JUNIOR gold play Kalgoorlie-Boulder Resources has given its wholly-owned Norseman gold project in Western Australian the tick of approval after results from the new scoping study confirmed robust economic returns from a 1.8 million tonnes per annum open cut gold mine operation.
The stock soared 3.8c (44%) on the news to an intraday high of 12.5c before cooling to 11c at market close with almost seven million shares changing hands.
The Kalgoorlie-based company said production was capable of commencing in 2010, producing an average of around 100,000 ounces of gold per annum for seven years and generating a net project cash flow of $A143 million over that period.
Capital costs have been estimated at $75 million and will include $56.4 million for the processing plant, $5.5 million for engineering, procurement and construction management, and $3.2 million for support infrastructure.
Additional capital costs of $10 million are projected for tailings storage facilities, accommodation, pit establishment and other plant ancillary costs.
Meantime, operating costs are estimated at $660/oz for the project.
The average net present value (NPV) for the project, at a 10% discount, has been estimated at $80 million while the average internal rate of return is 40%.
KBRL adopted a gold price of around $990/oz in analysing the merits of the project, considerably higher than the $550/oz gold price when previous owner Kinross Gold completed its pre-feasibility study into Norseman in 2001.
“Whilst the previous pre-feasibility study process had been extensive, a new scoping study was undertaken to take into account the revised cost environment and significantly improved gold price,” KBRL said.
“With gold trading recently at all-time highs, and with the negative outlook surrounding the US economy, strong growth in the gold price is anticipated over the next three years.”
Metallurgical test work performed to date on both the Mount Henry and Selene deposits has projected average gold recoveries of 89% and 86% respectively.
KBRL said it was aiming to extend the mill/mine life to at least 10 years by way of future exploration, joint ventures and potential acquisitions.
The company added that its new mill will be of major strategic value as it will be the lowest cost and largest mill for 60 kilometres, giving KBRL an advantage in treating other company’s ore in toll treatment or in a joint venture arrangement.
The scoping study was project managed and audited by Perth-based mining consultancy firm ElementCMC.
KBRL will now proceed with a formal pre-feasibility study which is expected to be completed by the last quarter of 2008.
Previous owners Kinross Gold completed a pre-feasibility study into the project in 2001, however at the time the project did not meet the Canadian company’s economic criteria.
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