Newcore Gold (TSXV: NCAU, US-OTC: NCAUF) shares jumped to a 12-month high Thursday after the company increased the net present value (NPV) of the Enchi gold project in Ghana by three quarters over the prior 2021 assessment.
Based on a gold price of $1,850 per oz., an updated preliminary economic assessment (PEA) shows a 75% increase in the post-tax net present value (NPV) of $371 million (discounted at 5%) and an internal rate of return (IRR) of 58%. These figures top the previous June 2021 assessment’s NPV of $212 million and IRR of 42% (calculated at $1,650 per oz.).The 36% yearly higher production of 121,839 oz. will require an initial investment of $106 million, slightly higher than the earlier $97 million estimate.
“Enchi is in its own efficiency class,” President and CEO Luke Alexander said. “These figures equate to an NPV-to-capital ratio of 3.5 times. I challenge you to find another development-stage project with such metrics,” he told The Northern Miner in an interview.
Ghana is Africa’s top gold producer, according to World Gold Council data, and is considered a Tier 1 jurisdiction. Newmont (TSX: NGT; NYSE: NEM) invested more than a billion dollars in the Ahafo North project. Galiano Gold (TSX: GAU; NYSE American: GAU) last month bought full control of the 130,000 oz. per year Asanko mine from Gold Fields (NYSE: GFI; JSE: GFI) for $170 million.
Newcore shares rose more than 20% in trading Thursday to hit an intra-day high at 23.5¢ apiece on the news. It closed at 23¢, gaining about 21% over the past 12 months and giving Newcore a market capitalization of $39.7 million. Alexander argues that most modest-sized gold development projects today involve capital outlays ranging from $400 to $500 million, with NPVs typically yielding ratios of only between one and two times capital.
He points out that at spot prices around $2,350 per oz., the post-tax NPV rises to $632 million and the IRR sits at an attractive 92%. It is generally understood that investors’ risk aversion eases at project IRR rates above 35%, with anything more than 15% still deemed worthy of a look.
The PEA, prepared by Lycopodium Minerals Canada, plans for an 8.1 million tonnes per year open-pit mining operation over 9 years using heap leaching, compared to the previous study’s 6.6 million tonnes per year throughput over 11 years. It involves a waste strip-to-ore ratio of 2.67 and a heap leach feed grade of 0.6 gram gold per tonne. The operation is to hire mining contractors.
Over the mine life, Enchi will produce just over a million ounces at all-in sustaining costs of $1,018 per oz., lower than the $1,066 in the prior study. The PEA update also budgets for higher sustaining capital of $92 million versus $23 million, and closure costs of $18 million versus the earlier estimated $22 million.
Newcore is to build the heap leach facility in three stages, with extra capacity planned for future expansion. Trucks are to carry ore from five deposits (Sewum, Boin, Nyam, Kwakyekrom, Tokosea) to a central crushing and heap leach facility between the Boin and Sewum deposits, which hold about 76% of the resources. The plan assumes that secondary crushing capacity will only be necessary when processing transitional and fresh rock in the latter half of the mine life, thereby reducing initial capital costs.
An updated resource estimate calculated at $1,650 per oz. underpins the PEA. Enchi hosts 41.7 million tonnes indicated at 0.55 gram gold per tonne for 743,000 oz. of metal, with another 46.6 million tonnes inferred grading 0.65 gram for 972,000 oz. of gold.
Alexander says the next steps involve proceeding to the pre-feasibility stage, but a definite timeline has not yet been established.
In February, Newcore increased Enchi to 248 sq. km by adding the Omampe licence, where the company will proceed with early-stage drill target development.
The company has also completed an updated environmental and social baseline study, which it says was well received by the local mining authority and communities.
Source: MINING.COM – Read More
