Blackham Resources (ASX:BLK) has been ticking the boxes at its Matilda gold project in Australia, where a pre-feasibility has increased the total amount of ounces that will be recovered, despite a 4% lower recovery rate.
The current mine plan now calls for a total mine life of almost 5 years producing an average of 98,000 ounces of gold per year at an all-in sustaining cost of A$1150/oz (approximately US$850/oz). As the initial capex is just A$28M resulting in a pre-tax IRR of 105% using a gold price of A$1550/oz, this project should be fully financed by the A$38.5M funding facility received from Orion Mine Finance.
Yes, the pre-tax NPV5% is quite low at just A$124M, but keep in mind the mine plan has incorporated just 539,000 ounces gold which is less than 15% of the total resources at Matilda (which currently stands at almost 5 million ounces). Blackham could create a lot of additional value by adding more tonnes (and ounces) to the mine plan as every additional 1.3 million tonnes of ore per year would increase the pre-tax cash flow by A$30-35M.
We also asked our consulting geologist, Doug Ramshaw, for his opinion about Blackham’s project and its mine plan; ‘It’s a solid PFS with excellent project economics that are blessed through the significant sunk capital at the project. Initial resources modelled for the operation’s initial mine life appear to focus largely on open-pittable oxide and underground free milling gold that play to the robust AISC that place Blackham squarely in the right part of the cost curve.
The overall global resource for their district wide project should provide excellent exploration upside to add mine life. With such limited capital requirements for the start-up of operation it would be expected that free cash flow can quickly be used to conduct the upgrading of additional resources to be incorporated into future mine development.
Australian mining companies have an uncanny ability to begin operations on relatively small reserve bases and mine life. Through historically excellent mining productivity and typically great infrastructure in the major mining camps a 4-5 year initial life can rapidly be expanded within conservative economic parameters. As they tighten up the current studies to those of Feasibility level I would expect that there will be additional upgrading in resource confidence as well as incorporation of additional ounces. At this stage, however, the ounces will come and the confidence already appears to be there for their financial backers.
Permitting risk appears negligible at this stage and the Orion Mining Finance facility should see them through to production if they can keep on schedule.’
> Click here to go to Blackham’s website
Disclosure: The author holds no position in Blackham Resources. Please see our disclaimer for current positions.
