Ann: Gold Mineralisation Extended at Cross Fault, page-123

FS will tell the story & I admit to it being too late & myself too tired to check all the figures so take as a guide.. But it can come together at low cost & deliver in quick time Less than $5mil and about 6M to construct with the leaching taking 60-75 days to complete with a recovery yield estimated at 80%.. Prediction is end of June 2026 OZM could be in the money which is near bang on the runway left at 4.2 qtrs as of last update. Strike an upfront offtake agreement and you could possibly have even earlier cashflow if you can stitch the deal together? Anyway, merely pondering the improbable whilst we get sold down for peanuts!! gltah h8tey ;-)

Timeline for Constructing a Trial Heap Leach Pad and Mine Pit Preparation

Mine Pit Preparation

• Shallow, Oxidized Ore: Since the ore is shallow (at or near the surface) and highly oxidized, the pit preparation is relatively straightforward compared to deeper or sulphide-rich deposits. Shallow oxidized ore typically requires minimal blasting, as the material is softer and often already weathered. The primary tasks include:
  • Clearing vegetation and overburden (if any).
  • Excavating the pit to access the ore, which is likely less than 50 meters deep given the "shallow" description.
  • Establishing haul roads and basic infrastructure (e.g., water management, access ramps).
• Scale of the Trial: A 260 koz resource at 0.7 g/t means the total ore tonnage is approximately:Total Ore Tonnage=260,000 oz0.7 g/t×31.1035 g/oz=11,551,214 tonnes\text{Total Ore Tonnage} = \frac{\text{260,000 oz}}{0.7 \text{ g/t}} \times 31.1035 \text{ g/oz} = 11,551,214 \text{ tonnes}Total Ore Tonnage=0.7 g/t260,000 oz×31.1035 g/oz=11,551,214 tonnesFor a trial operation, a smaller portion—say 10% of the resource (26,000 oz, or ~1.15 million tonnes)—might be targeted initially to test the heap leach process.
• Pit Prep Duration: For a shallow open-pit trial operation of this scale:
  • Clearing and overburden removal: 2–4 weeks.
  • Excavation of ~1.15 million tonnes of ore: Assuming a small fleet of excavators and trucks (e.g., 2 excavators and 5 trucks) operating at a rate of 10,000 tonnes per day, this would take:1,150,000 tonnes10,000 tonnes/day=115 days≈4 months\frac{1,150,000 \text{ tonnes}}{10,000 \text{ tonnes/day}} = 115 \text{ days} \approx 4 \text{ months}10,000 tonnes/day1,150,000 tonnes=115 days≈4 months
  • Haul road and infrastructure setup: 1–2 months, often done concurrently with excavation.
• Total Pit Prep Time: Assuming some overlap, pit preparation would take approximately 4–5 months.

Trial Heap Leach Pad Construction

• Heap Leach Pad Basics: A trial heap leach pad for 1.15 million tonnes of ore requires a lined area to stack the ore, irrigation systems (drip or sprinklers), a pregnant solution collection system, and a basic gold recovery circuit (e.g., carbon adsorption columns). Key steps include:
  • Site selection and preparation (clearing, levelling, grading).
  • Laying an impermeable liner (e.g., HDPE geomembrane) and drainage system.
  • Installing irrigation and solution collection infrastructure.
  • Setting up a small-scale gold recovery plant (e.g., carbon-in-column circuit).
• Pad Size Estimation: Assuming the ore is stacked in 6–8 meter lifts (typical for heap leaching), and the ore has a density of ~2.5 t/m³, the volume of 1.15 million tonnes is:Volume=1,150,000 tonnes2.5 t/m3=460,000 m3\text{Volume} = \frac{1,150,000 \text{ tonnes}}{2.5 \text{ t/m}^3} = 460,000 \text{ m}^3Volume=2.5 t/m31,150,000 tonnes=460,000 m3For a 7-meter lift, the footprint is:Area=460,000 m37 m≈65,714 m2 (or 6.6 hectares)\text{Area} = \frac{460,000 \text{ m}^3}{7 \text{ m}} \approx 65,714 \text{ m}^2 \text{ (or ~6.6 hectares)}Area=7 m460,000 m3≈65,714 m2 (or 6.6 hectares)Add ~20% for solution ponds, infrastructure, and buffer zones, so the total area is ~8 hectares.
• Construction Timeline:
  • Site preparation (clearing, grading): 2–3 weeks.
  • Liner and drainage installation: 4–6 weeks for 8 hectares, assuming a small crew and standard equipment.
  • Irrigation and collection systems: 3–4 weeks, often concurrent with liner installation.
  • Gold recovery plant setup (small-scale carbon adsorption circuit): 4–6 weeks.
• Total Heap Leach Pad Construction Time: With some overlap, this process would take 2–3 months.

