Big River Gold is on the verge of establishing a highly profitable, decade-long gold mining operation in north eastern Brazil that should pay for itself within just two and a half years according to the Perth based, ASX listed company.
Big River has just completed a definitive feasibility study for its Borborema project and it is now convinced that it is sitting on a stand-alone gold mine that will churn out at least 729,000 gold ounces over an initial 10.2-year life.
The company has used a USD$1,400 gold price to produce its numbers and it is looking to churn out an average of about 71,000 gold ounces per annum over the initial 10-year mine life, with that figure expected to come in at around 88,000 ounces a year over the first four years.
Life of mine expected C1 production costs of USD$642 an ounce also look positive – as does the anticipated all-in sustaining cost of USD$839 per ounce.
Importantly, Big River is predicting an average EBITDA of some AUD$79m a year for the life of mine with the AUD$145m CAPEX figure paid back in just 2.4 years at a pre-tax internal rate of return of 43.6%.
Internal modelling shows the project has a pre-tax net present value of around AUD$320m for the $24m market capped company.
The project will comprise of a single open pit and 2 million tonne per annum processing plant using industry-standard crushing and semi-autogenous and ball mill circuits.
Metallurgical recoveries are expected to be high, ramping up to 92.5% with a 36 hour residence time and low reagent consumption.
Gold recovered in years one and two are expected to be 83,888 and 83,954 ounces respectively, delivering revenues of US$235 million in the first two years.
Moreover, production in the third and fourth years is expected to increase to 96,938 ounces.
The all-important stripping ratio which shows the number of waste tonnes of ore that have to be moved for every mineralised tonne is also respectable at 4.2 to 1.
Of equal importance is the fact that Big River is planning to produce from just one single pit which should have the effect of keeping costs low.
The operation will also see the dry stacking of tailings above ground, removing the need for a tailings dam.
The definitive feasibility study has also identified additional opportunities that may result in reduced costs and construction timelines.
According to the company, funding in the order of $118 million is now required to start production, to be spent on capital works, mine pre-production costs and other working capital requirements, with a contingency built-in.
This DFS is a key milestone for the Andrew Richards led Big River as it allows the company to immediately advance project finance discussions with the help of Araujo Fontes, its financial advisor in Brazil.
Big River Gold Chairman Stephen Copulos said: “The reduction in operating costs and containment of capital estimates compared with previous studies provides a strong basis for profitability over the next 10 years at least.”
Whilst Big River’s reserve grade of 1.22 grams per tonne gold is reasonably modest, the company’s DFS shows that in the new uber-high gold price environment, grade is no impediment and at $79m a year EBITDA with capital paid back in just 2.4 years, Big River looks to be standing on the precipice of making that all-important leap from explorer to producer.
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