Although Banro itself is not speculating on actual gold production dates, one can logically assume that if the relevant feasibility studies produce satisfactory results next year, the company could have two gold mines operating and producing in the DRC by 2011.
The company’s four DRC properties – Twangiza, Kamituga, Lugashwa and Namoya – cover a distance of 2 600 km2 along the Twangiza- Namoya Gold Belt, which stretches 210 km from northeast to south-west. Twangiza – the most advanced of the company’s four projects – is located approximately 45 kilometres south-southwest of Bukavu, in South Kivu Province.
Banro is currently working toward completion of a formal pre-feasibility study by the end of 2007. Largely, this will involve the inclusion of a further resource update, pit optimisation and engineering studies, including the incorporation of further metallurgical and geotechnical investigations, as well as baseline environmental studies.
The company reveals in its preliminary assessment of the Twangiza project – prepared with input from a number of independent consultants – that pre-feasibility work will progress directly to a definitive, full feasibility study, with completion targeted for the second half of 2008. During this period, Banro intends to initiate discussions with potential project finance lenders, including both multilateral agencies and commercial banks.
HYDRO-ELECTRIC SOURCE THE BEST
In terms of finance, studies have been undertaken using hydro-electric and diesel power sources for the Twangiza project. Although capital costs are higher for the hydroelectric alternative, operating costs – especially processing power costs – are significantly lower, and subsequent project economics are better than a diesel-powered generation alternative.
SENET of Johannesburg has produced a cash flow valuation model for the Twangiza project based upon the geological and engineering work completed to date, and incorporating the hydro-electric power source. The financial model also reflects the favourable fiscal aspects of the Mining Convention governing the Twangiza project, which include 100% equity interest and a 10-year tax holiday from the start of production. An administrative tax of 5% for the importation of plant, machinery and consumables has been included in the projected capital and operating costs. The base case was developed using a long-term gold price of US$600 per ounce.
The capital cost for the Twangiza project amounts to almost US$350 million (R2.5 billion). It includes the knowledge gained from preliminary discussions with equipment providers, as well as the experience derived from current projects in Africa. This cost assumes an owner-operated mining fleet, as well as the development of a dedicated hydro-electric facility by Banro.
The estimates for operating total cash costs amount to US$215 an ounce for the initial seven years, and an average of US$257 an ounce over the 13 year mine life. The above financial analysis does not take into account ongoing exploration, feasibility, financing, interest or working capital costs.
DIESEL POWER MEANS HIGH OPERATING COSTS
Project economics were also run for the diesel power alternative. This resulted in the following:
- Average annual production of 312 500 ounces of gold per annum during the initial seven years of operations, and an average of 268 900 ounces of gold per annum over an 11 year mine life.
- Initial capital costs of US$300 million (R2.1 billion) and ongoing capital of US$28 million (R200 million)
- Operating cash costs of US$293 per ounce for the initial seven years (and an average of US$331 per ounce over the full mine life).
The preliminary assessment calculates an average annual production of 317 500 ounces of gold per annum during the initial seven years of operation, and an average 260 300 ounces of gold per annum over the currently defined 13-year mine life.
The Twangiza project’s attributed mineral resources have been derived from resource drilling and assays received up to June 2007. They are as follows:
|Category||Tonnes (Million)||Grade (g/t Au)||Ounces (Million)|
(Using a 1.0 g/t Au cut-off)
Based on metallurgical test work – including recovery and comminution studies on representative, composite drill core samples – SENET scoped a conventional gravity-CIL (carbon-in-leach) processing facility with annual throughput of 5 Mtpa, resulting in the currently defined mine life of 13 years. Metallurgical test work is continuing on alternative processing routes to optimise the extraction of gold from the refractory ores in the transitional and fresh sediment ore types.
VARIOUS SUPPORTING STUDIES UNDERWAY
SENET has also undertaken preliminary analysis of access routes to the Twangiza project for plant and equipment, as well as ongoing production materials and consumables. Access to site is available predominantly by rail from Dar es Salaam, on the coast in Tanzania, or via road from Mombasa in Kenya. The national road running from Bukavu to Kasongo will pass within approximately 24 km of the project, and is currently being upgraded through a World Bank initiative.
SRK Consulting is implementing a pre-feasibility, environmental baseline study at Twangiza which will include ecological, hydrological and socio-economic assessments. There are a number of settlements in and around the mine project area that could provide labour for the operation.
Banro is actively pursuing a number of alternative project opportunities for enhancing and increasing the economics and financial returns relating to the Twangiza project. These include delineating additional resources at Twangiza within economic hauling distances, optimising the mine plan schedule, optimising process recoveries for the various ore types, and targeting new near-surface prospects within the Twangiza project area.
TWANGIZA FOLLOWS NAMOYA PROJECT ASSESSMENT
Banro’s Twangiza assessment came hard on the heels of the preliminary economic assessment of its Namoya gold project, which indicated annual production of 194 000 ounces at average cash costs of US$217 per ounce during the first five years of operations.
The Namoya project is situated at the south-western end of the Twangiza-Namoya gold belt in the Maniema Province of the eastern DRC, and covers an area of 174 square kilometres.
Average annual production for Namoya is estimated at 194 000 ounces of gold per annum during the initial five years of operations, and at an average of 165 000 ounces of gold per annum over the currently defined eight-year mine life).
The Namoya project’s attributed mineral resources have been derived from resource drilling and assays received before June 2007. These are the latest calculations:
|Category||Tonnes (Million)||Grade (g/t Au)||Ounces (Million)|
(Using a 1.0 g/t Au cut-off)
Initial capital cost of the project using a hydro-electric power source will amount to US$187 million (R1.3 billion), with ongoing capital of US$27.5 million (close to R200 million). Operating costs are estimated at US$217 per ounce, while life of mine operating costs will amount to more than US$238 per ounce.
Project economics were also run for the diesel power alternative, resulting in the following calculations:
- Project capital expenditure of US$145 million (more than R1 billion) based on a 5% discount rate and gold price of US$600 per ounce
- Average annual production of 198 000 ounces of gold per annum during initial five years of operations, and an average of 175 000 ounces of gold per annum over a seven-year mine life
- Operating cash costs of US$265/oz for the initial five years, and an average of US$286/oz over the seven year mine life.
Preliminary analysis of transport and accessibility, as well as a pre-feasibility, environmental baseline study including ecological, hydrological and socio-economic assessments, are being undertaken at Namoya, and initial indications are positive.
NEW ALTERNATIVES BEING SOUGHT
Banro is also actively pursuing a number of alternatives for enhancing and increasing the economics and financial returns relating to the Namoya project. These include delineating additional resources at Namoya within economic hauling distances, and also targeting new near– surface prospects that would allow deferral of underground mining to much later in the mine life.
The regional exploration potential is encouraging. The property was recently covered by a helicopter borne magnetic and radiometric survey which is being analysed, and anomalies will be tested later in the year.
As in the case of Twangiza, it is expected that the prefeasibility work on Namoya – scheduled for completion in late 2007 – will progress immediately into a definitive, full feasibility study, with completion targeted for the second half of 2008.
“The results of these preliminary assessments of our Twangiza and Namoya projects are extremely encouraging,” says Banro president and CEO Peter Cowley. “Both have the potential to generate significant cash flow based on projected low cash operating costs,” he adds.
“Our focus now is on further improving the economics of both projects by expanding their resource bases, optimising various other aspects, completing feasibility studies, and moving them along the development path and up the value curve. The very positive results from Twangiza and Namoya indicate the potential for production of plus 500 000 ounces per year of gold from these two projects, and the generation of very significant cash flows,” he concludes.