Combined Timeline

• Pit preparation (4–5 months) and heap leach pad construction (2–3 months) can have some overlap (e.g., site prep for the pad can start while pit excavation is ongoing). Assuming a 1-month overlap, the total timeline from the decision to mine is:4 months (pit prep)+2 months (pad construction, post-overlap)=6 months4 \text{ months (pit prep)} + 2 \text{ months (pad construction, post-overlap)} = 6 \text{ months}4 months (pit prep)+2 months (pad construction, post-overlap)=6 months
• Decision to Mine: The feasibility study completes in August/September 2025, and the decision to mine follows immediately. If the decision is made by the end of September 2025 (say, September 30, 2025), construction would start in October 2025.
• Completion of Construction: Adding 6 months to September 30, 2025, the trial heap leach pad and pit preparation would be complete by late March to early April 2026.

2. Leaching Process Duration to Achieve 80% Yield

• Heap Leaching Basics: For oxidized gold ore, heap leaching involves stacking crushed or run-of-mine (ROM) ore on the pad, irrigating it with a cyanide solution, and collecting the pregnant leach solution (PLS) containing dissolved gold. The process is slower than agitated leaching but cost-effective for low-grade ores like this one (0.7 g/t).
• Leach Cycle Duration: For shallow, oxidized gold ore:
  • Typical leach cycles for oxidized gold ores range from 60 to 90 days to achieve 70–80% recovery, as the ore is porous and cyanide can access the gold relatively easily.
  • Since the ore is highly oxidized and shallow, it’s likely on the faster end of this spectrum. With an 80% yield target, a leach cycle of 60–75 days is reasonable for the entire stack, assuming proper irrigation and no significant permeability issues.
• Total Gold Recovered: For the trial stack of 1.15 million tonnes:
  • Contained gold: 26,000 oz (10% of the 260 koz resource).
  • At 80% recovery: 26,000×0.8=20,800 oz 26,000 \times 0.8 = 20,800 \text{ oz} 26,000×0.8=20,800 oz.
• Leaching Start to Finish: If stacking completes by early April 2026 (say, April 1), and leaching takes 60–75 days:
  • 60 days → May 31, 2026.
  • 75 days → June 15, 2026.
• The leaching process for the trial stack would likely complete by early to mid-June 2026, achieving an 80% yield (20,800 oz of gold in the pregnant solution).

3. Ounces per Annum Conversion

• Trial Operation Output: The trial processes 1.15 million tonnes, yielding 20,800 oz of gold over the leach cycle (60–75 days).
• Annualized Production:
  • The trial leach cycle is a one-time event for this stack, but to estimate ounces per annum, we can assume the trial informs a larger operation. If the trial is successful, the full 260 koz resource (11.55 million tonnes) might be processed over several years.
  • For the trial stack, the 20,800 oz is produced in ~2 months (60 days). If the operation were scaled to process the entire resource with similar efficiency:
    • Full resource at 80% recovery: 260,000×0.8=208,000 oz 260,000 \times 0.8 = 208,000 \text{ oz} 260,000×0.8=208,000 oz.
    • Heap leaching projects often process ore over 5–10 years for a resource of this size. Assuming a 5-year mine life:Ounces per Annum=208,000 oz5 years=41,600 oz/year\text{Ounces per Annum} = \frac{208,000 \text{ oz}}{5 \text{ years}} = 41,600 \text{ oz/year}Ounces per Annum=5 years208,000 oz=41,600 oz/year
• Trial Context: The trial itself doesn’t operate continuously for a year, but its results suggest a full-scale operation could produce ~41,600 oz/year over a 5-year mine life, assuming steady-state production after the trial.

