Korab Resources begins Pre-Feasibility Study for 2Moz Bobrikovo Monday, March 18, 2013 by Proactive Investors
Korab Resources' Bobrikovo Project Korab Resources (ASX: KOR) has begun a Pre-Feasibility Study targeting 60,000 to 70,000 gold ounces per year at its Bobrikovo Project in eastern Ukraine.
The study is focused on the development of fresh rock mineralisation that commences below the oxide zone currently being mined at the 2.04 million ounce project.
Significantly, a fresh-rock Scoping Study based on the current mineralised shell shows a robust, low operating cost project.
Korab is currently developing the oxide zone as a precursor to the development of the much larger fresh rock zone where it aims to increase the production to between 60,000 and 70,000 gold ounces per year.
The total Resource is currently undergoing an upgrade with the aim of increasing the higher confidence Indicated and Measured categories, as well as increasing the overall Resource.
Pit optimisation, as well as process design for two alternative processing methods has been completed
Oxide zone mining
As part of the development of the oxide zone, Korab has been mining and stockpiling ore on a campaign basis accumulating in excess of 340 thousand tonnes of high grade and low grade ore, which contains 32,000 gold ounces ready for extraction.
The ore is pre-crushed and is ready for milling and processing using a simple low-cost gravity concentration circuit.
Korab has also mined about 700,000 tonnes of very low grade rock assaying under 0.8 grams per tonne (g/t) gold (averaging 0.5g/t) which is currently stockpiled as waste but which may be considered for treatment in the future.
The CAPEX is estimated at $700,000. The processing cost of ore to concentrate is $295/ounce.
Positive economics
Earlier this month Korab released exceptionally positive metrics from the evaluation of the stage one economic development of the oxide zone.
The operating profit from 12 months of production is expected to be around $11.5 million before tax.
Production is fully permitted, however the commencement of the production of concentrate will depend on the timing of the completion of the gravity processing plant.
Korab has commenced construction of the processing plant and the ancillary infrastructure including lab, mechanical workshops and the administration building.
The selling costs and the discount to the spot gold price upon sale of the concentrate to refinery is about 15% of the gold price.
Oxide ore from Bobrikovo is amenable to low cost gravity processing using a simple second-hand circuit designed to produce concentrate containing gold, silver, and base metals.
An additional benefit of the oxide ore is that its gold particles are relatively large and occur as free grains, making it suitable for gold and silver extraction without the use of chemicals and at relatively coarse grind size.
The excellent grindability and metallurgy of this heavily weathered ore means that CAPEX and OPEX of the stage one development can be exceptionally low.
Upcoming share purchase plan
A large proportion of the funds to be raised under the upcoming share purchase plan will be used to fund the purchase and commissioning of the stage one processing plant.
Importantly, this will enable early production of gold concentrate and generation of early cash flow.
Part of the money raised will also be used to fund the fresh-rock Pre-Feasibility Study.
Adding to the funds expected to be raised, Korab has also signed an agreement to sell the Winchester Magnesite Project in the Northern Territory for around $33 million in cash and royalties.
On completion of the sale, part of the money received will be used to fund the development of the 110,000 ounce oxide zone of the Bobrikovo Project and the Pre-Feasibility Study on the development of 1.93 million gold ounces contained in the fresh rock zone of the Bobrikovo Project.
Analysis
Occasionally, a stock comes along with a profile that is under the radar yet has financial metrics that belie the current valuation. On an Ev/Oz basis, Korab is undervalued. On a short term potential cash flow basis, projected operating profit from 12 months of production from the oxide zone is expected to be around $11.5 million before tax, the stock is undervalued.
Korab has ticked alot of the boxes.
KOR Price at posting:
8.5¢ Sentiment: Buy Disclosure: Held
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