Aspiring Indonesian gold producer Sihayo Gold has been making solid progress on the ground at its developing Sihayo “starter” gold project in North Sumatra which is getting tantalisingly close to being “shovel ready”. An optimisation study on the proposed mine is also advancing towards tabling in the next quarter and the Brisbane-based company says upgrades to an access road and an existing camp are now largely completed.
In June last year, Sihayo Gold delivered an impressive definitive feasibility study on the starter project that was headlined by a life of mine EBITDA estimate totalling US$744 million or an annual average of US$93 million a year across an initial mine life of eight years.
The cracking EBITDA numbers are based on a gold price of US$1,890 an ounce. The study also showed an EBITDA of US$630 million using a base case gold price scenario of US$1,700 an ounce.
Life of mine gold production at Sihayo has been forecast at a total of 635,000 ounces or a touch under 80,000 ounces per annum.
Sihayo’s measured, indicated and inferred mineral resource for the main Sihayo-1 deposit and nearby Sambung deposit currently weighs in at 24 million tonnes grading a solid average of 2 grams per tonne for 1.5 million ounces of contained gold.
Proved and probable ore reserves within the broader resource tip the scales at 12.5 million tonnes going 2.1 g/t for 840,000 ounces of contained gold.
The Sihayo-1 deposit speaks for the lion’s share of the reserves at 11 million tonnes going 2.1 g/t for 750,000 ounces of gold.
According to the definitive feasibility study, the pre-production capital cost of construction is expected to come in at about US$144 million, while all-in sustaining costs of production are set to average a miniscule US$709 an ounce.
The capital payback period has been extrapolated at just over two years.
Since finishing the definitive feasibility study, Sihayo Gold has been carrying out further studies aimed at reducing construction and operating risks and identifying potential upside opportunities within the project.
The ASX-listed, $36 million market-capped company says it expects to square away the optimisation studies in the early part of the December quarter this year.
Sihayo Gold Executive Chairman Colin Moorhead said: “The company continues to make excellent progress on the Sihayo starter project, with early works now largely complete and project optimisation studies nearing completion. The project provides an excellent platform for further exploration success across the Contract of Work (project area).”
Management says the company is looking at multiple avenues for funding ongoing exploration programs and construction of the starter project, including traditional bank financing and potential investment from a strategic partner. The company has commenced discussions with potential lenders regarding debt financing.
Sihayo Gold, which has about A$8.7 million cash on hand, hopes to kick off the main construction phase at Sihayo next year with a view to the first gold being poured in the following year.
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By Matt Birney
