Rox is currently drilling to get more gold into the mining plan but the higher price of gold assumption in the DFS will also add a lot more gold into the Reserve.The PFS stated U/G Indicated Resource available for conversion to Reserve is 5.6Mt at 6.1g/t; the Reserve is 3.83Mt @ 4.4g/t (roughly 28% dilution).
Around 2Mt of the Resource has been consumed in Reserves and 3.6Mt is excluded from the Reserve in the PFS.
3.6Mt at 6.1g/t is a huge resource, part of which will be unlocked by the higher price of gold.
It was excluded in the PFS based on the economics of mining engineering studies, mainly geometry, and some scheduling.
In the PFS, we're seeing the exclusion of short-pay run material, material that requires a lot of development, and thin material that attracts too much dilution
to have a sufficient margin at the assumed POG. At a higher POG, the additional mine development such as building more stopes, and raising capex to pay for them is much less of an obstacle.
A higher POG also means that the cut-off grade can be lowered to profitably include more of the excluded resources in the mining plan.
In the PFS the cut-off grade is calculated at $2,600 oz Au so there is plenty of scope to lower it as the POG climbs higher.
As the cut-off grade decreases the size of the Reserve increases significantly. This is simply a function of revenue generated from selling the mineral vs costs to extract the mineral.
Rox has already locked in some of the benefits of a higher POG.
In particular, the AISC margin (profit after cost of production) is based on a spot price of $3,500 oz Au, which is quite high so this may not change in the DFS.
Note that the metrics of company valuation are based on an assumed gold price of $3,100, so we can expect large improvements that will encourage funding mine construction.
In summary, the higher POG means significantly more gold ozs can be included in the DFS mining plan.
That’s a much longer life of mine with a higher free cash flow over the LOM and significantly improved company metrics
The POG-driven benefits stand quite apart from the gold likely to be added in the current drilling campaign due for reporting next week.
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