Gabriel Resources (GBU-T) has received positive results from a definitive feasibility study at its 80%-owned Rosia Montana gold project in west-central Romania.
The study was prepared by Australia’s GRD Minproc. It envisages the development of a continuously operated, large-scale open-pit mine and processing plant. Mining would target four closely spaced, but separate, open-pit mine sites — Cetate, Cirnic, Orlea and Jig.
Running at an annual mining rate of 20 million tonnes, the mine would have a lifespan of 11.2 years.
Initial mining would target the Cetate site, which lies closest to the processing plant and requires the least amount of development. The operation would then move to include Cirnic, which, along with Cetate, contains the majority of the proven and probable reserves. Later, the mining would move to Orlea, which would be followed by Jig.
The feasibility study employed a proven and probable reserve figure of 225.7 million tonnes grading 1.4 grams gold and 7.5 grams silver per tonne. Of that, 118.2 million tonnes running 1.7 grams gold and 9.1 grams silver are classified as proven. A cutoff grade of 0.6 gram gold-equivalent was used.
Measured and indicated resources total 301.9 million tonnes grading 1.3 grams gold and 6 grams silver, with 48% in the measured category. Another 50.8 million tonnes of inferred resources average 0.8 gram gold and 4 grams silver.
Annual average lifetime production is pegged at 755,000 oz. gold, ranging from 870,000 oz. per year in the early stages to 625,000 oz. later. The mine will also produce an average of 2.6 million oz. silver byproduct each year.
Initial capital costs are estimated at US$295.9 million. These will include:
Processing of ore will involve conventional coarse crushing, semi-autogenous grinding (SAG) and ball mill grinding, gravity concentration and carbon-in-leach recovery. Metallurgical test work indicates overall gold recoveries of 80.9% and silver recoveries of 54.1%.
Tailings will be pumped into a facility in the Corna valley, immediately to the southwest of Cirnic. The facility will have a capacity of 250 million tonnes. It will be constructed mostly of mining waste rock and will be expanded over the life of the mine.
Working capital of US$5.3 million is required during the first year of operations. About US$130.3 million will be required to sustain the mine over the rest of its life. Estimated average cash operating costs of US$101 per oz. gold (net of silver credits) translate into a cash cost of US$107 per oz. Operating costs per tonne, including costs for mining, processing, tailings and general and administrative costs, will average US$4.34 over the life of the mine.
Based on a gold price of US$275 per oz. and a silver price of US$5 per oz., the project will produce an internal rate of return of 30.3% on a 100% equity financing basis. It will have an after-tax net present value of US$536 million at a discount rate of 5%. Projected after-tax net cash flow will be $914.4 million and the payback period will be 2.6 years.
Rosia Montana is located in an economically disadvantaged zone. This exempts it from income taxes until October 2009 and from customs duties for the life of the project. Gabriel will pay a 2% gross production royalty to the Romanian government on all production from the mine.
The study concludes that the project’s economics are more sensitive to changes in metal prices than to similar percentage changes in capital and operating costs.
The project has some social challenges in that, before mine construction can begin, the village of Rosia Montana must be relocated according to World Bank and Romanian legal requirements. However, due to high unemployment levels in the region and its strong mining heritage, local support is strong.
As part of an Environmental Impact Assessment, Toronto-based Planning Alliance prepared a resettlement plan for communities that will be affected by the project. Under the plan, Gabriel must negotiate resettlement and relocation packages and schedules on an individual-by-individual basis.
In March, the Local Council of the Rosia Montana borough approved a new land-use plan that essentially rezoned, for industrial purposes, all the land required for mine development. The company must yet work out details for the placement of the embankment for the tailings management facility in the Abrud borough.
A second study, considering an initial throughput rate of 8 million tonnes per year, is under way at Rosia Montana. Under this plan, throughput would be expanded over the life of the project. Results are expected in September.
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