West African Resources (ASX: WAF) has released an optimised feasibility study for its Sanbrado gold project in Burkina Faso, which supports the decision to proceed with its development.
The enhanced study envisages an initial 10-year mine life, including 6.5 years of underground mining, with strong early cash flow and a rapid payback of capital.
The company will aim to produce 301,000 ounces of gold in the first year of operation at all-in sustaining costs of US$497 per ounce.
Average annual production will them climb to 217,000oz gold over the first five years of Sanbrado’s mine life.
All-in sustaining costs for the first five years of operations have been estimated at US$563/oz and US$633/oz over the life of the mine.
The company said the low-cost, high margin operation was a result of high-grade ore from M1 South and the significant proportion of oxide and transition material in the mine schedule and the free milling nature of all ore types.
The estimated pre-production project capital cost is US$186 million, inclusive of all open-pit and underground pre-production mining and development costs, contingencies, duties and taxes.
Importantly, the company remains fully funded for the mine’s development, with construction underway and first gold pour scheduled in Q3 2020.
At the base case gold price of US$1,300/oz and using a 5% discount rate, the project generates a post-tax net present value of US$444 million, and an internal rate of return of 62% with a reduced post-tax payback period of just 14 months following commissioning.
West African Resources managing director Richard Hyde said the updated study highlighted Sanbrado’s attractive fundamentals.
“The optimised feasibility study confirms that Sanbrado is a high margin gold project, producing 217,000oz gold per annum at AISC of US$563/oz over the first five years mine life and 153,000oz per annum gold over the current 10-year mine life,” he said.
“Recent deep high-grade intercepts demonstrate the potential to extend reserves and increase annual production post year six with additional infill and extensional drilling.”
In the initial definitive feasibility study that was released in June last year, pre-production costs were estimated at US$185 million to build a 11-year mine, with production of 211,000ozpa over the first five years.
The new study, however, has been underpinned by an updated probable ore reserve of 21.6Mt grading 2.4g/t gold for 1.65Moz of gold.
The project comprises several open pits, all within 1-2km of the plant, and an underground mine accessed through a box-cut and portal immediately to the south west of the M1 South open pit.
Sanbrado covers an aggregate area of 116sq km, comprising one granted mining permit and one granted exploration licence.
The company has a 90% interest in the asset, while the Government of Burkina Faso has a free-carried 10% stake.
West African’s shares gained 1.5% to $0.33 at market opening.