TIDMLION
RNS Number : 9758N
Lionsgold Limited
15 August 2017
Lionsgold Limited
Feasibility Study Preliminary Results
Lionsgold Limited ("Lionsgold", "LION" or the "Company"), the
gold-focused exploration company with assets in India and Finland,
and a fintech subsidiary that provides physical gold online
accounts, is pleased to report on the preliminary results of the NI
43-101 compliant Feasibility Study on the Jonnagiri Gold Project
("Jonnagiri" or the "Project") owned by Geomysore Services India
Pvt Ltd ("Geomysore") in which Lionsgold holds a 21.15%
interest.
The final results of the FS will be updated upon completion of
the technical report. The findings detailed herein are based on the
current financial model for the Project. The finalisation of the FS
follows recent changes to the Indian tax system that result in the
implementation of a comprehensive goods and services single tax
(GST) and the exact impact of GST on the economic prospects of
Jonnagiri will be contained in the final published FS findings.
Highlights
-- Geomysore has concluded that Jonnagiri is an economically
attractive and robust project that can be developed into a viable
gold mine in India.
-- Subject to funding, Geomysore intends to establish an open
pit gold mine on the East Block, producing 495,000 tonnes of gold
ore per annum at a rate of 1,500 tpd (subject to statutory approval
to increase production from the currently approved 1,000 tpd).
-- Part of the East Block JORC-compliant Mineral Resource has
been upgraded to Probable Reserve of 2.8 million tonnes containing
151,020 ounces of gold metal, with an average grade of 1.68 g/t at
a cut-off grade of 0.6 g/t.
-- 92.4% gold recovery through a Gravity - CIL (carbon in leach)
processing circuit, which would produce 139,480 ounces of gold.
-- Life of Mine based on the current Probable Reserve is seven years.
-- Net Present Value of USD$25 million (pre-tax) based on the
domestic market gold price being the three year average of Indian
Bullion Jewellers Association ("IBJA") Price, INR 2,806 per gram
(equivalent of USD$1,301/oz based on USD$1 = INR 67.08), and
applying an 8.48% discounted cash flow rate (as advised by Indian
tax and accounting advisors).
-- "All in Cost" of gold production, including mining,
processing and capital costs, of USD$753/oz and cash cost of
USD$563/oz (based on USD$1 = INR 67.08).
-- Peak funding requirement of USD$39 million including land
acquisition and related capital expenditure and a 7.5% contingency
cost buffer.
-- Construction period of 18-24 months following purchasing or
leasing of land and Mine Developer/Operator contract being
agreed.
-- Targeting peak production rate of 1,500 tpd within six months
from the completion of construction and commissioning of processing
plant.
Cameron Parry, Chief Executive Officer of Lionsgold, commented:
"We are delighted to report that the preliminary results of the
feasibility study have resulted in a positive decision to mine.
"This is a major step towards establishing India's first
privately owned gold producing open pit mine (since India gained
independence in 1947) and materially increasing domestic gold
production. With the FS data we intend to finalise the independent
valuation of our India interests, including the Jonnagiri project
and surrounding exploration assets within the licensed area. These
include the West Block and South Block, where Geomysore has drill
data which should, in time, expand the gold ore available and
extend the mine life beyond the current seven years.
"With the FS data now available, the team at Geomysore can
continue making progress with the tender process in respect of the
Mine Developer/Operator contract and we expect those negotiations
to be concluded this calendar year, subject to completing
negotiations with local farmers over the coming months."
Key Preliminary Findings of Feasibility Study
A Feasibility Study is a technical and financial evaluation of a
proposed mining project to determine whether the mineral deposit
can be mined economically and to decide definitively whether to
proceed with developing a mine.
A foreign exchange rate of USD$1 = INR 67.08 was used in the
financial modelling and this announcement.
Financial Analysis
The financial model demonstrates an NPV of USD$25 million before
tax over the life of the mine. Geomysore's Indian taxation
consultants advised that the appropriate DCF rate to be applied to
Jonnagiri is 8.48% and the same has been used in calculating the
NPV. The IRRs calculated for the Project are 22.5% and 16.8% before
and after tax, respectively.
The gold price used in the FS for the calculations was INR 2,806
per gram (3-year average of gold price fixed by the IBJA). The IBJA
gold price in India incorporates the spot price for gold globally
(3-year average of USD$1,222/oz) plus the import duty payable on
gold imported into the country.
Key parameters of the financial analysis as reported in the FS
are presented in the tables below.
Table 1 - Economic model inputs
Item Unit Value
------------------------ ---------------- --------
Project Life Years 7
------------------------ ---------------- --------
Ore Processed Million Tonnes 2.8
------------------------ ---------------- --------
Waste Mined Million Tonnes 12.46
------------------------ ---------------- --------
Inferred and Low grade
ore Million Tonnes 1.59
------------------------ ---------------- --------
Total Material Mined Million Tonnes 16.85
------------------------ ---------------- --------
Strip Ratio : Ore 4.45
------------------------------------------ --------
Average Gold Grade g/t 1.68
------------------------ ---------------- --------
Average Gold recovery % 92.4
------------------------ ---------------- --------
Recoverable Gold Kg 4,338
------------------------ ---------------- --------
Recoverable Gold Troy Oz 139,480
------------------------ ---------------- --------
Table 2 - Summary of operating costs
Item Unit USD$M
--------------------------- -------------- ------
Mining costs USD$ Million $32
--------------------------- -------------- ------
Plant Costs USD$ Million $30
--------------------------- -------------- ------
General & Administration
Costs USD$ Million $7
--------------------------- -------------- ------
Other costs USD$ Million $2
--------------------------- -------------- ------
Cash Cost USD$/oz $563
--------------------------- -------------- ------
All in cost incl royalty USD$/oz $753
--------------------------- -------------- ------
Table 3- Summary of Capital Costs
Item Amount
----------------------------------- -------
USD$M
----------------------------------- -------
1 Mining $0.1
----------------------------------- -------
2 Processing Plant $14
----------------------------------- -------
3 Tailings Dam $6
----------------------------------- -------
4 Power $1
----------------------------------- -------
5 Water $3
----------------------------------- -------
Infrastructure, CSR, land, closure
6 & misc. $10
----------------------------------- -------
7 Contingency $2
----------------------------------- -------
8 Sustaining Capex $1
----------------------------------- -------
9 Capitalised Operating costs $2
----------------------------------- -------
TOTAL $39
----------------------------------- -------
The key outputs of the Project as reported in the FS, based on
mining only the Probable Reserve of 151,020 ounces of gold, are as
per Table 4 below.
