One year after buying the Thunderbox operations from Norilsk Nickel, Saracen Mineral Holdings has announced plans to develop an open pit gold mine that will double its production to about 300,000 ounces per annum by the 2017 financial year.
The Saracen board has approved the stage 1 development, which is a large open-pit on the Thunderbox deposit capable of delivering 597,000oz with all in sustaining costs of $1,032/oz.
“The board feels that this was an ideal time to develop a new project in Australia, with a falling Australian dollar and diesel price, high open-pit mining equipment availability, and tightening in the labour and contracting markets making for an ideal development environment,” Saracen said in a statement.
The company has agreed to a gold hedging program with Macquarie Bank, consisting of 140,000oz of forward hedging at an average price of $1,520/oz, and $33 million facility.
It said project capital requirements of $65 million would be fully funded from existing cash reserves and free cash flow generation from its Carosue Dam operations.
Managing director Raleigh Finlayson said the development approval for the Thunderbox operation was a significant milestone for the company.
“It will see Saracen produce gold from multiple operations for the first time in our history,” Mr Finlayson said
“Thunderbox stage 1 is forecast to deliver $195 million of free cashflow over an initial 4.5-year mine life that endorses the company’s acquisition of the Thunderbox operations in January 2014 for a total cash consideration of $23 million and royalty payments of 1.5 per cent capped at $17 million.
“Stages 2 and 3 have the potential to see production extend to in excess of one million ounces over an eight year mine life at an average production rate of 126,000 ounces per annum with an average AISC of $1,057 per ounce.”
Mr Finlayson said open pit mining at Thunderbox would be conducted using a similar operating model that the company employed at its Carosue Dam operations.
The company said pre-strip mining would begin in August, with processing set to commence in July next year at an average production rate of 124,000oz per annum.
“The cost of refurbishing and re-commissioning the existing treatment plant has been derived from a plant refurbishment report prepared by Mintrex Consultants, which includes a proposed scope of works and cost estimates provided by suppliers, mechanical and electrical contractors,” Saracen said.
Saracen shares closed 1.2 per cent higher at 42 cents per share.