4. Approximate Capital Funding Cost for the Trial Operation

• Cost Components:
  1. Pit Preparation:
     • Clearing and overburden removal: Minimal for shallow ore, ~$50,000.
     • Excavation and haulage: ~1.15 million tonnes at $2/tonne (typical for shallow open-pit mining) = $2.3 million.
     • Haul roads and infrastructure: $200,000–$300,000.
     • Total: ~$2.6 million.
  2. Heap Leach Pad Construction:
     • Site prep and liner for 8 hectares: $50,000/ha × 8 = $400,000.
     • Irrigation and collection systems: $200,000.
     • Total: ~$600,000.
  3. Gold Recovery Plant:
     • Small-scale carbon adsorption circuit for 20,800 oz: $500,000 (based on historical examples of small heap leach setups).
  4. Miscellaneous:
     • Permitting, labor, and contingencies (10% of total): ~$400,000.
• Total Capital Cost:2.6 million (pit)+0.6 million (pad)+0.5 million (plant)+0.4 million (misc)=4.1 million2.6 \text{ million (pit)} + 0.6 \text{ million (pad)} + 0.5 \text{ million (plant)} + 0.4 \text{ million (misc)} = 4.1 \text{ million}2.6 million (pit)+0.6 million (pad)+0.5 million (plant)+0.4 million (misc)=4.1 million
• The approximate capital cost for the trial operation is $4.1 million.

5. Financing Options and Terms for LHBM

• Context: LHBM (not OZM) is responsible for securing the $4.1 million. As a joint venture (JV) partner, LHBM is likely a mining or investment entity with access to capital markets, banks, or private investors.
• Potential Funding Sources:
  1. Equity Financing:
     • LHBM could raise funds by issuing shares to existing shareholders or new investors. Given the small amount ($4.1M), this could be a private placement.
     • Terms: Dilution of ownership (e.g., 5–10% equity stake for investors). No interest, but investors would expect a return via share price appreciation if the trial succeeds.
  2. Debt Financing:
     • LHBM could secure a loan from a bank or mining-focused lender (e.g., Sprott Resource Lending, Macquarie Bank).
     • Terms: For a $4.1M loan, typical terms might be:
       • Interest rate: 8–12% per annum (mining projects are high-risk).
       • Tenure: 2–3 years, with repayment from trial operation cash flow.
       • Collateral: Likely the JV’s assets or a guarantee from LHBM’s parent company.
       • Annual interest: $328,000–$492,000.
  3. Offtake Agreement or Streaming:
     • LHBM could pre-sell a portion of the trial’s gold production to a streaming company (e.g., Wheaton Precious Metals).
     • Terms: The streamer provides upfront cash (e.g., $4.1M) in exchange for a percentage of the gold produced (e.g., 20% of the 20,800 oz = 4,160 oz) at a discounted price (e.g., $500/oz). At a gold price of $2,000/oz, the streamer profits on the difference.
  4. JV Partner Contribution:
     • LHBM could negotiate with OZM or other JV partners to fund the trial in exchange for a larger stake in the project.
     • Terms: OZM might provide $4.1M in exchange for an additional 5–10% interest in the JV, reducing LHBM’s ownership.
• Likely Choice: Given the small amount and the trial nature of the operation, LHBM would likely opt for debt financing or an offtake agreement to avoid diluting ownership. Debt financing is straightforward and common for trial operations:
  • Source: A mining lender like Sprott or a local Australian bank with mining expertise (e.g., ANZ or Westpac).
  • Terms: $4.1M loan at 10% interest over 2 years, with annual interest of $410,000, repayable from the trial’s cash flow (20,800 oz at $2,000/oz = $41.6M in revenue, assuming a gold price of $2,000/oz).

