JOHANNESBURG (miningweekly.com) – A prefeasibility study (PFS) for gold junior Bullabulling Gold’s proposed Bullabulling project, in Western Australia, has indicated that the project is technically and financially viable.

The outcome justified the progression to a definitive feasibility study (DFS), which would start immediately, the ASX- and Aim-listed miner said on Thursday.

The PFS was based on the development of a 7.5-million-ton-a-year openpit mining operation with a conventional carbon-in-leach processing facility that would start production in 2016. Gold production of 1.95-million ounces was forecast over a mine life of 10.5 years.

The project had a Joint Ore Reserves Committee-compliant resource of 109.3-million tons grading 1 g/t gold, containing 3.5-million ounces of gold.

The base case financial evaluation was carried out over the three months to January 31, at a price of A$1 622/oz.

As a result, the project was forecast to generate an internal rate of return of 22% before tax and had a net present value of A$177-million, at an 8% discount rate, equating to $0.58 a share, based on current shares on issue. Net cash flow over the scheduled life-of-mine (LoM) was A$398-million.

Preproduction capital costs are estimated at A$326-million, with a further A$20-million of operating costs to be incurred before production starts. Average LoM cash costs were estimated at $1 145/oz; however, in the first three years of full production, 651 000 oz were targeted for production at a cost of $891/oz.

A development schedule had been prepared for the project, based on completion of the DFS and a development decision being made by the end of 2013.

Engineering, procurement and construction of the mine, plant and associated infrastructure would take an estimated 21 months to complete, leading to gold production starting at the beginning of the fourth quarter of 2015.

Mining would start six months prior, principally to provide waste rock to construct the run-of-mine ore pad and tailings storage facility.

In addition, some 160 000 t of ore will be produced during this period to facilitate plant commissioning.

A three-month ramp-up period had been allowed for the plant, during which time some 1.4-million tons of ore would be processed, with 50 000 oz of gold produced.

Construction of the processing plant and infrastructure necessary to support the operation would cost an estimated A$151-million and A$88-million, respectively. In addition, indirect costs associated with engineering, construction facilities and commissioning have been estimated at A$32-million and allowance of A$19-million has been made for owner’s costs.

Operating costs over the LoM would average A$28.20/t of ore processed, while cash costs would average A$1 145/oz of gold produced.

However, Bullabulling MD Brett Lambert pointed out that the study also identified a number of opportunities for financial improvement, driven by substantial cost savings.

These opportunities included acquiring a mining fleet and carrying out owner mining to remove contractor costs from operational costs; establishing waste dumps on the western side of the Phoenix pit to reduce the average haulage distance by 300 m; redesigning the tailings storage facility to reduce requirements for waste rock haulage to construct walls; and lifting plant recovery from 88% to 90%.