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KOTH proves up for Red 5

15th September 2020

By: Esmarie Iannucci

Creamer Media Senior Deputy Editor: Australasia

     

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PERTH (miningweekly.com) – A final feasibility study (FFS) into the King of the Hills gold project, in Western Australia, has confirmed the technical and financial viability of a new four-million-tonne-a-year mining and processing operation which could be expanded to six-million tonnes a year.

Owner Red 5 said that the FFS estimated a project capital cost of A$226-million, with first production scheduled for the June quarter of 2022.

The initial mine plan estimated a mine life of 16 years, with gold production in years one to six expected to average 176 000 oz/y, while peak annual gold production of 203 000 oz/y will be achieved in 2024, benefitting from underground mining of one-million tonnes a year in years one to four.

The FFS estimated that the project would have a pre-tax net present value of A$1.1-billion and an internal rate of return of 64.3%, with a capital pay-back period of 25 months.

“The completion of this high quality FFS, delivering a 2.4-million-ounce ore reserve, is a pivotal moment for Red 5 shareholders, for our hard working team and for communities in the Leonora-Leinster region of the Eastern Goldfields. It firmly places King of the Hills as one of the largest endowed gold mines in Australia,” said Red 5 MD Mark Williams.

“The FFS details the construction of a standalone carbon-in-leach processing facility on-site that will be fed initially by a combination of ore from both openpit and underground mining operations. This will form the engine room of a significant new Australian gold mine delivering total production of 2.5-million ounces over an initial 16-year mine life.”

Williams said that based on a A$2 500/oz gold price, the operation would deliver outstanding financial returns, and with strong production in the early years of the mine, the project was well placed to benefit from the favourable gold price environment.

“There are opportunities to improve on the base case outlined in the FFS by optimising mining costs in the contract tendering process, extending the mine life through further underground and surface exploration success, and expanding the operation once production is under way. The process plant is engineered in a way that this expansion can be achieved with minimal disruption and low cost.”

He added that given the significant outcome of the FFS, Red 5 was well placed to move ahead with site works, finalise permitting, award major tenders and to complete the project financing process.

“With our strong cash reserves, we are also now in a position to negotiate and secure a competitive project debt funding facility, and to this end, 12 prospective project lenders are already involved in the debt process.”

A final investment decision is being targeted over the coming months, before site construction starts in early 2021.

Edited by Creamer Media Reporter

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