Keegan has plans for Ghanaian gold project

VANCOUVER — A preliminary economic assessment for Keegan Resources’ (KGN-T, KGN-X) gold project in southwest Ghana found an open-pit mine at Esaase could produce some 200,000 oz. gold annually for a decade and, with an active drill program still pulling promising intercepts, it seems this economic study is just a start.

The study was based on an early 2009 resource of 58 million indicated tonnes grading 1.2 grams gold per tonne and 41.7 million inferred tonnes grading 1.2 grams gold, both using a 0.4 gram gold cutoff, but the company is partway through 50,000 metres of infill and exploratory drilling at Esaase that was not included.

Of that drilling, the company most recently released results in January from a step-out program to the north, with 23 holes hitting grades better than 10 grams gold. Hole 660, hit 25 metres grading 2.52 grams gold starting at 32 metres depth, hole 657 cut 17 metres averaging 3.61 grams gold starting 137 metres downhole and hole 669 returned 18 metres carrying 3.02 grams gold from 6 metres depth.

Based on just the current resource, Keegan could produce 243,000 oz. gold per year at a cash cost of US$389 per oz. for the first three years of operation. Overall, the company could mine 2 million oz. gold over a decade at an average cash cost of US$452 per oz.

Using a US$850-per-oz. base case gold price and a 5% discount rate, the study puts the project’s after-tax net present value at US$168 million and the internal rate of return at 17.2%. Factoring in those numbers, the company can expect to earn US$381 million before taxes and interest. With US$319.5 million in capital costs, the mine would pay for itself in a little over 3 years.

Based on the current plan, the company would use 14 90-tonne haul trucks, three 200-tonne-capacity hydraulic excavators, one loader and six drills to mine the conventional open pit.

Keegan expects a throughput of about 18,000 tonnes a day for the first two years as it mines the oxidized material and 13,000 tonnes a day when it moves to fresh rock. The company will process both types of material using a combination of coarse primary grinding followed by gravity-carbon-leaching for an estimated 94% overall gold recovery.

The company has started the permitting process, but does not expect to start production for another four years.

The project is located 35 km southwest of the regional capital Kumasi in the Amansi West district on a land package that covers almost 100 sq. km.

The company recently acquired the 10-sq.-km Mpatuom concession along the northwest boundary of the Esaase concession from the Ghanaian minerals commission.

Gold is hosted in highly deformed Birimian metasedimentary rocks containing sheeted and stockwork quartz veins.

The Ghanaian government holds a 10% carried interest in the project and a 3.5% net smelter return royalty, the latter of which was incor- porated in the value and return calculations.

The company is also set to begin drilling at its Asumura project, which is also in southwest Ghana and was the original reason Keegan came to Ghana.

Keegan’s share price was up 46¢ in the two days following the news to close at $6.55. With 45 million shares outstanding, the company has a 52-week trading range of $2.25-$7.98.