The cut-off grade is a bit on the low side at around 0.3 g/t, and with reserve grade at only 0.79g/t they had to plan for a larger sized plant at 6.1 mtpa with the high capex and large volume of earth movement per year. I am really surprised that AISC is forecast at around AUD AUD1200, and would have thought that would come out at least around AUD1600/ounce given the costs SBM incurred at Simberi in PNG.
They are using a gold price of USD1800/ounce in the DFS. I think Barrick still uses USD1300, in which case they would not be interested in acquiring Misima. The ore reserves have been based on a more conservative USD1600 POG, which seems more reasonable in case the POG dives lower.
There is a sensitivity analysis of pre-tax NPV, where they show various NPVs based on different USD gold price assumptions. The headline NPV of AUD956m only results in an IRR of 22% and payback period for capex of almost 6 years (which is a bit too long for most projects). Obviously a higher gold price would make the project more economically attractive. They have also estimated the post tax NPV at USD1800 gold atAUD624m+ and the IRR for that is only around 18%.
Looks like the sharemarket is not interested in the Misima project and KSN will not be able to progress it in the current high cost environment at today's gold price.
GLA
loki
KSN Price at posting:
13.5¢ Sentiment: None Disclosure: Not Held
