ASX-listed developer Bardoc Gold has deferred the final investment decision for its project near Kalgoorlie, Western Australia, to complete a strategic review of the development strategy for the 3.07-million-ounce gold project.
The strategic review has been prompted by a rapidly escalating cost environment in the Western Australia resources sector, a tightening labour market and other Covid-19-related challenges facing resource projects.
Bardoc said that a recently completed cash-flow optimisation study had indicated a 31% increase, about A$55-million, in the preproduction capital cost estimate for the project. In March 2021, the definitive feasibility study (DFS) indicated a capital cost estimate of A$177-million, this is now estimated to be A$232-million.
The company stated that key suppliers had indicated that cost pressures for new resources projects would continue to worsen over the next 12 to 18 months, citing rising steel prices, materials and input costs.
In addition, the market for skilled personnel, services and equipment was “severely tight”, exacerbated by Covid-19-related border closures and restrictions on the movement of people.
“It has become increasingly clear that the rising cost environment across the Western Australia resources sector has made this a very challenging time for any company to launch a significant new mine development,” said chairperson Tony Leibowitz.
He stated that the board was not prepared to expose its shareholders to the risk associated with mine development at a “very challenging time in the resources cycle”. “We are certainly not willing to take on significant amounts of debt and potentially blow our capital structure out to develop a project.”
The strategic review would include consideration of strategic merger and acquisition and consolidation opportunities, as well as other pathways to monetise the deposit in the near term.
While the review is under way, all expenditure related to predevelopment and project financing activities had been terminated and corporate overheads and costs would be reviewed.
“We have a unique and highly valuable asset in the Bardoc gold project with a resource of over three-million ounces, a one-million-ounce reserve, a premium location on the doorstep of Kalgoorlie and exceptional exploration upside which remains to be unlocked.
“Our focus as a board over the next few months will be to continue exploration to grow our resource and reserve base, while pursuing strategies to crystallise the value of our asset base for shareholders,” Leibowitz said.
The DFS forecasts average production of 136 000 oz/y at an all-in sustaining cost of A$1 188/oz, positioning Bardoc as a new midtier gold producer. The DFS is based on the development of a standalone mining and processing operation, with a 2.1-million-tonne-a-year carbon-in-leach plant and flotation circuit to be constructed on site.
The Bardoc mine will initially comprise a 10-year mining operation, delivering life-of-mine production of 1.10-million ounces of contained gold.
Bardoc lost 21% of its value on the ASX on Monday, trading at A$0.045 a share, giving the company a market capitalisation of A$74.18-million.