JOHANNESBURG (miningweekly.com) – Gold firm Geomysore Services India, in which Aim-listed Lionsgold has a 21.15% shareholding, has completed a feasibility study for the Jonnagiri gold project, demonstrating the project’s potential to be developed into India’s first privately-owned gold mine.

The Jonnagiri project, in the state of Andhra Pradesh, is forecast to produce about 25 000 oz/y of gold, contributing more than a quarter to India’s gold production based on current domestic output.

The feasibility study base case production is based on the 151 020 probable reserve gold ounces only and shows a net present value (NPV) of $28.2-million, applying a 8.48% discounted cash flow rate. The internal rate of return (IRR) for the base case is 24% before tax and 17.8% after tax.

The total production case, which includes the processing of low grade stockpiles and the inferred resource in the optimised pit shell, produces a NPV of $34.9-million and a pre-tax IRR of 28%.

Mine development at Jonnagiri is subject to an agreement for land acquisition. Lionsgold said that Geomysore was engaged in negotiations with relevant landowners to buy about 350 acres for land required for the development of an openpit mine and associated infrastructure. However, the company said that the landowners’ current expectations were above the expected market rates.

Should commercial agreement be reached, subject to financing, the building of a mine at Jonnagiri could start as early as the second quarter of 2018. The build is planned to take 24 months.

"We look forward to updating shareholders as and when able, noting the commercial sensitivities that exist around negotiations relating to land acquisition and leasing, contracting and financing of Jonnagiri,” said Lionsgold CEO Cameron Parry.

While negotiations with landowners regarding the Jonnagiri project continued, Geomysore has started an internal scoping study on the South Kolar project, in Andhra Pradesh. The project is located in the southern part of the Kolar gold field, which historically produced 25-million ounces of gold over a century of operation.

Lionsgold sees significant potential in the Indian market, where it plans to launch its new gold-backed digital currency and banking platform, Goldbloc, next year.

Last week, the junior announced it had appointed former Rio Tinto executive Alan Davies as a part-time consultant to assist with developing opportunities in India.