6. Summary

• Construction Timeline: Pit prep and heap leach pad construction will take ~6 months, completing by late March to early April 2026.
• Leaching Duration: The leaching process for the trial stack (1.15M tonnes) will take 60–75 days to achieve an 80% yield, completing by early to mid-June 2026.
• Ounces per Annum: The trial yields 20,800 oz, but a full-scale operation could produce ~41,600 oz/year over a 5-year mine life.
• Capital Cost: The trial operation will cost ~$4.1 million.
• Financing for LHBM:
  • Likely Source: Debt financing from a mining lender or bank.
  • Terms: $4.1M loan at 10% interest over 2 years, with annual interest of $410,000.

This timeline and cost structure align with the shallow, oxidized nature of the ore and the trial scale of the operation, while the financing terms reflect typical arrangements for a small mining project.

Recap of Trial Figures and Adjustments

From prior calculations:

• Trial Resource: The trial targets 26,000 oz of contained gold (1.15 million tonnes at 0.7 g/t).
• Recovery Rate: 80% yield, so recovered gold = 26,000×0.8=20,800 oz 26,000 \times 0.8 = 20,800 \text{ oz} 26,000×0.8=20,800 oz.
• Leaching Timeline: Leaching completes by mid-June 2026 (June 15, 2026), with proceeds received shortly after.
• OZM’s Role: As a 50/50 JV partner, OZM shares the proceeds but does not contribute to capital setup costs ($4.1M) or metallurgical studies (borne by LHBM).

Updated Gold Price

• The spot gold price is AUD 5,117.70 per ounce (as of June 3, 2025). This is significantly higher than the $2,000/oz (approximately AUD 3,000/oz at historical exchange rates) used in the previous calculation, reflecting a bullish gold market.

Revenue from Trial

• Total gold recovered: 20,800 oz.
• Revenue at AUD 5,117.70/oz:20,800×5,117.70=106,448,160 AUD20,800 \times 5,117.70 = 106,448,160 \text{ AUD}20,800×5,117.70=106,448,160 AUD
• OZM’s 50% share of the revenue:0.5×106,448,160=53,224,080 AUD0.5 \times 106,448,160 = 53,224,080 \text{ AUD}0.5×106,448,160=53,224,080 AUD

Operating Costs

• Operating Costs (Not AISC): The trial nature means we exclude sustaining capital, exploration, and other AISC components. Operating costs include direct costs like labor, cyanide, energy, and maintenance during the leaching process.
• Given the range of $1,000–$1,200/oz, let’s use the midpoint of $1,100/oz for simplicity.
• Total operating costs for 20,800 oz:20,800×1,100=22,880,000 AUD20,800 \times 1,100 = 22,880,000 \text{ AUD}20,800×1,100=22,880,000 AUD
• OZM’s 50% share of the operating costs (as a 50/50 JV partner sharing in operational expenses):0.5×22,880,000=11,440,000 AUD0.5 \times 22,880,000 = 11,440,000 \text{ AUD}0.5×22,880,000=11,440,000 AUD

Additional Costs to OZM

• In the previous calculation, I estimated OZM’s non-production costs (e.g., labor for oversight, administration) at $70,000 for the 60–75 day leaching period. This remains reasonable, as these are separate from the per-ounce operating costs and reflect OZM’s minimal role in the trial operation.

