Majestic Gold‘s (MJS-V) Songjiagou gold project in China’s Shandong province would have a net present value of US$525 million at a 10% discount rate and an internal rate of return of 78.6%, according to a preliminary assessment.
The study estimated that over the mine’s 22-year lifespan, total gold production would reach 2.32 million ounces or an average of 105,645 ounces per year.
Payback would be in just under one and a half years and the life-of-mine waste-ore strip ratio would be about 1.87:1.
The preliminary assessment was based on a resource estimate at a cutoff grade of 0.3 gram gold per tonne of 33.74 million tonnes grading 1.38 grams gold per tonne (uncapped) and inferred resources of 38.81 million tonnes of 1.5 grams gold.
Total capital costs are estimated at $129.2 million including initial capital, initial working capital and sustaining capital.
Life-of-mine operating costs are estimated at US$11.67 per tonne milled, including mining, process and transportation costs.
Based on pit optimization parameters, in the first eight years the mine would produce a total of 1.15 million ounces of gold and generate US$841 million in operating cash flow, compared with life-of mine production of 2.32 million ounces of gold in concentrate and operating cash flow of US$1.516 billion.
At presstime in Toronto Majestic was trading at 23¢ per share. Over the last year the company has traded between a low of 4¢ per share (Mar. 22 2010) and a high of 28.5¢ (Feb. 2 2011). The junior has 499.8 million shares outstanding.