Not-so-good news about higher costs and capex estimates in an updated prefeasibility study this week for Alacer Gold Corp.’s (TSX: ASR; ASX: AQG) Gediktepe project in Turkey were partly offset by good news of a 117% jump in the project’s indicated resource.
Gediktepe’s Ardich deposit is about six km northeast of Alacer’s 80%-owned Çöpler open-pit mine and is the company’s highest priority development project.
The updated mineral resource consists of predominantly oxide ore with some sulphide, totaling 13.24 million measured and indicated tonnes grading 1.50 grams gold per tonne for 639,000 ounces of contained gold and a further 2.58 million inferred tonnes averaging 1.16 grams gold for 96,000 ounces of contained gold.
The latest study estimates a post-tax net present value at a 5% discount rate of $252 million and internal rate of return of 27%
The company believes there is potential to expand the resource and will start step-out drilling next week to test the extent of the mineralization. Alacer also believes there are opportunities to process oxide ore from Ardich at its existing Çöpler oxide plant facilities and is undertaking an engineering study this year for a 20 million tonne per day expansion of Çöpler’s heap leach pad.
The resource estimate was released the same day as a prefeasibility study for the project that updates a previous PFS completed in 2016.
The PFS outlines a mine life of 11 years and total recovered metals, to both dore and concentrates, of 345,000 ounces of gold, 8 million ounces of silver, 254 million pounds of copper and 626 million pounds of zinc, for a total of 1.6 million gold-equivalent ounces.
The latest study estimates a post-tax net present value at a 5% discount rate of $252 million and internal rate of return of 27%, down from the 2016 study’s NPV of $475 million and IRR of 47%.
Pre-production capex of $164 million was up from the 2016 PFS estimate of $120 million, while life-of-mine cash costs were forecast at $817 per oz., up from the previous $613 per oz.
“The cost increase was mainly attributable to higher processing costs, as challenging metallurgy and ground conditions limited the viability of the previously proposed heap leaching flowsheet,” comments Cosmos Chiu of CIBC. “The oxide ore will now be processed through a CIP circuit.”
Chiu also estimated that Gediktepe’s total resources, inclusive of reserves, fell by 18%-25%.
News of the updated resource and PFS sent the company’s shares down 2% or C$0.07 to C$3.45 apiece on April 3.
CIBC’s Chiu has an outperformer rating on the stock and a 12-18 month target price of C$4.00 per share.
(This article first appeared in The Northern Miner)