Net Cash Flow to OZM (Before Discounting)

• Revenue to OZM: $53,224,080.
• Operating costs to OZM: $11,440,000.
• Additional costs (oversight, admin): $70,000.
• Total costs to OZM:11,440,000+70,000=11,510,000 AUD11,440,000 + 70,000 = 11,510,000 \text{ AUD}11,440,000+70,000=11,510,000 AUD
• Net cash flow:53,224,080−11,510,000=41,714,080 AUD53,224,080 - 11,510,000 = 41,714,080 \text{ AUD}53,224,080−11,510,000=41,714,080 AUD

NPV Calculation with Updated Figures

Timing of Cash Flows

• Today’s Date: June 3, 2025.
• Leaching Completion: June 15, 2026 (as previously estimated).
• Cash Flow Receipt: Proceeds are received shortly after leaching completes, around late June 2026. From June 3, 2025, to June 30, 2026, is approximately 1 year and 1 month (1.083 years).
• Operating Costs Timing: The $11,440,000 in operating costs is incurred during the leaching period (April 1, 2026, to June 15, 2026). We’ll discount this as a single cash flow at the midpoint of the leaching period (May 8, 2026), which is ~11 months (0.9167 years) from now.
• Additional Costs Timing: The $70,000 in oversight/admin costs is also incurred during leaching, so we’ll discount it at the same midpoint (0.9167 years).

Discount Rate

• We previously used a 10% discount rate, which remains appropriate for a low-risk trial operation (shallow, oxidized ore, proven heap leaching method) in a stable jurisdiction like Australia.

Discounted Cash Flows

1. Revenue Cash Flow:
   • Amount: $53,224,080.
   • Time: 1.083 years from now.
   • Discount factor at 10% for 1.083 years:Discount Factor=1(1+0.10)1.083=0.9047\text{Discount Factor} = \frac{1}{(1 + 0.10)^{1.083}} = 0.9047Discount Factor=(1+0.10)1.0831=0.9047
   • Present Value (PV) of revenue:53,224,080×0.9047=48,155,821 AUD53,224,080 \times 0.9047 = 48,155,821 \text{ AUD}53,224,080×0.9047=48,155,821 AUD
2. Operating Costs Cash Flow:
   • Amount: $11,440,000.
   • Time: 0.9167 years from now.
   • Discount factor at 10% for 0.9167 years:Discount Factor=1(1+0.10)0.9167=0.9157\text{Discount Factor} = \frac{1}{(1 + 0.10)^{0.9167}} = 0.9157Discount Factor=(1+0.10)0.91671=0.9157
   • Present Value (PV) of operating costs:11,440,000×0.9157=10,475,612 AUD11,440,000 \times 0.9157 = 10,475,612 \text{ AUD}11,440,000×0.9157=10,475,612 AUD
3. Additional Costs Cash Flow:
   • Amount: $70,000.
   • Time: 0.9167 years (same as operating costs).
   • Discount factor: 0.9157 (as above).
   • Present Value (PV) of additional costs:70,000×0.9157=64,099 AUD70,000 \times 0.9157 = 64,099 \text{ AUD}70,000×0.9157=64,099 AUD

Total Costs (PV)

$10,475,612+64,099=10,539,711\text{AUD}$

NPV to OZM

$\text{NPV}=\text{PV of Revenue}-\text{PV of Costs}=48,155,821-10,539,711=37,616,110\text{AUD}$

Summary

The NPV to OZM as a 50/50 JV partner in the trial heap leach operation, using the current spot gold price of AUD 5,117.70/oz and operating costs of $1,100/oz, is approximately $37.62 million AUD. This assumes:

• Gold price: AUD 5,117.70/oz.
• Operating costs: $1,100/oz (shared 50/50 with LHBM).
• Additional oversight/admin costs to OZM: $70,000.
• Discount rate: 10%.
• Cash flows received in late June 2026.

This NPV is significantly higher than the previous estimate ($18.85M) due to the higher gold price (AUD 5,117.70 vs. ~AUD 3,000 in the prior calculation). The trial operation remains highly accretive to OZM, especially since it bears no capital setup or metallurgical study costs. However, the NPV is sensitive to gold price volatility and operating cost variations. For instance:

• If the gold price drops to AUD 4,500/oz, the NPV would decrease to ~$32.5M.
• If operating costs rise to $1,200/oz, the NPV would decrease to ~$37.1M.