(Kitco News) - The current low gold prices environment is not stopping the development what could be one of the Yukon’s most unique gold mines.

In early July, Kaminak Gold Corporation (TSX.V: KAM) embarked on a feasibility study of its Coffee project; Eira Thomas, president & CEO of the company, explained in a recent media tour of the site that they had so much confidence in the project that the company decided to skip the pre-feasibility stage and move right on to a detailed evaluation.

According to the company’s preliminary economic assessment (PEA), the property has the potential to be one of the world’s highest grade -- with an average grade of 1.23 grams per tonne (g/t) of gold -- heap leach projects as it expects to produce gold at an all in sustaining cost of $687 an ounce.

Eira Thomas, CEO of Kaminak Gold shows off the company's Coffee project, which has the potential to be one of the Yukon's most unique gold mines.

The company developed the PEA with an average gold price of $1,250 an ounce, which leaves the company with a profit margin of more than $562 per ounce. Although gold has slipped considerably lower since the release of the PEA, Thomas added that because of the high profit margins, this project still has a lot of potential.

“I’m not losing sleep thinking about gold prices,” said Thomas. “You could still see prices fall to $1,000 an ounce and this project is still profitable.”

Thomas added that the PEA also assumed that the Canadian dollar would also be higher than current levels. The Canadian dollar is trading around 75 cents against the U.S. dollar and the price of gold in Canadian dollar terms is hovering just below $1,500 an ounce, Friday.

What makes the Coffee property so unique is the structure of the gold mineralization, which has been classified as high-grade hydrothermal gold. The rock is also highly oxidized, making the gold easy to extract through a simple leach process. The orange rock is also extremely brittle making it easy to crush.

Thomas explained they are able to keep costs low because there will be no milling involved in the mining process. In simplistic terms, the rock is scooped out of the ground, put through a crusher and then thrown on to the heap leach.

Not only is the process expected to be simple, but Thomas also noted that preliminary tests showed the rock crushed to sizes between one inch and half an inch showed 88% gold recovery, after 18 days, and 90% recovery after 90 days. Rock rushed to six inches showed gold recovery at 88% after 100 days.

Tony Reda, vice-president of corporate development shows some of Coffee's unique mineralization. The highly oxizied rock makes it easy to extract the gold through a leaching process.

During the mine tour, Tony Reda, vice-president of corporate development, said that part of the feasibility study will look at the optimal crushing size of the rock.

Reda added that the simplicity of the project has allowed the company to progress so quickly over the years.

“Within the last five years, we have gone from taking simple soil samples to launching a feasibility study,” he said. “That is almost unheard of with this kind of grassroots project.”

Currently, Kaminak is looking at developing a mine with an 11-year lifespan, expecting to produce an average of 167,000 ounces of gold per year, with expected average gold production of 224,000 ounces within the first two years.

There are currently three sites the company is looking to develop first: Supremo, Double Double, and Latte; however, Reda said there is a lot more potential in the property, which covers 150,000 acres. Only about 20% of the property has been explored at this time.

Of course, the Kaminak does have some hurdles to cross as the development of the project progresses, starting with infrastructure. The company will need to raise about $305 million to cover total capital costs, which includes building a road to the property.

By Neils Christensen of Kitco News; nchristensen@kitco.com

Follow Neils Christensen @neils_C