Red Mountain Mining delivers bountiful Batangas scoping study
Red Mountain Mining (ASX: RMX) has estimated a low $16.7 million pre-production capital cost and attractive IRR of 70% and projected life of mine revenue of A$134 million in the Scoping Study for its Batangas gold project in the Philippines.
The results of the study affirm that Red Mining can move Batangas
into production with achievable capex and attractive project metrics.
The
revenue is estimated over the initial 4.5 year mine life on production
of 90,000 ounces of gold while net cash flow is estimated at $40
million. Payback is expected in 1.2 years.
Average all-in costs (C3) are A$1050 per ounce while C1 cash costs are about A$769 per ounce.
This is based on the current gold price of A$1,500 per ounce.
The
Scoping Study is entirely based on a simple open pit mining and carbon
in leach (CIL) processing of existing, high grade resources, of which
90% of the resources to be mined are in the Indicated category.
The
processing plant is intended to be located at Lobo, close to the very
high grade South West Breccia resource and local infrastructure, about 2
kilometres east of Lobo township.
“The results from the Scoping
Study are very positive for us. It shows we can establish the project
relatively quickly, generate early cashflow and payback the up-front
capital within a short timeframe based only on known existing
resources,” managing director Jon Dugdale said.
“We’ll continue
our exploration drilling campaign testing high grade targets at the Lobo
prospect and anything we find there could improve the bottom line even
further.”
Red Mountain’s board has also approved a Definitive
Feasibility Study based on results from the Scoping Study to begin
immediately.
This is expected to cost about $1.1 million with completion expected by December 2014.
Based
on a successful DFS, funding options will then be evaluated and
finalised prior to anticipated commencement of construction in early
2015.
The DFS will be completed in parallel with submission of an expanded
10 year mining plan to meet the requirements for Declaration of Mining
Project Feasibility (DMPF) and related permit applications to be
submitted to the Philippines Government Mines and Geosciences Bureau
(MGB) of the Department of Environment and Natural Resources.
Scoping Study
The Scoping Study was compiled with assistance of Perth-based Sedgman Ltd on process engineering and design, supported by a number of Philippines based consultants and coordinated by management.
Initial
production is planned to be open pit mining inventory from the South
West Breccia (SWB) resources on the granted Lobo mining permit (Mineral
Production Sharing Agreement - MPSA), following which the higher grade
mining inventory from Kay Tanda West resources will be transported from
the granted Archangel MPSA, about 15 kilometres by road.
Low grade mining inventory from Key Tanda West will be stockpiled.
Average
operating cash flow, after C1 cash costs, is estimated to be
approximately $14.5 million per annum, to return pre-production capital
of $16.7 million within a short time frame of just 14 months from
initial production.
Mineral Resources and Mining Inventory
The Lobo and Archangel MPSA’s are located 2 kilometres and 10 kilometres east of the city of Lobo respectively.
Lobo
has a current Resource of 194,000 tonnes at 7.2 grams per tonne, or
45,000 ounces of contained gold, while Archangel hosts 5,586,000 tonnes
at 2g/t, or 363,000 ounces of contained gold.
The SWB Resources
at Lobo are associated with a linear, steeply dipping, epithermal lode
with high-grade “shoots” of mineralisation.
Kay Tanda Resources is associated with a low to moderate grade stockwork gold deposit in andesitic volcanics.
The
mining inventory that forms the basis of the initial Scoping Study
includes 880,000 tonnes grading 3.4g/t gold and 9.2g/t silver.
This
includes 150,000 tonnes at 6.4g/t gold from the upper 80 metres of the
SWB Resources at Lobo, to be mined then processed within the first 18
months of production.
A further 730,000 tonnes grading 2.8g/t
gold and 11g/t silver (3 g/t Au equivalent) from Kay Tanda West is to be
mined and transported to Lobo by road then processed over the
subsequent three years.
There remains an opportunity to extend
high grade production through identifying further high grade resources.
There is also an opportunity to mine and process further lower grade
resources from the Archangel project, based on higher prevailing gold
price or lower cost processing on site.
Processing
Metallurgical
testing indicates that the two mining inventory resource types need to
be processed at different grind sizes and leaching residence times for
optimum recovery and cost.
It is planned that SWB mining
inventory will be processed at 12.5 tonnes per hour with 80% passing
45μm and 48 hours leaching residence time. Kay Tanda West mining
inventory will be processed at 32.3 t/hour with 80% passing 106μm and 24
hours leaching residence time.
This translates to a processing
rate for SWB mining inventory of 100,000 tonnes per annum and average
gold recovery of 95% and a processing rate for Kay Tanda West mining
inventory of 258,000tpa and average gold recovery of 90% for a total
life of mine average processing rate of 196,000tpa and average gold
recovery of 92%. Average silver recovery is 80%.
The processing plant, to be located at Lobo, includes a preliminary circuit design produced by Sedgman Ltd based on the SWB production rate.
This
comprises two stage crushing, ball milling, cyanide leach and carbon
adsorption (CIL), carbon elution and regeneration, gold room
incorporating electrowinning, cyanide detoxification, reagent mixing and
distribution, power distribution and associated infrastructure.
Process plant residues will be gravity fed to a Residue Storage Facility (RSF) close to the processing plant.
The
estimated capital cost of the processing plant is A$10.7 million,
including direct costs of A$8.6 million and indirect costs,
commissioning and contingency of $2.1 million.
Red Mountain noted that its capital expenditure estimate assumes that the majority of plant and equipment is purchased new.
The
DFS will assess the opportunity of purchasing refurbished second hand
equipment and/or the opportunity to carry out a higher proportion of
construction locally using the high quality engineering and construction
facilities at nearby Batangas city.
Infrastructure and Administration
Accommodation
for the workforce will be in the nearby Lobo township with permanent
access roads to be established to the Lobo and Archangel sites while
existing roads will be refurbished from Lobo to the Lobo mine.
Power
generation for the processing plant and associated infrastructure will
be via a leased diesel generating facility. There is also an opportunity
to utilise grid power from Batangas by extending high voltage
facilities within 30km’s of the processing plant site.
A residue
storage facility (RSF) will be established close to the Lobo processing
plant with the initial lift catering for 2 years production then a
second lift for the remaining 2.5 years.
The RSF will be lined
and built to required environmental and seismic standards. The RSF will
be capped and rehabilitated with vegetation at completion of the
project.
Analysis
The Scoping Study has established Red Mountain Mining’s
Batangas Gold Project in the Philippines as a low capital cost project
that can be developed in terms of achievable Capex and highly attractive
early cash flow generation and a quick return on capital.
The
estimated capital cost of $16.7 million is well within reach of a
company with a market cap. of circa $12 million while the IRR of 70%
presents an attractive return on the company’s initial investment.
This
is further highlighted by the company’s decision to proceed with a
Definitive Feasibility Study with construction targeted for early 2015.
In
addition, the company’s exploration drilling campaign testing high
grade targets at the Lobo prospect could further improve the project’s
economics if successful.
The results of the study are value accretive for Red Mountain providing a pathway to development and production and cash flows. This is all systems go for Red Mountain.
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