WA-focused gold exploration and development company Rox Resources has moved closer to delivering its promise to bring Youanmi back to operation, releasing an extensive technical and financial study outlining its preferred development scenario for the historic gold project near Mt Magnet.
Following a substantial upgrade to the Youanmi underground gold resource in January 2022 and a subsequent increase to the near-surface resource in April 2022, Rox (ASX: RXL) started work on an advanced scoping study to evaluate the economics and likely development scenarios.
Successful exploration over the past three years has seen the project-wide resource increase to 27.9Mt at 3.57g/t for 3.2Moz of gold.
The scoping study released this week is based on this resource estimate though the actual preferred path for an initial return to operations considers only 3 per cent of the near-surface resource estimate and about 27 per cent of the underground resource estimate.
Managing director Alex Passmore said given the current high-cost environment Rox would adopt a conservative, pragmatic approach – targeting a low-cost and high-grade starter project to return to mining. Near-term cash generation would then be used to help fund future development and growth at Youanmi.
Under the plan, Rox is targeting average annual gold production at Youanmi of about 71,000oz per year with an average gold head grade of 5g/t for total gold production of about 569,000oz over an initial eight-year mine life.
The first three years of the production target are underpinned by a 79-21 ratio of indicated to inferred resource material in the production target plan. As a well-located and historic mining centre, the economics for Youanmi benefit from existing infrastructure and mining approvals.
Rox envisages a combination of gold-in-concentrate and carbon-in-leach (CIL) bullion production to be the optimum commercialisation strategy for initial cash flow generation at Youanmi. It estimates total pre-production capital expenditure, including working capital and assumed financing charges, of $134 million.
The study forecasts compelling financial outcomes that reflect the high-grade and low-capital intensity of the project, including:
- Project life of eight years
- Cumulative EBITDA of about $577 million over the life of the project
- Pre-tax undiscounted free cash flow of about $418 million over the life of the project
- Pre-tax and unleveraged net present value of about $303 million
- Pre-tax and unleveraged internal rate of return of about 45 per cent
- Pre-tax and unleveraged payback of about three from the start of production
The release of the scoping study represents the latest milestone of an impressive journey for Rox since its acquisition of Youanmi in 2019. When Rox first acquired its stake, Youanmi had an inferred and indicated resource of 12.4Mt @ 2.97g/t for 1.19 million ounces.
Rox has overseen an increase in that resource to the current measure of 3.2 million ounces through successful exploration, adding ounces to both the near-surface and deep resource.
The company also successfully spun out its nickel and base metal assets into Cannon Resources (ASX: CNR), which listed on the ASX in August last year.