Development of an open pit mine and copper concentrator at the T3 copper-silver deposit in the world-class Kalahari Copper Belt, Botswana, is expected to deliver exceptional financial returns for MOD Resources.
The ASX-listed explorer along with its joint venture partner, Metal Tiger Plc (30%), have now agreed to proceed with a Feasibility Study in the current quarter based on the outstanding financial outcomes indicated by the Pre-Feasibility Study (PFS) into the project.
Two cases – a Base Case and Expansion Case – were provided in the PFS of T3.
The PFS Base Case – with plant throughput of 2.5Mtpa – indicates a technically sound and financially robust project generating around A$960 million EBITDA over 9 years.
Pre-production costs came in at A$192 million, Life of Mine costs were a low A$38 million with All in Sustaining Unit Costs (AISC) of A$2.1/lb Cu including silver credits.
Under the Base Case scenario, the project is expected to generate Net Present Value (NPV) of A$370 million pre-tax using long term A$3.72/lb copper price and 8% real discount rate at 8% with annual free cash flow of A$101 million pre-tax.
The PFS Expansion Case assumes open pit mining and conventional flotation processing with a plant throughput of 2.5Mtpa for the first three years from production start.
The plant would then be upgraded to enable it to treat 4Mtpa during Year 4 onwards.
The first three years of production (estimated capital payback period) are based on processing Proved and Probable Ore Reserves. The Expansion Case includes processing of currently existing Inferred Mineral Resources in addition to Measured and Indicated Mineral Resources.
Assuming the Expansion Case proceeds, the PFS indicates a potential for generating in excess of A$1.45 billion EBITDA over approximately 12 years.
The expansion of the plant from 2.5Mtpa to 4Mtpa is tipped to cost a low A$46 million, Life of Mine costs were A$67 million with AISC of A$1.81/lb Cu including silver credits.
NPV under the Expansion scenario is $529 million pre-tax, using long term A$3.72/lb copper price and 8% real discount rate. The project is expected to generate net cashflow of A$1.1 billion pre-tax.
MOD Resources’ Managing Director Mr Julian Hanna said the PFS clearly demonstrated the project’s strong technical foundation and exceptional financial returns as well as the opportunity for significant upside assuming the Expansion Case proceeds.
This is our starting mine – and while it is an exciting milestone, we believe there is more to come with potential for satellite deposits around T3 and numerous other exploration targets to be tested along a 140km corridor,” said Mr Hanna.
“None of this potential upside has been included in the scope of the PFS.”
“We are extremely lucky to be operating in such a favourable mining jurisdiction and look forward to transforming into a profitable long life copper producer in Botswana,” he said.
Drilling at T3 is ongoing to upgrade existing Inferred Mineral Resources to Measured and Indicated Mineral Resources with a revised resource estimate expected in Q2 2018.
Shares in the company (ASX:MOD) were last trading at 5.8c, down 0.2c.