Stronger gold price boosts Exterra project’s fortunes
JOHANNESBURG (miningweekly.com) – Strong upward movement in the Australian dollar gold price has significantly increased the prospects for the Second Fortune gold project, which Perth-based Exterra Resources is studying at its Linden gold mine, in Western Australia.
The company reported on Tuesday that a A$300/oz increase in the gold price to A$1 700/oz had almost doubled the cash surplus projected in the gold mine’s prefeasibility study (PFS), which was completed in 2014.
At a gold price of A$1 700/oz, the life-of-mine (LoM) earnings before interest and tax (after state royalties) increased to A$34.4-million.
“The numbers indicate that in today’s current gold environment, the Second Fortune gold mine appears to be highly profitable. Unlike many other planned developments being both fully permitted and with low capital requirements, the Second Fortune gold mine can be brought into production quickly, providing the opportunity for the company to benefit from a strong gold price and further increases that may occur,” MD John Davis commented.
He added that Exterra expected Second Fortune’s costs to fall, pointing out that the 2014 PFS had used higher contracting rates than those that could be achieved in the current climate and that it was also based on diesel prices of A$1.30/l.
“Given the current environment we would expect cash costs to fall, creating a further upside case for the development of the mine,” Davis said.
Currently, the mine’s operating cash costs were estimated at A$720/oz and its total cash costs at A$1 015/oz.
At a gold price of A$1 700/oz, the LoM revenue of Second Fortune was estimated at A$97-million and the payback period at 11 months. Should the gold price increase to A$1 900/oz, the LoM revenue would be A$108-million and the payback period 10 months.
The mine would require preproduction capital of A$5-million and would produce 56 600 oz over a 2.5 year mine life.
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