Panoramic Resources (ASX:PAN) has re-branded and renamed its Gidgee gold project in Australia into the Gum Creek project as the company wanted to highlight its land package on the GC greenstone belt.
Panoramic also completed a scoping study on the project at the end of last quarter, and the mine plan now expects to see a total gold production rate of approximately 290,000 ounces of which 240,000 ounces would be produced in the first four years of the mine life. The expected AISC per ounce is A$1209/oz, resulting in a net margin of approximately A$400/oz using the current gold price and USD/AUD exchange rate. Panoramic has used a gold price of A$1700/oz as its base case scenario, in which case the pre-tax NPV11% comes in at A$37M. We are usually nervous when we see pre-tax NPV’s, but as Panoramic has a carried forward tax loss of almost A$80M, it does look like it won’t have to pay a single dollar in taxes on this project.
However, using the current gold price, the pre-tax NPV11% falls to just A$17M, which makes the project pretty marginal, but this is partly caused by the high discount rate as the cumulative amount of (undiscounted) free cash flow is in excess of A$50M.
Despite this, the company has been able to work on an underwritten entitlement offer to raise A$11M before costs to keep the company going.
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The author has no position in Panoramic Resources. Please read the disclaimer
