Musgrave Minerals (ASX:MGV) has released robust results of its stage 1 pre-feasibility study for the Cue Project in Western Australia’s Murchison region confirming low-cost, high-margin gold production.
Highlights:
- Confirms a financially attractive standalone project with an initial 5-year LOM demonstrating low-cost, high-margin gold production.
- LOM undiscounted pre-tax free cash flow of $314M over ‘Stage’ 1 5-year term (A$2,600/oz sale price), increases to $427M at current spot of A$2,950/0z.
- Payback period of 9 months from commencement of production, accounting for standalone 500,000tpa processing plant and three months pre-production activities totalling A$121M in startup capital.
- Stage 1 PFS gold production of 337,000oz (345,000oz mined) with the initial three years averaging 80,000oz/year.
- The project displays robust financial metrics including EBITDA of $528M, with a C1 cost of A$934/oz, average LOM AISC of A$1,315/oz, including sustaining capital of $93M over the LOM, pre-tax NPV of $235M, with an IRR of 95% ($215M and 91% post-tax).
The Stage 1 PFS Life of Mine (LOM) plan focuses predominantly on the current 417,000 ounce Indicated component of the 868,000 oz Southern Area Mineral Resource to generate gold production of 345,000 oz with compelling physical and economic metrics.
Musgrave to rapidly advance to Stage 2 PFS which is expected to extend the LOM as ongoing drilling tests new prospects and extends and upgrades existing Inferred Mineral Resources into the mine plan, within Musgrave’s 100% owned tenure.
Musgrave is continuing to fast-track drilling, to make new discoveries and grow and de-risk the resource base with a focus on adding mine life through the Stage 2 PFS. Any future resource additions in the S2 PFS will add mine life and continue to drive value for the project. The Company is also advancing technical studies and permitting to accelerate the project towards development.
The excellent Stage 1 PFS outcomes demonstrate that Musgrave’s Cue Gold Project is one of the highest margin, undeveloped gold projects in Australia,” Managing Director, Rob Waugh, said.
“This potential new standalone development has a rapid payback period of nine months from first processing due to the extraordinary near-surface, high-grade nature of the Break of Day and White Heat deposits.”
“The project has an IRR of 95% (pre-tax) and the potential to deliver over 65,000 ounces of gold annually over an initial fibe year period, including 80,000oz/year for the first three years, at an AISC of A$1,315/oz and AIC of A$1,675/oz (based on full amortisation of start-up capital).
“The project generates cashflow of $314M (before tax) and an EBITDA of $528M (at A$2,600/oz) with a C1 cost of A$934/oz. With this cost profile (based on Q1 2023 capital and operating cost assumptions), the Project is expected to be in the lowest cost quartile of gold producers in Australia
“The Stage 1 PFS predominantly focuses on the current Indicated Mineral Resources at Cue which constitute only 47% of the total Resource base. The Stage 1 PFS includes the mining of six open pit deposits (Break of Day, White Heat, Lena, Big Sky, Numbers and Leviticus) and an initial two years of gold production from the upper levels of the Break of Day underground mine.
“A thorough and relatively conservative view was taken with the Stage 1 PFS utilising current costs from Q1CY23 RFQ’s acknowledging the current inflationary environment while also applying top- cuts, ore loss and dilution to the resources.
“The initial pre-production CAPEX for the proposed standalone development of a 500kt/pa processing facility (with supporting camp, infrastructure and pre-production mining activities) is $121M. Reduced capital processing scenarios will be further evaluated during the Stage 2 PFS.”
“The Stage 2 PFS, is set to add mine life through the extension and conversion of existing Inferred Resources to the higher confidence Indicated category, together with the potential inclusion of newly discovered resources.
“The Musgrave team has been very successful in defining new targets, making new discoveries and growing the resource base. The project has significant upside growth potential with recent discoveries like Amarillo and Waratah expected to add to the resource base in 2023 to align with delivery of the Stage 2 PFS in early 2024.”
