Baomahun closer to reality for Amara

Amara Mining’s (TSX: AMZ; LSE: AMA) Baomahun project in Sierra Leone has moved one step closer to realization. 

The company announced its ­results from a feasibility study on the gold project — 180 km east of the capital of Freetown in the central part of the country — and it appears that Amara could have a robust, future mine on its hands.

The study envisions a mine that would turn out 148,550 oz. gold per year over its first six years.

These ounces are built on an average head grade of 2.53 grams gold per tonne, which is above the average grade of the maiden probable reserve estimate that outlined 23.3 million tonnes grading 1.62 grams gold for 1.21 million oz. gold.

Amara could attain the higher head grade by processing higher-grade ore and building stockpiles for later processing.

BMO Capital Markets analyst Andrew Breichmanas says this is one of the project’s strengths, and “may offer the potential to further optimize the project.”

Breichmanas also likes the estimated 8.25-to-1 strip ratio, which beat the 15-to-1 strip that BMO assumed in its modelling.

“As a result, the project’s economics are markedly better than BMO Research’s estimates, for an internal rate of return (IRR) of 8% and a net present value (NPV) of US$58.4 million, using the same price assumptions,” he writes in a research note.

The study estimates a 22% IRR and US$101-million NPV, using a gold price of US$1,350 per oz. and a 10% discount rate.

The study anticipated life-of-mine operating cash costs of US$752 per oz., while total cash costs are estimated to be US$799 per oz.

The company plans to build a 2-million-tonne-per-year processing plant that would include single-stage crushing, a semi-autogenous grinding mill and a carbon-in-leach circuit, for an estimated cost of US$253.1 million. 

It could cut capital expenditures by optimizing the scale of the mill and deferring a US$74.7-million mining fleet and construction of a US$11.3-million power station.

As of last November, the project had indicated resources of 38.4 million tonnes grading 1.82 grams gold for 2.24 million oz. gold, and inferred resources of 6.6 million tonnes grading 2.52 grams gold for 540,000 oz. gold.

More could be on the way once mining begins: the orebody is open at depth and will be mined via open-pit and underground methods. The underground resources, however, were not part of the probable reserve calculation, and they weren’t considered in the feasibility study.

Amara’s journey at Baomahun began in 2004 when it acquired a 60% stake in the property from Winston Mines. It took over the remaining 40% in 2008.