PERTH (miningweekly.com) – A prefeasibility study (PFS) into the Cannon underground gold project, in Western Australia, has demonstrated positive economic results for owner Horizon Minerals.

The ASX-listed company on Tuesday told shareholders that based on a mineral resource estimate of 32 330 oz, the project would produce 15 910 oz of gold at a capital development cost of A$4.3-million, and a C1 cost of A$1 644/oz.

The PFS estimated that the project would generate net cash flow of A$10.1-million over its 16-month mine life, based on a gold price of A$2 600/oz.

Horizon told shareholders that there was significant potential for resource growth down-plunge and along strike on the Cannon shear zone, with further drilling planned from both surface and underground locations.

A development decision for the Cannon project is expected in the June quarter, with first production potentially in the first half of 2023.

“We commenced the consolidated feasibility study for a standalone development centered around our baseload Boorara project near Kalgoorlie at the onset of the global pandemic. Our team and our potential contracting partners and suppliers have done an excellent job in managing the operating challenges and we have continued to run our business without interruption,” said Horizon MD Jon Price.

“Unfortunately, we’ve seen inflation and volatility in cost estimates increase materially since the second half of last year to a point where we now believe too much risk and potential for value destruction exists, making it reckless to pursue a large-scale development in such an uncertain operating environment.

“We are fortunate to have a 1.1-million-ounce resource within close proximity to the mining centre of Kalgoorlie-Boulder which provides significant opportunity and flexibility. Our location gives us the opportunity to monetise low tonnage high-grade assets through a contract mining and toll milling model as we have done successfully in the past.

“The results of the Cannon underground PFS demonstrate the ability to produce solid cash flow of an estimated A$10.1-million over five quarters with a proven and relatively low risk operating strategy,” said Price.

“By maintaining our technical and approval workstreams for the consolidated development we retain the ability to quickly update and finalise the feasibility work when more predictability returns to the cost, labour and material supply environment. We will also continue to evaluate other business development opportunities to facilitate the larger scale development in a lower risk way.

“We now look forward to continuing our drilling programme and advancing the project to a development decision in coming months, completing mining studies on Penny’s Find and Rose Hill to deliver a potential sequence of underground projects and testing the depth and strike extensions at Cannon.”