Table 4 - NPV calculation only mining Probable Reserve
Pre Tax Post Tax
-------- ---------
USD$M USD$M
------------ -------- ---------
NPV(5%) $36 $21
------------ -------- ---------
NPV(8.48%) $25 $13
------------ -------- ---------
NPV(10%) $21 $10
------------ -------- ---------
IRR 22.5% 16.8%
------------ -------- ---------
There is low grade ore (0.3 - 0.6 g/t) and Inferred Resource
within the optimised pit shell, which will be stockpiled separately
during the LOM. Analysis was undertaken considering processing a
portion of the low grade ore once capital costs had been repaid and
processing of the Inferred Resource assuming that its grade and
tonnage would be validated with additional drilling during mining
operations. The key outputs of the financial analysis for such
assumptions are shown in Table 5 below.
Table 5 - NPV based on processing low grade stockpiles and the
Inferred Resource within the optimised pit shell
Pre Tax Post Tax
-------- ---------
USD$M USD$M
---------- -------- ---------
NPV5% $43 $24
---------- -------- ---------
NPV8.48% $31 $16
---------- -------- ---------
NPV10% $27 $13
---------- -------- ---------
IRR 26.5% 19.2%
---------- -------- ---------
Mineral Resource Reclassification
Geomysore has conducted 28,569m of drilling (22,916m diamond
core and 5,653m reverse circulation) on the Jonnagiri Mining Lease
area, which includes East, West and South Blocks. Golder
Associates, Perth, Australia, validated the drill programme and
carried out JORC-compliant resource estimate in early 2017
totalling 361,000 ounces of indicated and inferred resource.
Ukwazi Mining Solutions (Pty) Ltd, Centurion, South Africa,
carried out the mine design and mineral reserve estimate. Based on
the Golder mineral resource model and the local operating costs
provided by Geomysore, Ukwazi completed the optimisation with
different capacities and various different cut-off grades.
The available mineral reserve for the East Block was determined
to be 2.8Mt of ore at an average mill feed grade of 1.68g/t at a
cut-off grade of 0.6 g/t, upgrading 195,000 oz of the Indicated
Resource at East Block to 151,020 ounces of Probable Reserve.
The information in this statement which relates to the
Feasibility Study on Jonnagiri is based on information compiled by
Mr Gordon Cunningham who is a full-time consultant with Turnberry
Projects Pty Ltd (Johannesburg, South Africa), a Professional
Engineer with the Engineering Council of South Africa and a Fellow
of the South African Institute of Mining and Metallurgy. Mr
Cunningham, as lead FS consultant, consents to the publishing of
the information in relation to the FS in the form and context in
which it appears.
For further information, please contact:
Lionsgold Limited Tel: +44 (0) 20 7397 2880
Cameron Parry (Chief Executive Officer)
Luke Cairns (Executive Director)
WH Ireland Limited (Nominated Adviser) Tel: +44 (0) 113 394 6600
Tim Feather
Ed Allsopp
Smaller Company Capital Limited (Joint Broker) Tel: +44 (0) 20 3651 2911
Rupert Williams
Jeremy Woodgate
Beaufort Securities Limited (Joint Broker) Tel: +44 (0) 20 7382 8300
Elliot Hance
Tavistock (Financial PR) Tel: +44 (0) 20 7920 3150
Emily Fenton
Edward Lee
About LIONSGOLD
Lionsgold is a London Stock Exchange AIM market quoted,
gold-focused exploration and fintech company, with gold assets in
India and Finland and a majority shareholding in a physical gold
and silver online account provider.
Lionsgold's three core focuses are:
-- Strategic partnership with leading India gold exploration and
mine development company, Geomysore, in which Lionsgold has
increased its holding to 21.15%;
-- Majority ownership of a financial technology platform
enabling people to hold physical gold through online accounts
(www.indexgold.com); and
-- Gold exploration and production in Finland.
GLOSSARY
"CIL" carbon in leach, a gold recovery process
"DCF" discounted cash flow
"FS" feasibility study
"g/t" grammes per tonne
"Inferred Resource" the part of a mineral resource for which
tonnage, grade and mineral content can
be estimated with a low level of confidence.
It is inferred from geological evidence
and assumed but not verified geological
or grade continuity
"INR" Indian rupees, the currency of the Republic
of India
"IRR" internal rate of return
"LOM" life of mine
"MDO" Mine Developer/Operator
"Mt" million tonnes
"NPV" net present value
"Probable Reserve" the part of indicated, and in some circumstances,
measured mineral resources that can be
mined in an economically viable fashion.
It includes diluting material and allowances
for losses which may occur when the material
is mined. A Probable Reserve has a lower
level of confidence than a Proved Ore
Reserve but is of sufficient quality to
serve as the basis for decision on the
development of the deposit
"tpd" tonnes per day
"USD$" US dollars, the currency of the United
States of America
This information is provided by RNS
The company news service from the London Stock Exchange
END
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