TORONTO (miningweekly.com) – Toronto-based Iamgold will go ahead with a feasibility study on developing the large deep sulphide resource below the current pit at the Sadiola mine, in Mali, the company announced on Monday.

The mine's owners, including operator AngloGold Ashanti, have approved a $9-million feasibility study on the project.

Iamgold and AngloGold Ashanti own 38% each in Sadiola, with the balance held by the Malian government and the International Finance Corporation (IFC).

Iamgold also revealed on Monday it has reached a “tentative” agreement with the IFC to buy the body's 6% stake in the mine for $12-million, plus some additional payments if the gold price remains above $900/oz, as well as if the deep sulphides project goes ahead.

AngloGold and the government can also opt to take up their proportionate share of the IFC's holding.

Although AngloGold is the operator at Sadiola, Iamgold has taken the lead this year in re-engineering and updating a prefeasibility study on the deep sulphide project.

The results of the optimised prefeasibility study were recently presented to the partners, which approved the start of a feasibility study, to further refine the Sadiola Deeps project as well as consider possible optimisations, Iamgold said.

As things stand, the current Sadiola mine plan estimates production of 350 000 oz of gold for 2009, declining over time going forward until the end of the life-of-mine in 2015.

However, the prefeasibility study projects an increase in production at Sadiola to between 400 000 oz and 500 000 oz/y, with an end of life-of-mine in 2019.

This would boost the total gold production at Sadiola by around 2,2-million ounces beyond the current mine plan.

“Assuming positive results from the 11-month feasibility study and the investment decision, construction would begin in late 2010, prestripping would commence in 2011 with the new fleet, and the new plant would begin operating in 2012,” Iamgold said in a statement.

The prefeasibility study envisages continuing openpit mining, but which would require larger mining equipment.

The study is based on construction of a new crushing, grinding and carbon-in-leach (CIL) plant for treatment of the deep sulphide ores and existing hard ore stockpiles, while the existing mill would continue to treat soft oxide ores in parallel, or treat additional sulphide ore once the oxide ore is exhausted.

The total nominal treatment capacity of the proposed operation would be 8,5-million tons a year altogether, compared with the current 4,5-million tons a year.

The prefeasibility study suggests the project would have an after-tax project internal rate of return of 11%, at a gold price of $800/oz and a breakeven gold price of about $625/oz based on an initial investment of $400-million for the treatment plant, mining fleet, waste prestripping, and various infrastructure elements.

The average cash costs are forecast at $490/oz on a life-of-mine basis, including royalties.

However, Iamgold cautioned that the economics are dependent on the successful conclusion of ongoing negotiations with the Malian government for access to grid power at “appropriate rates,” as well as agreement with the government that the Sadiola Deeps project is subject to a tax treatment equivalent to new projects.

Shares in Iamgold rose 2,9% on Monday, to C$14,76 apiece by 12:05 in Toronto.

AngloGold Ashanti, which published third-quarter results earlier in the day, gained 3,5%, to close in Johannesburg at R300,10 a share.

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