Catalyst Metals Ltd (ASX:CYL) says the results of a scoping study conducted for its Trident Underground Deposit in the Plutonic Gold Belt of Western Australia are in and they highlight the potential of the project and the newly consolidated belt.
Investors have welcomed the positive study, sending Catalyst shares as much as 5.4% higher this morning to $0.79.
Low capital costs
The study indicates a low upfront capital development cost of A$36 million that leverages the existing Plutonic infrastructure and strong pre-tax cashflows estimated at A$294 million.
This scoping study reveals an estimated initial mine life of 4.3 years, with an internal rate of return (IRR) of 132% and a pre-tax net present value (NPV) of $246 million at a gold price of A$2,700 per ounce.
These figures increase to $276 million (145% IRR) considering spot gold prices. The projected all-in-sustaining cost (AISC) is A$1,046 per ounce and the mine is expected to generate free cashflow of $294 million over its lifespan.
The study also emphasises the exploration potential, as Trident remains open along strike and at depth.
A notable aspect of the scoping study is Trident's leverage to future resource conversion. With a conversion cost of $18 per ounce, the project has the potential to generate $160 per ounce in free cashflow.
Definitive feasibility study to come
Definitive feasibility studies have already commenced to support the final investment decision, targeting first ore production in the fourth quarter of 2024.
The Trident Underground Scoping Study evaluates the development of an underground mine at Trident, with ore transported and processed at the Plutonic facility. The study assumes that Trident will serve as an incremental ore source, supplementing the base load processed at Plutonic. Leveraging the existing infrastructure enables cost-effective processing of incremental ore at Plutonic.
According to the study, the Trident mine is estimated to produce 230,000 ounces of gold over an initial four-and-a-half-year mine life, with an average grade of 6.7 grams per tonne of gold.
At an assumed gold price of A$2,700 per ounce, Trident's NPV is around $246 million, with a payback period of around one year and an IRR of 132%.
The project's free cashflow over the initial mine life is estimated at $296 million. Considering current spot gold prices, the NPV increases to $278 million, with an IRR of 146%.
Further potential for exploration
Catalyst is actively developing a longer-term exploration strategy to extend the Trident mine life. The deposit holds further potential along strike and at depth, presenting opportunities for targeted exploration to increase the mineral resource.
Sensitivity analyses, including key economic assumptions such as discount rates, gold prices, operating and capital costs, and metallurgical recoveries, consistently demonstrate positive economic estimates for the Trident Project.
To achieve the outlined outcomes in the scoping study, funding of around $50 million will be required, covering all pre-production costs, with $36 million allocated to pre-production capital.
The company is confident that it can secure the necessary funding based on the project's technical and economic fundamentals, strong cashflows even at conservative gold prices, and its successful track record in capital raising.
Catalyst has enlisted Argonaut PCF as its corporate debt advisor to support funding efforts, benefiting from their experience in financing resource projects. However, the company acknowledges the uncertainties and potential dilution associated with securing funding.
Next steps
The next steps for Catalyst include commencing the definitive feasibility study, expected to conclude in the second half of this year. This comprehensive study will address specific areas identified in the scoping study that require additional detail to support financing and final investment decisions.
Catalyst aims to achieve first ore production in the fourth quarter of 2024, with key milestones including the definitive feasibility study later this year, regulatory approvals, licensing and construction next year.