THE BOURSE WHISPERER: MOD Resources (ASX: MOD) announced results of a scoping study, looking at a proposed open pit mine at the company’s 70 per cent-owned T3 copper-silver deposit in the Kalahari Copper Belt in Botswana.
MOD Resources said it was highly encouraged by the project economics to emerge from the study, which it said highlighted MOD’s potential to become a long-life copper producer in Botswana.
The robust financial outcomes indicated by the scoping study, have provided the impetus for MOD and its Joint Venture partner, Metal Tiger (30%) to proceed with a pre-feasibility study (PFS) commencing early 2017.
The study follows on from the announcement in September this year, six months after the discovery of T3, of a maiden resource at the deposit comprising 28.36 million tonnes at 1.24 per cent copper and 15.7 grams per tonne silver, containing approximately 350,200 tonnes of copper (approx. 772Mlbs copper) and more than 14 million ounces of silver.
The T3 resource includes 18 million tonnes at 1.35 per cent copper and 16.7g/t silver in the Indicated Resource category, accounting for 64 per cent of the total resource.
The resource is open along strike west of current drilling and extension drilling is planned in early 2017.
The scoping study produced two preliminary scoping level models have been generated using two different copper price assumptions.
The study was based on an optimised pit design to approximately 220 metres vertical depth and construction of a processing plant to treat two million tonnes per annum of ore with low cost expansion optionality if required.
Pre-stripping of the first stage of the planned open pit is scheduled to commence in 2019 with ore processing targeted to commence later in 2019.
Total indicative mine life is approximately 10 years with 9.25 years of ore production with estimated life of mine (LOM) average production of approximately 21,800 tonnes per annum copper and 665,000 ounces per annum silver.
The first Preliminary Base Case Model (A) was prepared using a consensus copper price of US$2.53/lb copper, a price approximately 6 per cent lower than the copper spot price (approximately US$2.69/lb Cu).
MOD said the base case model A indicated robust financial metrics which include an estimated average annual pre-tax cash flow of approximately US$44 million per annum, a pre-tax NPV10% of approximately US$180 million and an IRR of approximately 31 per cent.
LOM C1 costs are estimated to be US$1.2 per pound copper including silver credits.
The estimated project cost (±35%) is US$135 million (MOD share US$94.5M), including US$18 million capital for pre-strip costs and US$18.3 million contingency. The expected payback period is 2.6 years.
The second preliminary upside case model (B) was prepared using an elevated price of US$3 per pound copper.
MOD explained this elevated price is in line with recent UBS Global Research price projections for 2019 and is approximately 20 per cent above the base case copper price assumption.
This is considered by the MOD Board to be a reasonable forward estimate to use as a basis for the upside case model.
The upside case model indicated outstanding financial metrics which include an estimated average annual pre-tax cash flow of approximately US$65 million per annum, a pre-tax NPV10% of approximately US$297 million and an IRR of approximately 42 per cent.
C1 costs are estimated to be US$1.31 per pound copper including silver credits.
The expected payback period is approximately two years.
Each US10 cent per pound rise in the copper price is estimated to add approximately $US25 million to pre-tax NPV.
“The scoping study clearly demonstrates the project’s strong commercial potential as well as the opportunity for significant upside,” MOD Resources managing director Julian Hanna said in the company’s announcement to the Australian Securities Exchange.
“T3 is a significant new sediment hosted copper and silver deposit which has progressed from discovery to completion of a positive scoping study in just nine months.
“Total cost from discovery to completion of the scoping study was only approximately US$2.5 million, confirming the outstanding efforts and commitment of the exploration and scoping study teams as well as the quality of the deposit.
“T3 is also exciting from a geological standpoint because it opens up a wider potential for further discoveries in this extensive area of the Kalahari Copper Belt which remains untested.”