THE BOURSE WHISPERER: Hodges Resources (ASX: HDG) has completed mine scoping and power integration studies for the company’s Morupule South project in Botswana.
Highlights from the study include:
– Life of mine ROM production costs for 1.5 million tonnes per annum (Mtpa), 5Mtpa and 5-10Mtpa operations were US$10.18 per Run Of Mine (ROM) tonne, US$10.59 and US$10.96 on an owner operator basis and US$12.90 on a 1.5Mtpa contract mining basis;
– The project can be developed through a staged process with capital costs ranging from US$55.7 Million for a 1.5Mpta contractor run mine for domestic coal markets up to US$199.6 million for the initial stage of a two stage development mine of 5Mtpa up to 10Mtpa; and
– An initial operation scenario of 1.5Mtpa from open cast contract mining operations generates Net Present Value of US$384.2 million; and Initial Rate of Return of 29 per cent at current prices.
Hodges has approved feasibility phase studies for an initial start-up development of around 2 to 3Mtpa with a ramp-up to 5Mtpa within 3 to 5 years.
“After extensive evaluation of all the independent studies the Board of Hodges has approved the commencement of feasibility level studies to refine the operational and capital cost estimates associated with a staged development up to 10 million tonnes per annum run of mine coal operation”, Hodges Resources managing director Mark Major said in the company’s announcement to the Australian Securities Exchange.
The studies have also identified areas where Hodges could achieve additional operational and possible capital cost savings.
Hodges said it had now confirmed the potential for a robust project at Morupule South and any further savings will only add more value to the project.
The company said it considered the confirmation of the potential to develop the project through a staged process had a material impact on its attitude towards feasibility.
“Despite having the resources to support this, a run of mine production scenario of 20 million tonnes per annum has not been considered appropriate at this stage until developments are made to the existing rail and port infrastructure,” Major said.
Hodges indicated it will instead focus on the feasibility of an initial stage of operation requiring less capital supporting an operation for the domestic/regional coal markets with a run of mine ranging from 1.5 to 3Mtpa.
Having completed the scoping studies, Hodges said it is confident electricity demand exists to support the integration of the small scale power plant at Morupule South, and in doing so create an immediate market for the mine’s product given its proximity to an existing grid.
“We have a clearer view now on the commercially viable opportunity to develop a mine in a staged and less capital intensive manner, and to deliver product to satisfy Botswana’s emerging and increasing power requirements whilst longer term infrastructure developments are developed in the region,” Major said.