Renaissance Minerals (ASX:RNS) has released the final results of its long-awaited pre-feasibility study at the Okvau gold project in Cambodia. The initial capital expenditures are now expected to be $120M with an additional $10M in sustaining capital expenditures. This should be sufficient for a 4,000 tonnes per day operation resulting in an 8 year mine life producing an average of 91,500 ounces of gold per year.
The expected all-in sustaining cost per produced ounce of gold is $735/oz which is remarkably low, especially considering the strip ratio is 7.7 which is quite high. The after-tax internal rate of return using a gold price of $1100/oz is 19% but if you’d use a gold price of $1250/oz, the IRR increases to 29% with a pre-tax NPV5% of 174M (which is just $90M in the $1100 gold price scenario).
Okvau is a really interesting project, but at the current gold price the NPV of the project is a bit underwhelming and that’s the main reason why the company’s share price has been going south.
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Disclosure: The author holds no position in Renaissance. Please see our disclaimer for current positions.
