Sandspring Resources (SSP.V) has released the results of the Pre-Feasibility Study at their 100% owned Toroparu-project in Guyana, South America.
This PFS outlines a production of approximately 228,000oz/annum over the life of mine at an average cash cost of $700/oz (including royalties and net of by-products). The first four years will have a higher production rate and lower costs, targeting an output of approximately 246kozpa at an all-in cost of $504/oz, which provides healthy margins, even at a gold price of $1450/oz.
By using a base case scenario price of $1400/oz gold and $3.25/lbs copper, the IRR comes in at approximately 23% with an after-tax NPV8% (we feel more comfortable using a 8% discount rate versus the company’s proposed 5% discount rate as base case) of $476M. The lower case scenario with a $1200 gold price has a NPV8% of $233M. We like that the company provides a sensitivity analysis but would also have liked to see them use a lower copper price to see what consequences a lower copper price has on the Toroparu-Project.
Capex for the project’s Phase 1 and 2 comes in at approximately $501M (excluding revenue from the early phase of production), but we would like to see a higher contingency than the current 8%. If we use a 20% contingency, the capex increases to $557M.
We are relatively happy with the outcome of this PFS, given the fact only the Proven and Probable reserves of 4.1Moz are included, and there’s plenty of potential to increase these reserves by converting some of the Measured, Indicated and Inferred categories to the reserve status.
Disclosure: The author holds no position. Please see our disclaimer for current positions.