VANCOUVER — With lower overall gold prices taking hold, it’s become important for developers to find affordable projects — and Latin America-focused Troy Resources’ (TSX: TRY; US-OTC: TRYRF) wholly owned West Omai gold project in southern Guyana may be just such an asset.
On Jan. 21 Troy released a preliminary economic assessment (PEA) on West Omai that models a 750,000-tonne-per-year operation, with upfront capital costs of just US$87 million. And since Troy’s economic study uses a relatively realistic US$1,250 per oz. gold price, West Omai offers the company upside if gold prices improve.
Troy’s mine plan contemplates a hybrid open-pit, underground operation that would feed a conventional carbon-in-leach plant with material from West Omai’s Hicks and Smarts deposits. Hicks would be mined via four open pits, with the deepest extending to a 90-metre depth. Production would begin in the Hicks pits while overburden is removed from Smarts, with an underground component later developed to access Smarts’ higher-grade zones.
CEO Paul Benson noted in the release that Troy’s current plan only uses 42% of West Omai’s total resources, which amounts to 690,000 oz. gold. The company intends to process 5.2 million tonnes grading 4.13 grams gold per tonne.
West Omai’s global indicated resources total 2.9 million tonnes grading 4.7 grams gold for 447,000 contained oz., while inferred resources tack on 14.2 million tonnes grading 2.6 grams gold for 1.2 million contained oz. All resource estimates use a 1-gram-gold cut-off grade.
The Smarts open-pit component would chip in 2.2 million tonnes grading 4.5 grams gold, while Hicks’ pits would produce 1.3 million tonnes of plant feed averaging 2.4 grams gold. Underground operations at Smarts would contribute 1.7 million tonnes grading 5 grams gold and extend 400 metres deep.
The project would produce 90,000 oz. gold per year over its seven-year mine life, with annual production in the first year pegged at 102,000 oz. Troy estimates all-in sustaining cash costs of US$805 per oz.
“As Troy has previously done at [the Sertao mine] and [the Andorinhas mine] in Brazil, and [the Casposo mine] in Argentina, we will manage the project in-house and use second-hand plant and equipment where it makes sense,” commented Benson. “Site development would follow [our] successful strategy of designing a plant with a base throughput suitable for the existing resource, but which can be expanded quickly and at a low incremental cost.”
By reducing development costs and focusing on high-grade material, Troy has generated impressive economics for the project. Assuming the base-case study at US$1,250 per oz., West Omai would generate a US$101-million net present value (NPV) at a 6% discount rate, along with a 44% internal rate of return (IRR) and 1.8-year payback period. If gold prices jump to US$1,400 the NPV increases to US$150 million, while the IRR jumps to 61%.
Troy touts the prospectivity of its exploration licences within trucking distance of its proposed plant, reporting 30 drill targets within 30 km of the mill site. Regional exploration programs are to target more ounces in 2014.
Troy is modelling a 1.5-million-tonne-per-year plant capacity if its exploration efforts unveil more economic mineralization.
In the meantime, the company is aiming to start construction at West Omai in the second half of 2014.
Troy produced 127,000 oz. gold equivalent during 2013 at by-product cash costs of US$818 per oz., which generated US$19 million in annual net profit. The company expects its Andorinhas mine in Brazil to stop operating in 2014.
Troy shares have traded within a 52-week window of 68¢ and $4.15, and closed up 9% after news of the West Omai PEA. The company has 168 million shares outstanding for a $17-million market capitalization, and reported US$25 million in cash at the end of June.
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