bulk cut-off grade is also down to 1.1 g/t gold (from 1.3 g/t)."
On the exploration front, Gallo noted that Nighthawk has a budget of 75 km of drilling for 2021 and drilling with five rigs in the first drill phase is expected to start in mid-March.
"In 2021 we will look for drilling to increase open pit resource size while maintaining grade, and potentially to uncover higher-grade satellite deposits that could be sweeteners in a mining scenario."
Haywood Securities' Pierre Vaillancourt has a buy rating and $3.50 per share target price on the stock.
"We are encouraged by the open pit resource increase but recognize there is more work ahead to reach a critical mass," he wrote in a research note to clients. "While results will be weighted to 2H21, we look for drilling in 2021 to drive the stock, in particular, we believe the potential at Cass could make a difference, and lead to a significant resource addition."
The mining analyst noted that about 50% of the drilling this year is expected to be at Colomac, "identifying opportunities adjacent to the Colomac Main deposit," and up to 35% of drilling is planned for the Cass zone, 15 km away.