Nusantara Resources reveals improved economics for Awak Mas gold project
Recently updated mineral resource and ore reserve estimates have boosted the Indonesian project’s net present value by 240%.
Gold junior Nusantara Resources (ASX: NUS) has announced a “significant improvement” in the economic assessment of its Awak Mas gold project in Indonesia following the recent upgrades to its mineral resource and ore reserve estimates.
Highlights include a 240% increase in the project’s net present value (NPV) after tax to US$517 million (A$752.4 million) and a 120% improvement on the internal rate of return (IRR) after tax from 20% to 45%.
“This outstanding economic assessment update provides a compelling case for advancing Awak Mas through the debt process towards construction development early next year,” Nusantara managing director Neil Whitaker said.
The improved economics follow an announcement earlier this month that Awak Mas’ gold reserve increased by 34% to 35.6 million tonnes at 1.33 grams per tonne of gold for 1.53 million ounces of contained gold. The report had also revealed a five-year boost in the project mine life from 11 to 16 years.
The project’s mineral resource estimate was also upgraded to 2.35Moz gold in April.
Updated project economics for Awak Mas
The new assessment is based on a definitive feasibility study completed in October 2018 that has now been amended for the June 2020 mine schedule, updated capital and operating mining cost estimates, updated metallurgical recoveries and reagent use arising from the 2019 phase two testwork, as well as changes to project royalties and the Indonesian company income tax rate.
The new valuations assume a higher gold price of US$1,700 per ounce (A$2,470/oz) and a total 1.5Moz of gold produced over the life of the mine (averaging 96,600oz per year), compared to the 2018 estimate of 1.1Moz gold.
Upfront capital costs for the project have increased by US$10 million to US$156 million (A$226.7 million) but pre-production capex estimates have remained the same at US$16 million (A$23.25 million).
Given the boosts to the project’s NPV and IRR, the estimated payback period has also more than halved from four years to an estimated 21 months.
Project financing
Nusantara intends to finance the development of Awak Mas through a combination of project debt, mezzanine finance and equity.
In February, the company signed a binding deal with energy company Indika Group to secure a US$40 million (A$58 million) investment in exchange for a 40% stake in the project.
Indika has invested an initial US$15 million (A$21.8 million) to acquire a 25% interest and is expected to invest a further US$25 million (A$36.3 million) to boost its ownership to 40%.
Nusantara has engaged Noah’s Rule as a specialist debt and hedge adviser and has commenced formal engagement of a debt financing syndicate.
Nusantara said following the updated definitive feasibility study project economics, it will be engage an independent technical expert report to aid prospective financiers.