Alkane Resources Ltd (ASX:ALK, OTC:ALKEF) has produced a positive scoping study for the Boda-Kaiser Project in Central West New South Wales, Australia, that outlines a 20 million tonnes per annum operation that would produce 323 million tonnes of ore at 0.26 g/t gold and 0.15% copper over 17 years and generate free cash flow of A$5.7 billion.
This large gold-copper porphyry system to the northeast of the company's Tomingley Gold Operations presents the potential for a long-term bulk-tonnage mining and processing operation.
The scoping study puts forward average annual production of 35,600 tonnes of copper and 159,300 ounces of gold for the first five years of operation.
“This scoping study shows that at current copper and gold prices a large mine and processing facility can be built at Boda-Kaiser with strong economic returns that could provide supply into global gold and copper markets – both highly attractive commodities with strong market fundamentals over the long term,” said Alkane managing director Nic Earner.
“There remains significant potential to add both to the overall resource with further exploration, and to the potential project economics with further examination of mining cost and method, particularly large-scale underground mining.
“Our focus over the next year at Boda-Kaiser is regional exploration, environmental studies, increasing our understanding of mining options and discussions with potential strategic partners,” Earner said.
Development scenarios
Alkane evaluated three possible scenarios to understand the project economics and potential economies of scale from different-sized operations and identify a potential pathway to development:
- Mining and processing 20 million tonnes of ore per annum.
- Mining and processing 10 million tonnes of ore per annum.
- Mining and processing 5 million tonnes of ore per annum.
The largest development scenario (20 million tonnes) was shown to be the highest value due to the potential economies of scale.
Given its positive economics, the 10 million tonnes per annum development could form part of a staged build for a larger project, or as a standalone project in a rising gold and copper price environment.
But it is unlikely that a 5 million tonnes per annum development would meet Alkane’s investment return hurdles at current gold and copper prices.
An underground mining option, using a long hole open stoping (LHOS) mining method, is consistent with Alkane’s experience at its Tomingley Gold Operations.
The company said that given that a high throughput was beneficial to the project economics, future studies would evaluate the potential for sub-level caving or a similar bulk tonnage underground method.
The 20 million tonnes per annum scenario
- Processes 323 million tonnes of ore at 0.26 g/t gold and 0.15% copper over 17 years.
- Mines 319 million tonnes from open cut mining and 4 million tonnes from underground mining. 85% of the ore mined comes from indicated resources and 15% from inferred.
- Produces an average 35,600 tonnes of copper and 159,300 ounces of gold per annum for the first five years of operation.
- Costs were estimated at A$630 per gold ounce (with copper by-product credit) over the 17-year life (2024 dollars).
- Undiscounted free cash flow of A$5.7 billion would be generated over the 17-year life (using an average price of A$15,000/tonne for copper and A$3,500/ounce for gold).
- A forecast capital cost of A$1,783 million with an additional A$223 million of development and sustaining capital over the 17-year life.
- An estimated net present value (NPV 7%, pre-tax) of A$1,808 million, estimated 24% internal rate of return (IRR, pre-tax), with a pre-tax NPV to start-up capital ratio of 1.
What’s next?
Alkane’s next steps for the Boda-Kaiser Project will be:
- Conduct the baseline environmental monitoring and impact assessments that will be required for project approval in the future;
- Evaluate the potential for sub-level caving or a similar bulk tonnage underground method;
- Further consider potential routes for infrastructure to the project area, particularly for the supply of power and water;
- Ongoing metallurgical test-work and optimisation of the flowsheet;
- Continued engagement with local stakeholders;
- Continued exploration throughout the broader Northern Molong Porphyry Project area; and
- Continue to evaluate potential funding pathways and partners, the outcome of which will contribute to the selection of which development option to progress further into feasibility.