Magellan Minerals (MNM-V) has completed a preliminary economic assessment (PEA) on its Coringa gold deposit in Brazil’s Tapajos province, suggesting strong economics to move the project to the feasibility stage, with a construction decision expected in late 2013.
The PEA envisions Coringa as a 750-tonne-per-day underground operation, producing nearly 50,900 oz. gold a year at costs averaging US$531 per oz. over the mine’s 8.5-year life. The project should cost US$64.5 million to build. Sustaining capital over the life of mine is estimated at US$50.6 million, for a grand total of US$115 million.
The project boasts an after-tax internal rate of return (IRR) of 33% and net present value (NPV) of US$109.9 million, using a 5% discount rate and US$1,350 gold price. Payback is expected in less than three years.
The returns appear even better when the current gold price of US$1,720 per oz. is applied, lifting the after-tax IRR to 52% and NPV to US$206 million at a 5% discount.
“The robust economics shown in the PEA indicate the Coringa is a project of merit and worth advancing expeditiously,” said John Kiernan, the company’s vice president of project development.
Based on the study, prepared by Global Resource Engineering, Magellan plans to jump straight to a feasibility study, which will include a drilling program to upgrade the existing resources. Once the study is completed, the junior will make a construction decision, currently slated for the fourth quarter of next year.
Using a 1 gram gold cut-off, Coringa currently hosts 3.2 million tonnes grading 5.5 grams gold per tonne for 561,000 oz. in indicated and measured. It has another 5.5 million tonnes grading 3 grams for 534,000 oz. gold in inferred.
Magellan plans to mine the shear-vein Coringa project from underground employing an overhand cut and fill mining method that it says will provide some grade control and lower start-up costs.
Once the ore is extracted, it will be treated in a conventional Merrill Crowe milling circuit. Gold recovery is estimated at 93.5%. Total operating costs should average US$106 per tonne milled.
The project is located in a friendly jurisdiction near infrastructure, including a paved road and a 138 kilovolt power line, said Kiernan, adding the project has “potential to generate significant cash flow and earnings for Magellan’s shareholders in the near term.”
On the PEA news, the stock gained 12.5% to close at 36¢ on more than half a million shares traded.
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