Burkina Faso – Orezone Gold, the TSX-listed gold junior, has announced the highlights of the independent Feasibility Study for its wholly-owned Orezone Bombore gold project in Burkina Faso, West Africa.
The study envisions a shallow open pit mining operation with a processing circuit that combines heap leaching and carbon-in-leach (CIL) without any grinding to process the soft and mostly free digging oxidized ores.
The eleven-year mine plan, based on a mineral reserve using an US$1 100 gold price, is designed to deliver higher grade ore in the early years (0.88 g/t over the first eight years of production at a strip ratio of 1:1). Lower grade stockpiles will be processed in the final three years.
The financial model with revenues based on a $1 250 gold price, yields a robust 24.4% after tax internal rate of return to the company (based on 90% ownership, 10% Government) with a net present value of $196 million at a 5% discount rate.
Project payback is estimated at 2.7 years with all in sustaining costs averaging $678/oz. Initial capital is estimated at $250 million including contingencies, all working capital and a $10.5 million credit for gold revenues generated during the pre-production period.
Capital costs include the mining fleet, a much larger water storage reservoir and higher resettlement costs than envisioned in the March 2014 Preliminary Economic Assessment (PEA). Sustaining capital is estimated at $75.2 million, taking into account the additional three years of mine life and higher resettlement costs than estimated in the PEA.
Total reclamation and closure costs are estimated at $22.5 million including $8.7 million of heap rinsing costs expensed in year 12.
“The results of the Study are compelling and the project benefits from size, location, low reagent consumption, rapid leaching kinetics and low all-in operating costs,” says Ron Little, CEO of Orezone.
“Bomboré is one of the largest and most advanced undeveloped gold deposits in the region that lends itself to phased development. The initial 11 year phase requires less capital and has lower operating costs to process the shallow and softer oxidized ores. A second phase, at slightly higher gold prices (>$1 400) could expand the standard CIL circuit with the addition of grinding to process the well-defined sulphide resource (73 Mt at 1.1 g/t for 2.6 Moz).”
The study was completed by Kappes, Cassiday and Associates of Reno, Golder Associates, Inc. of Reno and Montreal, and WSP Canada in conjunction with Socrege and BEGE of Burkina Faso.
Summary of Financials
The Base Case assumptions include mineral reserves using an average gold price of $1 100/oz and revenues based on $1 250/oz along with current prices for fuel, reagents and labor. Capital is based on quotes received from potential equipment and service providers between Q3, 2014 to present.
The Mineral Resource and Mineral Reserve
The Mineral Reserve estimate is based on the 2013 Mineral Resource estimate which includes 139.9 Mt of M&I resources grading 1.01 g/t for 4.6 Moz plus 18.4 Mt Inferred resources grading 1.22 g/t for 0.7 Moz. The Study mineable reserve is limited to only the measured and indicated near-surface saprolite (oxide) and transitional (semi-oxidized) resources to an average depth of 45 m.
The Mineral Resource estimate consists of three separate block models.
Estimated Annual Gold Production
The Study assumes during years 1 through 8 an average annual mining rate of 13.9 Mt, including 5.5 Mt of ore. The ore is composed almost equally of +/- 212 micron material and is processed via the heap leach pad (+212 micron) and CIL (-212 micron) circuits.
Some gold is recovered during the pre-production period as a result of mining and processing the ore contained within the water storage facility (OCR). During years 9 to 11 ore is only processed from the lower grade stockpiles.
The project is also sensitive to operating costs, in particular fuel (diesel and HFO) which accounts for approximately 25% of expenses. Diesel pricing is set by the government of Burkina Faso. The Study uses the conservative delivered to site fuel prices of $1.20/L for diesel and $0.77/L for HFO. Although diesel prices are lower than those used in the 2014 PEA, they are not as low as the current price in Burkina Faso or the free market price.
The project economics and other mining operations in the country would benefit if the government were to change their policy to allow free market pricing and direct supply.
Estimated time to construct the Bomboré operation (pre-production) is 21 months.
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