PFS proves Batangas mine’s low cost, strong cash flow potential

JOHANNESBURG (miningweekly.com) – A prefeasibility study (PFS) of ASX-listed junior gold developer Red Mountain Mining’s Batangas gold project, 120 km south of Manilia, in the Philippines, has been completed, demonstrating the low operating costs, high margins and strong cash flow potential of the project.

The study concluded that the project would generate A$46-million in free cash flow during the first seven years of production at a gold price of A$1 700/oz. This would be generated by the low operating costs of $735/oz, at an all-in cost of $914/oz. Further, the low upfront capital cost of $16-million would include a new carbon-in-leach processing plant.

Red Mountain MD Jon Dugdale said that the initial high reserve grades from surface, averaging more than 6.6 g/t gold for the South West Breccia pit, would allow the Batangas project to achieve strong early cash flows and a high rate of return on initial capital.

“In addition, there is potential to expand ore reserves through drilling of the over 320 000 oz of additional, mostly inferred, resources, and upside potential remains to be tested within the 14 km of identified epithermal gold structures at Lobo.”

Dugdale added that Red Mountain and joint venture (JV) partner Bluebird Merchant Ventures were now aiming to complete the definitive feasibility study by year end.

“The JV partners very much look forward to developing the Batangas gold project, which will deliver major positive benefits to the people of Lobo and the Batangas regions, as well as the Batangas JV partners,” he said.

The PFS revealed that Batangas had a maiden probable ore reserve of 1.44-million tonnes at 2.6 g/t gold and 9 g/t silver, or 2.8 g/t gold containing 128 000 oz gold. This would include high-grade ore of 746 000 t at 4 g/t gold and 9.2 g/t silver, or 4.2 g/t gold containing 100 000 oz of gold.

Red Mountain noted that the probable ore reserve was derived from optimised openpit designs based on indicated resources only, representing a mining and production schedule that was expected to recover 116 000 oz of gold during the initial seven years of production. However, the PFS added 26 000 oz of recoverable gold, compared with the scoping study completed in March 2014.

Batangas was expected to generate A$190-million in revenue from gold sales, with A$117-million in costs to be spent in the Philippines and A$13-million in royalties and taxes to be paid to the Philippines government and communities during the initial years of production.