Auroch Minerals (ASX:AOU) has released the results of the scoping study it conducted at the Fair Bride gold project in Mozambique, and we’re intrigued by these initial results. Even though the project is relatively small (the mine plan calls for a total gold production of less than 350,000 ounces), the economics are very robust.
The initial capital expenditures will be less than $30M, which is quite low for a project with an annual production rate of 46,000 ounces of gold at an all-in sustaining cost per ounce of less than $800. The mine life will be short but with an IRR of in excess of 57% and a NPV8% of $50M the project is definitely viable. Keep in mind Auroch used a gold price of $1250/oz as its base case scenario, but even at $1100 gold it would still make sense to build the project. The NPV could be increased by adding additional resources to the mine plan, something which is quite likely to happen.
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Disclosure: The author holds no position in Auroch Minerals. Please see our disclaimer for current positions.
