Emerging Cote d’Ivoire gold producer Tietto Minerals (ASX: TIE) has delivered a maiden ore reserve and “compelling” pre-feasibility study (PFS) that shows its Abujar open pit project could produce 200,000 ounces of gold in its first year.
The maiden open pit probable reserves total 15.7 million tonnes at 1.7 grams per tonne gold for 860,000oz gold – a conversion of more than 65% of indicated resources.
The life-of-mine inventory, inclusive of reserves, stands at 22.9Mt at 1.5g/t gold for 1.1Moz at an average all-in sustaining cost of $839/oz.
The study presents Abujar as a robust, long-life project, based on a standalone open pit and cyanide-in-leach processing plant with a 3.5Mt per annum milling capacity, that is estimated to pay back its $230 million capital costs in 2.8 years.
It also demonstrates strong economics including a pre-tax net present value (NPV) of $363 million and an internal rate of return (IRR) of 53% (based on an average gold price of US$1,506/oz). Leveraging to a spot gold price of US$1,700/oz, the pre-tax NPV is estimated at $502 million with an IRR of 63%.
In addition, Tietto said free cash flow of more than $509 million (pre-tax) is expected over the first 10 years with “substantial upside” to be considered in the definitive feasibility study (DFS) which is anticipated for completion next quarter.
Tietto managing director Dr Caigen West described the PFS metrics as “compelling” and said they “clearly suggest that the development of Abujar will transform Tietto into a substantial West African gold producer”.
“Delivery of this maiden JORC 2012 open pit ore reserve and supporting PFS is a milestone for Tietto and our shareholders, as it moves us closer towards realising our goal of developing West Africa’s next gold mine,” he added.
Substantial upside demonstrated to Abujar PFS base case
The PFS demonstrates that 200,000oz gold could be produced from the Abujar open pit in its first year of production and more than 168,000oz per annum over the first six years of the project.
The study also shows “substantial upside” to the Abujar PFS base case, with an expanded project including an underground mine expected to increase NPV to $432 million and IRR to 54% at an average gold price of US$1,491/oz, or $620 million and 64% using the US$1,700/oz spot gold price.
This expanded project also has the potential to extend the project’s mine life and increase gold production to 1.44Moz.
“We believe there is considerable upside to the base case PFS, with a scoping study of the APG open pit and AG underground demonstrating considerable value remains to be unlocked for our shareholders,” Dr West said.
He said the PFS will be used as the basis for a DFS which will build on the value drivers that have been identified.
“The DFS will consider the additional throughput potential and the lower operating costs of processing oxide and transition material in mine plan, and we will investigate the optimum processing rate to ascertain the correct mill size during the DFS.”
“This has the potential to increase the value from mining operations earlier in the life of mine. Work will also commence on determining the feasibility of establishing a heap leach operation that will seek to add further value to the project from the resource base at APG,” Dr West added.
Discussions continue with potential project financiers
Tietto said the PFS’ “robust” economics support a substantial debt element to the funding mix for the Abujar project and discussions are continuing with potential project financiers.
“We have commenced early-stage debt financing negotiations for the project and we are focused on advancing the Abujar Gold Project towards becoming West Africa’s next gold mine,” Dr West said.
To date, no material or binding agreements for funding has been signed.
Completed DFS expected in third quarter
Tietto said it is well-funded with about $52 million in cash at the bank to complete a DFS on the project in the 2021 third quarter.
This study will optimise the mine and mill throughput with the aim of reducing waste stripping costs.
More than 25,000m of infill drilling is being completed targeting inferred resources within and beneath the current ore reserve pit design at AG and APG, with an updated resource model expected in late May. This new estimate will underpin the DFS.
“We are confident the Abujar gold project will continue to enjoy growth in both resources and reserves over the year through our continued aggressive drilling program,” Dr West said.
An additional PFS test work program to assess the potential for heap leach at APG to add to CIL gold production at Abujar is also expected to be completed this year.
Tietto has secured all mining and environmental approvals for Abujar and negotiations with the Ivoirian government on the Abujar mining convention is underway with ratification expected this quarter.
Early site works to the value of US$2.5 million is already underway at the project.