An updated Pre-Feasibility Study has provided Calidus Resources (ASX:CAI) with increased confidence in the financial strength of its Warrawoona Gold Project in the Pilbara Region of Western Australia.
Managing Director Dave Reeves, said the new PFS has highlighted the strong cashflow, outstanding financial returns and short payback of the project.
The updated PFS includes a 24 per cent increase in Reserves to 519,000oz. This underpins forecast production averaging 85,000 ounces a year in the first six years, including 90,000oz in year one, at an average AISC of A$1251/oz.
Based on a gold price of A$2500/oz, the average gold price for the last six months and $70/oz below the current spot price, Warrawoona will generate a post-tax internal rate of return of 77 per cent and have a payback period of just 13 months.
Mr Reeves said that considering these strong findings and the current gold price, Calidus has committed to accelerating its development timetable, with construction planned to start in the March quarter of next year.
The Definitive Feasibility Study on Warrawoona, is on track for completion in the current quarter.
The Updated PFS reflects several significant changes that are aimed to minimise risk, maximise initial cash generation and ensure a simple and robust operation to maximise value to shareholders.
These changes include the modelling technique used in the Mineral Resource that includes greater inherent dilution than the initial PFS, delaying the underground development until year three to minimise construction capital and allow a single focus on the low risk Klondyke Open Pit and installation of a ball mill to ensure grind size and operational flexibility.
Mr Reeves said that with construction planned to commence in six months, the Updated PFS provides a clear, simple, lower capital and lower risk road map to near term gold production for Calidus.
“The Updated pre-feasibility highlights the superb cash generating potential of the Warrawoona Gold Project and reinforces why we are accelerating the development timeline of the Project to take advantage of the current gold price environment,” he said.
“Risk minimisation is a fundamental theme of all work at Calidus. As such, we have altered the resource modelling technique to a more conservative method, we have delayed the underground to allow the company to focus on a single open pit operation initially and we are including a more flexible comminution circuit.
“The decisions being made ahead of development mean that targets laid out for the operating project have maximum probability of being met or exceeded.
“The only changes anticipated at DFS level are associated with costs and fine tuning of mining schedules. The company is currently preparing tenders for all major contracts to allow preferred contractor status to be issued as part of the DFS which will lock in process for the proposed development of the mine next year.
“With the recent addition of some very exciting regional exploration prospects and now the confirmation of the cash generating potential of Warrawoona, the company is poised to enter a period of significant and rewarding growth.”
Project Economics Highlights from the new PFS includes:
- A$2,500/oz (spot gold price A$2,580on 26 June 2020):
- Pre-Tax Project Cashflow of A$648M, average EBITDA of $97M pa, NPV8% $423M, IRR 88% and payback of 13 months
- Post-Tax Project Cashflow of A$468M, NPV8% $303M, IRR 77% and payback of 13 months
- Pre-production capital cost of $116M including contingency of $6M and pre-production mining costs of $13M
- Average production of 85koz a year over first 6 years with 90k ozs in year one
- Life of Mine All-In Sustaining Costs (AISC) of $1,251/oz