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But new technical report sees 96% hike in free cash
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But new technical report sees 96% hike in free cash
Andrea Soh
28 January 2014
A new technical report on LionGold's mine in Bolivia has lowered its estimate of the reserves it holds there, but a higher gold price estimate will see free cash generated from the mine increase 96 per cent to US$269 million.
The company also plans to develop the project in two phases to reduce risks.
The latest report, by AMC Mining Consultants, in an update to a 2011 study, took a different approach to interpret the mineralisation in the mine with new available data.
The updated version estimates that LionGold is sitting on a higher amount of indicated and inferred resources at 1.79 million tonnes, up 40 per cent from the earlier study. An increase in the quality of ore, from 1.1 grams a tonne to 2.4 grams, helped to offset the drop in resources in tonnage terms.
But reserves - the part of resources deemed commercially viable to extract - now appear less. While the earlier report stated probable reserves of 18.9 million tonnes at 1.3 grams per tonne for 787,000 ounces, new estimates now put it at 9.1 million tonnes at 2.4 grams for 701,000 ounces, an 11 per cent decrease in ounces terms.
Nevertheless, the higher ore quality enables the company to build a plant with smaller throughput for a similar production in ounces per year, LionGold said.
The first phase of the project involves a plant processing 0.55 million tonnes per annum (mtpa), using either a gravity or a leaching method to recover the gold. This will produce some 30,000 ounces of gold a year for the first three years, with a capital cost of US$37.4 million.
In the fourth year, LionGold will expand its mining and equipment fleet, as well as its gold processing plant, to process 1.55 mtpa from the fifth year. At this stage, it will produce an average of 95,000 ounces of gold each year for four years, at US$130.3 million.
In all, LionGold will spend about US$167.7 million in capital expenditure for 616,000 ounces of gold.
Based on a higher gold price assumption of US$1,300 an ounce, compared with the earlier assumption of US$1,020, free cash generated from the project is estimated to be US$269 million, up from US$137 million.
Net present value and the internal rate of return from the project also grows to US$110 million and 38 per cent, respectively, from US$81.7 million and 17 per cent.
The company is now evaluating bids for the design and construction of the processing plant, and expects production to start next year.
LionGold acquired the owner of the mine, Minera Nueva Vista, in December 2012. On the stock exchange yesterday, it closed trading at 15.2 cents, up 0.1 cent.