PERTH (miningweekly.com) – An economic assessment of the Kanmantoo copper/gold project, in South Australia, has confirmed the project’s potential.

ASX-listed Hillgrove Resources on Tuesday said restart of the Stage 1 underground operation would require a capital investment of A$26-million, with first copper production expected within seven months of a final investment decision.

The Stage 1 operation would deliver 36 000 t of copper and 10 000 oz of gold over an initial three-year mine plan, at an all-in sustaining cost of A$6 991/t of copper.

The economic assessment estimated post-tax free cash flows of A$196-million, a net present value of A$166-million and an internal rate of return of 389%.

“The study confirms the excellent project potential. Kanmantoo underground Stage 1 presents a unique opportunity to produce copper in a Tier 1 jurisdiction at a time of record prices, generating post-tax cash flows of A$196-million in the initial stage, with resource upside through depth extensions, strike extensions, and additional lodes,” said Hillgrove CEO and MD Lachlan Wallace.

“The project requires only A$26-million of development capital, due to the existing processing facility and tailings storage infrastructure, both of which are being maintained in a ready restart condition. The existing infrastructure and the short distance from the portal to the copper lodes, positions Kanmantoo as one of the lowest capital intensity copper development projects in Australia at $1 550/t of annual copper production in the first three years, well below other development projects which average over $16 000/t.”

Wallace said that the strong potential project economics reinforced the decision earlier this year to commence the underground decline development ahead of the final investment decision.

The first 500 m of the decline is being established under trial conditions using a continuous mining machine which has the potential to transform existing mining development processes; making them safer, faster, more cost effective, and as a fully electrical machine, has the potential to facilitate industry’s transition towards zero emission mining.

The initial 500 m of decline is funded through a A$2-million grant from the South Australian government, and deferred payment terms with Komatsu.

“Orchestrating funding in this manner enables Hillgrove to establish the decline for very little up-front capital outlay, accelerating what is already a very short time to first copper, whilst at the same time, enabling this technology to be tested for the benefit of the mining industry,” said Wallace.

He said that Hillgrove was fully funded to complete the current 16 000 m drilling program and the initial 500 m of decline, after which the company expected to be in a position to make a final investment decision.

“In parallel, we have commenced discussions with potential funding partners,” he added.