We did like Cluff Gold/Amara Mining, which was acquired by Perseus Mining (PRU.TO, ASX:PRU) which wanted to get its hands on the Yaoure gold project in Africa’s Ivory Coast. Perseus has now released both an updated reserve estimate as well as a first feasibility study.
The current indicated resource contains 1.93 million ounces of gold at an average grade of 1.39 g/t, whilst the additional inferred resource contains an additional 1.5 million ounces at (just) 1 g/t. Keep in mind the pit shell designed for Yaouré resources was based on a gold price of $1800 per ounce. Once this was updated to reflect a gold price of $1200/oz, approximately 1.52 million ounces at an average grade of 1.76 g/t were left.
This reserve statement was used to base the feasibility study on, which envisages a total gold production of 1.4 million ounces of gold, of which 1 million ounces would be produced in the first five years of the mine life, at an AISC of $734/oz (the LOM AISC is expected to be $759/oz). At a gold price of $1250/oz, the after-tax internal rate of return will be approximately 27%, resulting in an NPV5% of $259M (and an NPV10% of $170M).
Although the IRR and AISC’s are really good, we are a bit disappointed with the initial reserve estimate. Yaouré was sold to Perseus as a 5-6M+ ounce gold project, so it’s disappointing to see a production of just 1.4 million ounces in this first feasibility study. Of course, it’s always possible Perseus will be able to convert more resources into reserves, but even then it will be a tough to pretend Perseus is creating value at Yaouré, as it paid a total consideration of $85M to acquire Amara Mining …