DFS shows Deflector has the goods Monday, 22 October 2012
Lauren Barrett - MINING NEWS
MUTINY Gold is forging ahead with plans to kick off construction at its flagship Deflector gold project in Western Australia in December after a definitive feasibility study forecast a net profit increase of 30%. Releasing the results of the DFS to the market today, Mutiny was pleased to confirm that Deflector continued to reveal a profitable, low cost, high-grade gold project was on the cards.
The DFS follows on from a bankable feasibility study which was released in July and confirmed a seven-year mine life was possible, with total production forecast at around 382,000 ounces gold equivalent.
Boosting the economics of Deflector, the DFS forecast profits of $A223 million.
Mutiny attributed the increase to the lift in resources by 25% to total 2.8 million tonnes grading 6.41 grams per tonne gold for a contained 591,000oz of gold.
The initial mine plan for the project, located 160km east of the port of Geraldton, will consist of a 7.5-year mine operation.
Production will start at 480,000 tonnes per annum from an open cut operation in the first two years, followed by 380,000tpa in years three to seven from an underground mining operation.
The forecast initial gold production of 397,000oz of gold and 480,000oz gold equivalent represents a 20% jump from the BFS estimate.
The project is tipped to generate an initial net operating cash flow of $425 million, with the study forecasting earnings before interest, tax, depreciation and amortisation of $425 million, up from the estimated $342 million in the BFS.
At a gold price of $1750 per ounce, net present value was evaluated at $137 million, with capital costs for plant construction expected to total $71 million and capital costs for mine construction of $20 million.
Operating C1 cash costs remain low at $618/oz while overall start-up capital costs have increased slightly from $87 million to $91 million.
Mutiny managing director John Greeve labelled the DFS a significant improvement on the BFS.
“It shows the team has delivered a substantial gain in project value and forecast returns, with a low budget $3 million drill program generating an increase of about 100,000 production ounces and an increase to forecast bottom line profits by $55 million,” he said.
The company is also looking at a project expansion at Deflector in the near term.
“By spending as little as an additional $25 million to $35 million in capital to expand the project processing plant with a second line milling circuit, the production can be lifted from a forecast average of 65,000 ounces gold equivalent to 105,000 ounces gold equivalent,” Greeve said.
“With the significant prospectivity available to us at Deflector, we can see that further drilling success along strike and downdip will be the catalyst to activate this plan.”
Subject to receipt of project financing, construction is tipped to begin in December followed by mining early next year, with gold production tipped for October 2013.
The company has already pre-ordered its mill to ensure its start-up plans for Deflector remain on schedule.
MYG Price at posting:
12.3¢ Sentiment: Hold Disclosure: Held
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