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Gascoyne Resources - Low Capex Dalgaranga Development
BY GAVIN WENDT - 04/03/2016 | VIEW MORE ARTICLES BY GAVIN WENDT

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GCY - GASCOYNE RESOURCES LIMITED


Gascoyne Resources (ASX: GCY, Share Price: $0.29, Market Cap: $60m) is a gold exploration and development company led by a vastly experienced board and management with a strong blend of exploration, discovery and mining backgrounds. The company has grown its resource inventory to 2.05 million ounces of gold in 3 advanced projects, all located on granted Mining Leases in Western Australia.

Gascoyne has advised that the preferred process plant design and flow-sheet has been completed, along with the capital cost estimate, for its Dalgaranga project, confirming the project will be a substantially lower cost development than a typical goldfields development of the same size.

Market Significance

Gascoyne’s share price has firmed solidly from a 12-month low of $0.063 during early 2015 to a high this week of $0.32 – largely as a result of growing market awareness of its sizeable gold resource base, situated in an ultra-low risk jurisdiction. Adding further luster to the company’s attraction is the strong A$ gold price performance and thus the robust profitability of quality domestic gold projects. Solid corporate interest in what could be the next domestic gold miner is driving the company’s share price performance, particularly as ongoing exploration results continue to add to the overall resource potential.

Announcement Detail – Completion of Dalgaranga Plant Design

Gascoyne has announced the completion of the preferred process plant design and flow-sheet, along with the capital cost estimate, for its proposed gold processing plant and associated infrastructure at its Dalgaranga gold project in Western Australia.

The flow-sheet, design and capital cost estimate has been completed by the engineering group Mintrex, which has been involved in the flow-sheet development and plant design of some of the most successful gold project developments in Western Australia over recent years.

The design and flow-sheet developed and costed by Mintrex as a key part of the Dalgaranga Pre-Feasibility Study (PFS) has confirms the project will be a substantially lower-cost development than a typical goldfields development of the same size due to a number of favourable characteristics of the project.

  • Process plant capital cost (including contingency) - $60.5 million
  • Ancillary infrastructure capital cost (including contingency) - $14.5 million
  • The working capital required for the development is still being prepared along with the mining schedule.

Technical Significance

There are a number of characteristics of Dalgaranga that result in relatively low capital costs when compared to operations of a similar scale, including the soft nature of the ore. This results in a considerably lower installed power requirement that significantly reduces the capital cost.

Along with the soft ore, the gold is very easily liberated, resulting in a relatively coarse grind (106 μm) and rapid leaching. The existing tailings storage facility (TSF) can also be utilised, which reduces the pre-production capital, as only a TSF lift is needed and not a whole new facility. These combined attributes result in a total saving of around $35-50 million.

Dalgaranga contains a recently upgraded Measured, Indicated and Inferred Resource of 23.7Mt @ 1.4 g/t gold for 1.05 million ounces of contained gold.

The Dalgaranga Gold Project Pre-Feasibility Study (PFS) is on schedule for completion by the end of March. The mining schedule is nearing completion, which will feed directly into the financial modelling of the project. It is expected that the project will produce around 100,000ozpa of gold with a mine life of around 6 years from the known resources.

The PFS is investigating the establishment of a 2.5Mtpa processing plant on site, which recent pit optimisation studies suggest will result in production of approximately 100,000oz p.a. at A$1,035/oz for 6-7 years.

In addition to the PFS, exploration is ongoing with follow-up drilling around the Hendricks discovery, with further drilling at the Beefeater, Vickers, Gilbeys North, Gilbeys South and Caorunn prospects. This drilling is expected to be completed by the end of March, with results expected to be received gradually from late March to mid April.

Summary

We recently introduced Gascoyne Resources to our Portfolio around $0.17 during February.

Confirmation that the Dalgaranga Gold Project can be progressed with a relatively low capital cost is very welcome news. The deposits at Dalgaranga have a number of unique characteristics that Gascoyne and Mintrex have identified which will result in lower than normal capital and operating costs, including the very soft nature of the ore, the excellent metallurgical recoveries, rapid leaching and very low reagent consumptions. When combined these make a very substantial impact on the costs for development.

Dalgaranga can offer a lower capex starter project that will allow it to leverage into its +1Moz Glenburgh project in WA’s Gascoyne region, which requires further drilling to extend beyond the current ~4 year mine life. Both projects in operation would see Gascoyne with a potential production profile of +150,000 oz p.a. The company will remain firmly held within our Portfolio.



View More Articles By Gavin Wendt

After a decade as a broking resources analyst with Intersuisse, Gavin helped establish the Fat Prophets Mining Report during 2005, writing and producing the report until he established MineLife during late 2010. He writes about mining and energy companies via his MineLife reports.



Disclaimer: Gavin Wendt, who is a director of Mine Life Pty Ltd ACN 140 028 799, compiled this document. It does not constitute investment advice. In preparing this report, no account was taken of the investment objectives, financial situation and particular needs of any particular person. Before making an investment decision on the basis of this report, investors and prospective investors need to consider, with or without the assistance of a securities adviser, whether the information is appropriate in light of the particular investment needs, objectives and financial circumstances of the investor or the prospective investor. Although the information contained in this publication has been obtained from sources considered and believed to be both reliable and accurate, no responsibility is accepted for any opinion expressed or for any error or omission in that information.

 

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