Sunstone Metals (STM.AX) has released the results of an updated metallurgical test program on its Bramaderos copper-gold project. Not only did the recent test run confirm the copper concentrate contains a low percentage of arsenic (resulting in minimal smelter penalty risks), the recovery rates of both copper and gold came in higher than the numbers used in the scoping study.
Whereas the scoping study applied a recovery rate of 75% for copper and 85% for gold, the recent test work indicated recovery rates of 80% and 93% are possible, on a respective basis. As a reminder, the scoping study indicated a 23 year mine life with an annual production rate of 135,000 ounces gold-equivalent in the first 8 years of the mine life, but the higher recovery rates could increase the copper and gold recovery numbers by 6% and 9% respectively, without changing the size of the operation. This would result in an additional (pre-royalty and pre-tax) revenue of US$1B over the mine life at $6 copper and $4250 gold, and it goes without saying this would have a noticeable and important impact on the economics. The base case scenario shows a US$1.2B after-tax NPV7.5% at $4000 gold and US$1.6B using a 5% discount rate. Updated recovery results would add several hundreds of millions of dollars to this number.
Bramaderos currently hosts a resource of 220 million tonnes across the indicated and inferred resource categories at a grade of 0.33 g/t gold, 0.10% copper and 1.16 g/t silver for a gold-equivalent grade of 0.5 g/t and 3.6 million gold-equivalent ounces contained. Bramaderos also has an additional exploration target of 315-505 million tonnes of rock at an average grade of 0.41-0.68 g/t gold-equivalent for an additional 4.1-11.2 million ounces gold-equivalent (which would push the total resource to 8-15 million ounces gold-equivalent).
This would come on top of the 1.2Moz AuEq resource at El Palmar (also in Ecuador), where an exploration target of 15-45 million ounces gold-equivalent has been outlined within a 1-1.2 billion tonne mineralized body.
Disclosure: The author has no position in Sunstone Metals but could initiate a long position within the next week. This post is for educational purposes only; be mindful investing in junior mining stocks is risky and you may lose your entire investment if things go wrong. Please read the disclaimer.
