Magellan Minerals (MNM-V) has completed a preliminary economic assessment (PEA) of its Coringa gold deposit in Brazil’s Tapajos province. It concludes that strong economics justify moving the project to the feasibility stage, with a construction decision expected late next year.
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 would cost US$64.5 million to build. Sustaining capital over the mine’s life is estimated at US$50.6 million, for a grand total of just US$115 million.
The project boasts an after-tax internal rate of return (IRR) of 33% and a net present value (NPV) of US$109.9 million, using a 5% discount rate and US$1,350 per oz. gold price. Payback is expected in less than three years.
The anticipate returns are even better when the current gold price of US$1,720 per oz. is applied, lifting the after-tax IRR to 52% and the NPV to US$206 million at a 5% discount rate.
“The robust economics shown in the PEA indicate the Coringa is a project of merit, and worth advancing expeditiously,” the company’s vice-president of project development John Kiernan says.
Based on the study, prepared by Global Resource Engineering, Magellan plans to jump straight to feasibility, which will include a drilling program to upgrade the existing resources. Once the study is complete, the junior will make a construction decision, slated for next year’s fourth quarter.
Using a 1 gram gold cut-off, Coringa hosts 3.2 million indicated and measured tonnes grading 5.5 grams gold per tonne for 561,000 oz.. It has another 5.5 million inferred tonnes grading 3 grams for 534,000 oz. gold.
Magellan plans to mine the shear-vein Coringa project from underground, using an overhand cut-and-fill 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 in a mining-friendly jurisdiction near infrastructure, including a paved road and a 138-kilovolt power line, Kiernan says, adding that the project has “potential to generate significant cash flow and earnings for 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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