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Alacer reports positive DFS results for Çöpler, in Turkey

17th June 2014

By: Henry Lazenby

Creamer Media Deputy Editor: North America

  

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TORONTO (miningweekly.com) – Intermediate gold producer Alacer Gold on Monday reported buoyant results for a definitive feasibility study (DFS) on the addition of a sulphide ore-processing circuit at its Çöpler mine, in Erzincan province, Turkey, extending the life of the mine and boosting current resources and reserves.

The TSX- and ASX-listed company said the DFS had adequately demonstrated the robustness of the sulphide project. The company, which was currently producing gold from oxide ore at the mine, intended to process sulphide ore through whole-ore pressure oxidation (POX).

The company said it had completed extensive technical, design, engineering and procurement studies in preparing the DFS and would be carrying out basic engineering and further optimisation studies, as well as completing the permitting process, before making a construction decision during the first quarter next year.

“The results of this DFS are an important and positive milestone for Alacer that not only reconfirms the world-class nature of the Çöpler mine, but provides a definitive pathway for Çöpler and positive cash flow for Alacer for the next 20 years. Taking the time to get the DFS right has provided us the opportunity to significantly derisk the various technical aspects of the study and has produced a robust economic result,” Alacer's CEO Rod Antal said in an after-market conference call with analysts on Monday.

The POX facility was expected to process sulphide ore at a rate of 5 000 t/d and would result in a 20-year mine life for the project. The company had already accumulated a stockpile of more than two-million tonnes of sulphide ore, grading 4.9 g/t gold, ready to be processed.

From the start of next month, Çöpler’s life-of-mine (LoM) gold output would total 3.2-million ounces, including both oxides and sulphides. The mine would produce yellow metal at a total cash cost of $540/oz, all in sustaining costs of $580/oz and all in costs of $801/oz.

The company expected to start construction of the sulphide expansion in the second quarter of next year, with commissioning late in 2017.

Alacer also reported that an ongoing resource reconciliation project had lifted Çöpler’s compliant measured and indicated resources by 9%, or 620 000 oz, to 7.8-million ounces of contained gold. Its mineral reserves had also increased by 6% or 210 000 oz to 3.84-million ounces of contained gold.

The mine’s oxide grade had increased by 34% to 1.32 g/t gold and the sulphide grade had increased by 14% to 2.67 g/t gold for the mineral reserves. The oxide LoM gold output was lifted by 24% or 134 000 oz.

Alacer owns 80% of the mine, with Lidya Mining holding the balance.

ACCRETIVE RETURNS

The sulphide project would generate attractive financial returns. Based on capital expenditure of $660-million, including a $69-million contingency and a gold price of $1 300/oz, the after-tax unleveraged internal rate of return was 20% and the net present value (NPV) $627-million, which would result in increased cash flows as opposed to the oxide-only mine.

Çöpler now had an after-tax, unleveraged NPV of $926-million on the combined heap leach and POX production.

The sulphide project would pay itself back within 1.7 years from the start of sulphide production and generate $1.6-billion in free cash flow over the LoM.

"The DFS has proven the viability of the sulphide project and with our current cash position and Class 3 cost estimate complete, we could start construction tomorrow without the need for any additional funding. However, our work is not done.

“As the project moves into basic engineering, we will continue to pursue ways to derisk and optimise the project for Alacer. The focus will be on all areas of the project, including the various financial aspects of the project, capital cost controls, strengthening the execution team and operating cost management, while continuing to look at additional ways to value-engineer the project,” Antal said.

He noted that the critical path required the company to first secure all of the permits and land acquisition required to move into construction.

“This process started in earnest with the submission of the supplemental environmental-impact assessment in April. We anticipate receiving all required permits in the first quarter of 2015, with construction starting in the second quarter of 2015. We believe the sulphide project provides the best growth opportunity for Alacer and solidifies our strategy of focusing our efforts and expertise on Turkey,” Antal stressed.

Alacer’s TSX-listed stock on Monday closed down 1.12% at C$2.64 apiece, having gained about 11% in the last six months.

Edited by Creamer Media Reporter

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