Scoping study details revealed today on the Carnaby Resources (ASX: CNB) - DiscovEx Resources (ASX: DCX) copper-gold joint venture (JV) in Mount Isa shows the operation will deliver $491 million in free cash during the project’s nine-year mine life.
The study indicates that commercialisation of the project is viable by 2026 and also confirms that processing by a third party will be the best option. Preliminary results from metallurgical testwork suggest that the ore will be easily processed through Glencore’s Mount Isa copper mill and concentrator.
The scoping study was launched in a bid to model the planning and design for both open pit and underground mining and used conservative price estimates of $12,000 per tonne for copper and $2950 per ounce for gold. Currently, the prices for copper and gold are about 31 per cent and 21 per cent higher, respectively – and that could potentially allow the JV to lower the minimum grades and increase production.
Financial analysis using higher prices of $15,000 per tonne for copper and $3500 per ounce for gold resulted in a net present value (NPV) of $294 million and an internal rate of return (IRR) of 105 per cent for the scenario of using a third-party processing facility. Management expects to spend $35 million before production starts, with environmental bonds estimated at about $12 million.
The release of the Scoping Study by Carnaby significantly de-risks the project and adds significant value to the Greater Duchess Joint Venture. The project now has a clear pathway to a low-capex start-up and given the significant margins expected at current metals prices, the valuation equation just got better for DiscovEx shareholders.
DiscovEx Resources managing director Toby Wellman
Under the third-part scenario, the mine would operate for nine years, processing 7.5 million tonnes of ore with an average copper content of 1.71 per cent and gold content of 0.27 grams per tonne. It would yield about 128,000 tonnes of copper and 64,000 ounces of gold.
The JV would expect to recover and sell 117,000 tonnes of refined copper and 46,000 ounces of gold. The first three years would mainly involve open pit mining, followed by six years of underground mining.
For a standalone development scenario, 10.3 million tons of ore could be processed, with an average copper content of 1.52 per cent and gold content of 0.24g/t. It would generate about 158,000 tonnes of copper and 81,000 ounces of gold, with 145,000 tonnes of refined copper and 59,000 ounces of gold recoverable and saleable.
That scenario includes three years of open pit mining, producing 17,000 tonnes of copper equivalent per year, followed by nine years of underground mining.
The study suggests a variation in cut-off grades to match higher prices would result in a similar production targets for the third-party processing scenario and the standalone scenario. As an example, the cut-off grade for the Lady Fanny open pit would be 0.71 per cent copper equivalent for third-party processing and 0.5 per cent in the standalone situation.
With the higher prices, the cut-off grade for third-party processing would also be 0.5 per cent – an adjustment that could add 2.8 million tonnes to the production target.
The total production target in the study contains 79 per cent of indicated mineral resources and 21 per cent inferred mineral resources. In the first three years focussed on open pit mining, the resources are 80 per cent indicated and 20 per cent inferred.
DiscovEx holds a 17.5 per cent free-carried interest in a 12-tenement package of the Greater Duchess project held by Carnaby. The project is centrally located in the Cloncurry-Mount Isa mining district and is surrounded by world-class infrastructure including rail, road, a gas pipeline and a highly-experienced and mine-ready workforce with abundant contract mining and haulage operators.
The Mount Hope, Nil Desperandum and Lady Fanny major discoveries are standout prospects within the project, where broad high-grade copper mineralisation has been intersected at all three locations. The tenement package also includes the historical Duchess copper-gold mine that produced some 205,000 tonnes at 12.5 per cent copper from 1900 to1940.
Carnaby is expected to soon complete its prefeasibility study (PFS)-level metallurgical testwork program to assess the amenability of potential ore from Greater Duchess. Negotiations with Glencore are likely to begin soon in a bid to establish commercial third-party processing and offtake agreements.
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