Tongon
TONGON PROJECT Cost estimates in the feasibility study represent costs as at September 2008. With the drop in the price of many of the significant inputs - diesel, steel and transport - we anticipate a reduction in both the capital and operating costs. As such we have detailed below a comparison of the current costs estimates to costs calculated on a similar basis but assuming input prices approximating those experienced in the third quarter of 2007:
Feasibility Cost estimate Cash operating costs US$420/oz US$357/oz Total cash costs US$444/oz US$381/oz Life of Mine mining cost Life of Mine plant operating US$12.56/tonne US$9.95/tonne
The feasibility study on Tongon has been updated to reflect the latest drilling results, testwork and designs completed since the board approved the development of the project in January 2008. In general results have confirmed the Feasibility Type 3 approach and with the better definition of the ore zones there has been an appreciable increase in grade.
A summary of the important aspects are documented below:
Reserves: 38.25 million tonnes of probable reserves at a grade of 2.6g/t for 3.16 million ounces.
Capex: Current (September 2008) capex estimate is US$280 million excluding ongoing replacement capex and closure costs.
Mining: Contractor mining with a peak rate of 25 million tonnes. Life of Mine strip ratio of 4.3:1.
Plant: Throughput of 300 000 tonnes per month using 3 stage crushing, ball milling with gravity and flash flotation to produce minimum recoveries exceeding 90%. Annual gold production is expected to exceed 290 000 ounces per year in the first two years of operation and to average 270 000 ounces over ten years for a total of 2.88 million ounces of gold over the Life of Mine.
Q3 2008
Q3 2007
(@ US$800/oz gold price)
(including fleet capital)
US$3.03/tonne*
US$2.64/tonne+
cost
* Based on a diesel cost of US$1.15/litre or approximately US$111/barrel of oil.
+ Based on a diesel cost of US$0.80/litre or approximately US$75/barrel of oil.
Discussion with shortlisted mining contractors have reached an advanced stage and are expected to be concluded in the near future.
Senet have completed the detailed plant design. Currently we are reviewing the expected costs of major items as a result of the recent decrease in input costs.
ANDE, the state environmental agency, have opened the public inquiry on the Tongon Environmental Impact Assessment completed by consultants Digby Wells & Associates. This is expected to be concluded by November with the issue of the ministerial decree approving the environmental licence soon thereafter. The mining licence application has been submitted and this is expected to be approved subsequent to the issue of the environmental licence. The mining convention is awaiting final approval from the Minister of Finance.
On site construction activities have centred on building the single quarters accommodation which will initially be used as the construction camp, as well as clearing and levelling the plant area and conducting sterilisation drilling.
Conditions in the country continue to improve both economically and politically. However, it seems likely that the date of the presidential election might well be postponed to 2009 with the agreement of all parties.
During the quarter, we agreed with our joint venture partner in Côte d’Ivoire, New Mining CI, that we will fund their portion of the capital required for the Tongon Project in exchange for an additional 3% interest in the project. The funding for their share of the capital will be repaid from the project’s cashflows. This increases our participation in the project to 84% and reduces their participation to 6%. Government participation remains at 10% and will also be funded by the company and repaid from project cash flows.