Search

Capricorn adds $100m in value to gold play

Capricorn Metals has stacked on nearly $100m in net present value at its Karlawinda Gold Project after tweaking the various expected inputs and outputs associated with its soon to be built gold mine near Newman in W.A.

A recent optimisation study catapulted the forecast pre-tax NPV from $144m to $243m, a jump of some 69%.

The upgraded financial forecast is mostly due to a sizeable increase in reserves, a smarter processing flow sheet and a 10% reduction in expected capital costs.

The company also said that debt financing discussions were now entering their final stages with credit-approved term sheets expected in August and completion later in the September quarter.

Capricorn says the project now shows an improved IRR of 36% with the $132m capital payback period reduced to 2.5 years from 3 years. The IRR was previously estimated at 31%.

The recent jump in reserves from 713,000 ounces to 892,000 ounces has heralded a sizeable jump in the initial mine life from 6.5 years to 8.5 years.

The all in sustaining cost to produce an ounce of gold is estimated at just $1038 an ounce, shaking off any trepidation that may exist around the project’s 1 gram per tonne dirt.

The company said that cashflows in the first two years of production will be improved by optimisation of the mining schedule whilst a reduction in processing costs has been achieved due to reductions in power costs, higher throughput of ore and improved operational efficiencies.

A competitive tender process for contract mining is underway and expected to be finalised in July and the company has already received a fixed contract price of $88.1m from GR Engineering to design and construct the process plant with a further $5 million allocated for other supporting plant infrastructure.

Whilst the total capital cost is expected to be $132m, the fixing of the price for the key processing plant and supporting infrastructure significantly de-risks the project.

Capricorn Executive Chairman Heath Hellewell, said: “The value of the Project has increased by approximately $100 million with improved rates of return and quicker payback. This outstanding result highlights the serious potential of our Project and brings us even closer to becoming Australia’s newest significant gold producer”

The story of the Karlawinda project begins in 2005 with the chance discovery of gold mineralisation at the Francopan prospect in a previously unrecognised Archaean greenstone belt extension by WMC Resources.

WMC was acquired by BHP Billiton the same year, who sat on the project until Independence Group acquired it in 2008 and discovered the key Bibra deposit in 2009.

About $12m was spent on regional exploration, resource evaluation and prefeasibility activities by the previous owners before Capricorn acquired the project in 2016.

Since then the company has carried out over 80,000m of reverse circulation and diamond drilling at the Bibra deposit which resulted in  the ore reserve hiking by 25% to 27.5 million tonnes at 1 gram per tonne gold and the measured and indicated mineral resource increasing by 286,000 ounces to 1.4 million ounces.

Karlawinda’s attractive economics come courtesy of its location and the geology of the Bibra deposit, which is currently defined over a 2km strike and remains open at depth. Importantly the stripping ratio at Karlawinda is estimated to be just 4.8 to 1.

Being blind at surface, the Bibra deposit still has the full in-situ profile with between one and ten metres of sand cover followed by a laterite cap, oxide mineralisation and finally fresh rock.

This allows the company to access the near surface laterite and oxide ores for the planned open pit first, in order to front end the project cash flows.

Karlawinda also remains largely unexplored with regional exploration limited to wide spaced aircore drilling, surface geochemistry and programs of geophysics.

A recent 800m deep hole drilled 1km along strike at Bibra that was partly funded by the Western Australian Government, encountered 33m @ 1.42g/t gold from 697m down-hole, including higher grade intercepts of 5m @ 4.5g/t gold from 708m and 3m @ 4.6g/t gold from 725m.

This major step out hole effectively doubles the potential size of the Bibra gold system with its high-grade zones representing future exploration targets.

Limited early stage exploration outside the Bibra deposit has also returned intercepts of 37m @ 1.9g/t gold including 8m @ 5.1g/t gold from 179m and 81m @ 1.2 g/t gold including 15m @ 3.0 g/t gold from 400m at Francopan.

Drilling at the K3 prospect – an up-plunge projection of the Francopan deposit – has returned 26m @ 1.08g/t gold from 132m and 21m @ 1.31g/t gold from 230m.

With a global resource sitting at 1.5m ounces, an 892,000 ounce reserve and contracts about to be let, it is quite likely that Capricorn is going to be Western Australia’s next gold producer – and soon.

Add your comment

BNIQ sponsored byLPC cresa

Share Price

Closing price for the last 90 trading days
Source: Morningstar

Total Shareholder Return as at 30/11/18

1 year TSR5 year TSR
47thHigh Peak Royalties90%-16%
121stOrecorp30%26%
360thCapricorn Metals-10%13%
551stKey Petroleum-37%-14%
643rdAruma Resources-50%-15%
741 WA (and selected non WA) listed companies ranked by 1 year TSR relative to other companies with similar revenue
Source: Morningstar

Share Transactions

27/12/17
$11k Bought
27/12/17
$5k Bought
24/11/17
$0 Issued
Total value as at the date of the transaction
Source: Morningstar

Revenue

190th↓Capricorn Metals$262k
192nd↑Key Petroleum$256k
193rd↓Aruma Resources$252k
195th↑High Peak Royalties$246k
196th↑Orecorp$244k
509 listed resources companies ranked by revenue.
Source: Morningstar

BNiQ Disclaimer