Musgrave Minerals Ltd (ASX:MGV, OTC:MGVMF) has revealed a stage 1 pre-feasibility study (PFS) for the Cue Gold Project in the Murchison gold region of Western Australia, demonstrating solid financial and technical fundamentals.
The stage 1 PFS outlined an initial five-year life of mine (LoM) with low-cost, high-margin gold production.
“The excellent Stage 1 PFS outcomes demonstrate that Musgrave’s Cue Gold Project is one of the highest margin, undeveloped gold projects in Australia,” Musgrave Minerals managing director Rob Waugh said.
“This potential new standalone development has a rapid payback period of nine months from first processing due to the extraordinary near-surface, high-grade nature of the Break of Day and White Heat deposits.”
The company has been careful to account for the current inflationary economic climate, with 86% of the PFS’s total costs having been directly quoted from service providers or contractors within the first quarter of this calendar year.
Strong financial fundamentals
MGV’s PFS outlines the following financial highlights:
- Internal rate of return of 95% pre-tax and 91% post-tax.
- Gold production of 65,000 ounces per year, with 80,000 ounces a year over the first three years.
- All-in sustaining costs (ASIC) of A$1,314 per ounce, all-in costs (based on full amortisation of start-up capital) of A$1,675 per ounce.
- Cashflow of A$314 million (before tax).
- Earnings before interest, tax, depreciation and amortisation (EBITDA) of A$528 million (at A$2,600 per ounce) with a C1 (direct) cost of A$934 per ounce.
“With this cost profile (based on Q1 2023 capital and operating cost assumptions), the project is expected to be in the lowest cost quartile of gold producers in Australia,” Waugh highlighted.
“The stage 1 PFS predominantly focuses on the current indicated mineral resources at Cue, which constitute only 47% of the total resource base.
“The stage 1 PFS includes the mining of six open pit deposits (Break of Day, White Heat, Lena, Big Sky, Numbers and Leviticus) and an initial two years of gold production from the upper levels of the Break of Day underground mine.”
Processing facility and Stage 2 operations
Musgrave intends to build a 500,000 tonnes per annum standalone processing facility at Cue, an undertaking that will require some $121 million in supporting camp, infrastructure and pre-production mining activity costs.
MGV expects to generate free cash flow of $314 million over the first five years of Stage 1 production, which would increase to some $427 million at the current gold spot price of A$2,950 per ounce.
Even with the additional capital expenditure costs from the processing facility, MGV expects Cue’s payback period to be just nine months from the beginning of gold production, clearing the way for stage 2 development.
“The stage 2 PFS, is set to add mine life through the extension and conversion of existing inferred resources to the higher confidence indicated category, together with the potential inclusion of newly discovered resources,” Waugh explained.
“The Musgrave team has been very successful in defining new targets, making new discoveries and growing the resource base.
“The project has significant upside growth potential with recent discoveries like Amarillo and Waratah expected to add to the resource base in 2023 to align with delivery of the stage 2 PFS in early 2024.”