Three aspiring gold miners have announced an increase in projected free cash flow for their respective projects as a result of the strong gold price, coupled with falling fuel costs.
Three aspiring gold miners have announced an increase in projected free cash flow for their respective projects as a result of the strong gold price, coupled with falling fuel costs.
While there was some variation in the gold price assumptions, RNI, Red Mountain Mining and Southern Gold increased their financial model for their projects.
Subiaco-based gold explorer RNI said by basing a financial model on the current gold price of $1,620 per ounce (at the time of the announcement), it had increased projected free cash flow by 95 per cent to $172 million for its Grosvenor project in the Bryah basin.
“Significantly, the revised modelling does not account for cost reductions which may be achieved from lower diesel prices resulting from the recent sharp decline in global oil prices,” the gold hopeful said.
“A lower diesel price has a significant cost impact on pre-strip mining costs and ongoing operational costs.”
The company said it had been in discussions with several parties over financing the Grosvenor project to bring it into production, under a process being managed by PCF Capital Group.
“The pre-production capital requirement to commence production at Grosvenor is estimated to be at $38.2 million,” RNI said.
RNI managing director Royce McAuslane said Grosvenor had the added advantage of having the permitting and infrastructure in place, including a 1 million tonne per annum gold plant.
It was a similar story for West Perth-based gold explorer Red Mountain, which increased its free cash flow forecast by 50 per cent to $45 million, on the back of reduced diesel fuel costs, for its Batangas project in the Philippines.
The company also projected an increase in operating cash flow to $67 million in the first five years of production.
“The 25 per cent decrease in the Philippines diesel price has resulted in a 5 per cent reduction to forecast mining and processing operating costs,” Red Mountain said.
At the Batangas project, the company holds an agreement with London backed BMVL, which includes a two-stage funding arrangement totalling $US5.5 million.
“Funding under the agreement with BMVL will allow the company to complete a definitive feasibility study on the project, with initial results confirming low capital and operating costs and recover of over 100,000 ounces of gold during the initial five years of production,” Red Mountain said.
Western Australia-focused explorer Southern Gold also increased its free cash flow forecast for its Cannon gold project near Kalgoorlie by 50 per cent, to $18.5 million.
The company said it held a finance agreement for the mine with Perth-based gold miner Metals X.
Meanwhile, WA gold miners have warned more jobs would be lost if there was an increase to the gold royalty rate.
Speaking on ABC radio yesterday, Premier Colin Barnett said any increases in royalty rates recommended by the Minerals Royalty Review would be phased in over time.
“As I said to some of the sectors, if there is change, it won't be a shock. It won't be large changes overnight. And if changes are necessary, they'll be phased in," he said.
Responding to comments made by Mr Barnett, Gold Royalties Response Group spokesperson and Doray Minerals managing director Allan Kelly said the industry could not bear any additional costs.
“We are very concerned by the Premier’s reference to potential increases in rates being phased in over time,” Mr Kelly said.
“WA gold miners continue to face tough operating conditions. Any increases in royalties will see mines close and jobs lost.
“More than 4000 direct jobs in gold were lost last year as a result of miners being forced to downsize and the reality is that any additional costs will result in more job losses and seriously damage our industry.”
