1st Mar 2016 10:36
LONDON (Alliance News) - Polo Resources Ltd Tuesday said one of the companies that it is invested in has completed a definitive feasibility study for a gold project in Australia.
The natural resource investment company said Blackham Resources Ltd, in which it holds a 10.18% stake, has completed the definitive feasibility study for the Matilda gold project which will produce over 100,000 ounces a year to generate well over AUD50.0 million in earnings each year.
According to the study, the Matilda project will produce 101,000 ounces of gold per year over the first five years of production, taking it from a mining inventory of 767,000 ounces and reserves of 481,000 ounces, giving it an initial mine life of over seven years.
Matilda is aiming to begin producing gold in the third quarter of this year, and the definitive feasibility study has shown improved economics and an extra two year lifespan compared to previous estimates, said Polo.
The mine looks economical at current prices, with a life-of-mine cash cost of only AUD850, or USD600 per ounce.
To put that into perspective, spot gold was trading a touch under USD1,240 per ounce on Tuesday morning, but the gold price the project is based on is even lower than that at USD1,207 an ounce.
Matilda is expected to generate earnings before interest, tax, depreciation and amortisation of AUD58.0 million in the first year of production, before averaging around AUD63.0 million per year thereafter.
Blackham will need to spend AUD32.0 million in capital to get the project producing, which will generate cash flow of around AUD234.0 million over its lifetime. The project has a net present value before tax of AUD170.0 million, a payback period of only 12 months, and an internal rate of return of 150%.
"Blackham has confirmed the project's robust economics including a low capital requirement, short timeframe to production, fast payback and operating costs that are in line with its Western Australian peers. The very low capex required for the project is due to the substantial plant and infrastructure at site and the minor plant refurbishments required to re-start the project," said Polo.
Polo shares were trading down 10% to 2.89 pence per share on Tuesday morning.
By Joshua Warner; [email protected]; @JoshAlliance
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