JOHANNESBURG (miningweekly.com) – TSX-V-listed African Gold Group on Tuesday announced the completion of a scoping study and an updated preliminary economic assessment (PEA) for its Kobada gold project, in Mali, demonstrating low capital expenditure requirements and high returns.
African Gold said the scoping study demonstrated robust project economics for a 1.6-million-ton-a-year gravity concentration and concentrate leaching operation, with production during the first two years of more than 50 000 oz/y of gold and life-of-mine (LoM) average gold production of 44 000 oz/y over a 15-year mine life.
Cash costs for the first two years of production were estimated at $482/oz, while LoM cash costs were estimated at $694/oz. LoM all in sustaining costs were expected to be $792/oz.
Total preproduction capital required was estimated at $46.6-million including a contingency of $6.1-million.
The scoping study also indicated that the project would generate $278-million in pretax cash flow over the 15-year mine life. The net present value of the project at a discount rate of 5% was estimated to be $172-million and the internal rate of return was 62% at a gold price of $1 250 per troy ounce.
Meanwhile, African Gold president and CEO Declan Franzmann noted that the mineral resource estimate technique used in this scoping study had lowered the resource tonnage, with a corresponding 20% improvement in gold grade to 1.05 g/t.
“This is a significant increase in resource grade and has an important impact on the project's economics.
“The favourable metallurgy characteristics have resulted in a processing route with a cost profile equivalent to heap leaching techniques, but with more reliable, faster and greater recovery of gold. This favourable metallurgy also means that preproduction capital expenditures are significantly lower than for carbon-in-leach processing plants of this throughput,” he said.
African Gold also noted that work on the project’s feasibility study was about 80% complete.
“Much of the key data and studies that support the PEA are of a very high level of confidence; however, the requirement to complete geotechnical drilling for both the final pit shell design and detailed engineering for the tailings storage facility will require further time, necessitating completion of the final study in early 2015,” the company explained.
African Gold stated that the issues which differentiated the current updated PEA from the full feasibility study were not significant from an economic, social or environmental risk perspective and, therefore, it was planning to apply for a mining licence in the near term.
Availability of debt finance for the project would, however, require the full feasibility study outcomes despite the fact that assumptions and parameters used in the current study were conservative.
“This position offers the opportunity to further improve on the economic outcomes of the project with further detailed work,” African Gold said.