Ora Banda Mining has delivered its inaugural definitive feasibility study at the Davyhurst project in WA that it picked up when Eastern Goldfields went bust. The DFS is underpinned by an existing 1.2 million tonne per annum processing plant, which is reflected in the project’s extraordinarily low CAPEX figure of just AUD$45m that it intends to pay back in only 14 months.
Leveraged by $258m worth of carried forward tax losses, the DFS shows a pre-tax free cash flow from the initial 5.2-year mine life of $175m at a forecast Australian gold price of $2,100 per ounce.
With an all-in-sustaining-cost of $1,566 per ounce, Ora Banda’s base case DFS scenario looks to be robust.
The pre-tax net present value of the project is $137m and it is showing an impressive internal rate of return of 109.3 per cent against its modest $45m CAPEX figure.
With the spot price of gold currently trading north of $2,500, it looks like there could also be some upside to Ora Banda’s numbers.
The company said its IRR would soar to a whopping 237.8 per cent at the spot gold price of $2,550 per ounce.
At that gold price, payback would be achieved in just 7 months according to the company.
Ora Banda has also tabled a maiden ore reserve at the Waihi and Callion deposits, bringing the total probable reserves for the Davyhurst project to 6.1 million tonnes grading a solid 2.4 grams per tonne gold for 460,000 ounces.
Ore dilution, which can sometimes see more waste rock mixed with the mineralised ore than planned, is an inherent risk in any mining scenario.
A common waste to ore dilution factor of 5 to 10 per cent is often used in mining studies, which effectively reduces the original modelled ore grade by around 10 per cent.
Curiously, Ora Banda has applied between 14 and 50 per cent dilution within the open pits in its modelling, leaving plenty of room to move before suffering a serious grade degradation due to dilution.
The company said the Riverina underground ore reserve is not included in today’s update, as the modelling is still underway, potentially adding even more upside to the project.
Ora Banda said its production plan initially includes six deposits, mined from both open pit and underground sources and it will kick off with the Riverina pit and Golden Eagle underground mine.
The other mines in the 5.2-year schedule include the Sand King, Missouri, Waihi and Callion open pits.
With the DFS hurdle now well and truly cleared, Ora Banda plans to get pre-infrastructure works going straight away - plant refurbishment is ongoing and development will now commence at both the Riverina open pit and Golden Eagle underground mines.
With around 2.13 million ounces of mineral resources right across the company’s landholdings and only 460,000 ounces currently sitting in reserve, it looks like the initial 5.2-year mine life should also have plenty of upside.
Ora Banda’s DFS represents an outstanding turn around for this project that essentially fell over under a previous owner.
It has now been scrubbed up, refinanced to a point, drilled out and is looking pretty much nothing like it did when the David Quinlivan led team of technocrats at Ora Banda pulled it from the ashes of Eastern Goldfields.
Is your ASX listed company doing something interesting? Contact: matt.birney@businessnews.com.au
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