Perth, Australia-based GRD Minproc compiled the study with the assistance of Perth-based Resource Service Group, Vancouver-based Knight Piesold and Toronto-based Planning Alliance.
Proven and probable reserves at Rosia Montana now total 226 million tonnes grading 1.4 grams gold per tonne and 7.5 grams silver per tonne, or 10.5 million contained ounces gold and 54.6 million contained ounces silver. Additional measured and indicated resources are estimated at 302 million tonnes grading 1.3 grams gold and 6 grams silver. These figures were calculated using a cutoff grade of 0.6 gram gold per tonne.
Reserves are contained in four principal areas of low-sulphidation, epithermal-to-mesothermal mineralization — named Cetate, Cirnic, Orlea and Jig — that are situated close together, straddling the Rosia Montana Valley in western Romania’s Transylvanian mountains.
According to the study, mining would begin at Cetate, as it is closest to the proposed processing plant and it would require the least amount of development. Cirnic would be mined next, followed by Orlea and Jig, generating an overall, life-of-mine stripping ratio of 0.86-to-1. However, metallurgical tests carried out by Minproc shows recovery rates of only 80.9% for gold and 54.1% for silver, cutting the recoverable ounces within the reserve base to 8.5 million oz. gold and 29.5 million oz. silver.
With such a large, low-grade deposit, Minproc has enhanced the economics of the project by scaling up the planned mine to a 20-million-tonne-per-year operation that would produce an average of 755,000 oz. gold and 2.6 million oz. silver each year over an mine life of 11.2 years.
The processing plant would comprise coarse crushing, semi-autogenous and ball-mill grinding, to be followed by gravity concentration and carbon-in-leach recovery.
The initial capital cost of such a plant is estimated at US$296 million, which would consist of: US$11.3 million for preproduction mining; US$41.4 million for mining equipment and mine development; US$169.9 million for plant and infrastructure costs; US$15.4 million for tailings-facility costs; and US$57.9 million in “owners’ costs,” which include resettling the village of Rosia Montana.
The feasibility study also foresees the need for US$5.3 million in working capital and another US$130 million in sustaining capital. The study estimates that the project would have a total cash cost of US$107 per oz. over the life of the mine, assuming prices of US$275 and US$5 per oz. for gold and silver, respectively.
The study indicates a total production cost of US$158 per oz. gold, though this figure is derived from an optimistic on-site operating cost of only US$4.34 per tonne of ore — comprising US$1.26 per tonne for mining costs, US$2.82 per tonne for processing costs and US27 for general and administrative expenses.
(By comparison, at Cambior’s marginal Omai open-pit gold mine in Guyana, the direct mining cost in 2000 was US$9.47 per tonne, with a throughput of 7.9 million tonnes, a head grade of 1.40 grams gold and a recovery rate of 93%.)
Using a 10% discount rate, the net present value of the entire Rosia Montana project is estimated at US$312 million, or US$250 million attributable to Gabriel’s 80% stake. (The remaining 20% is held by the Romanian state-owned company Minvest.)
The company notes that the project’s economics benefit from the region’s status as a “disadvantaged zone” in Romania, as well as provisions in Romania’s mining law giving the project a tax exemption until 2009 and a duty exemption over the life of the project. Gabriel will still have to pay a 2% gross production royalty to the Romanian government on all production.
The feasibility study includes an environmental impact assessment, which addresses the construction, operation and closure of the project in a manner consistent with current European Union standards.
Taking a 2-track approach, Gabriel plans to complete a separate feasibility study that will consider a smaller, 8-million-tonne-per-year operation at Rosia Montana which could be expanded in later years. This second study is due for completion in September. The larger question surrounding Rosia Montana remains: will a project with these (at present) marginal economics draw the interest of a major producer with the financial muscle to advance it to production, or will it become the Las Cristinas of the Danube?
Taking over Gabriel will be not be an inexpensive proposition for any potential suitor. With Gabriel shares trading at C$3.85 apiece and 81.1 million shares currently outstanding, the company already has a market capitalization of C$312 million, or US$203 million.
And a second, even bigger question looms: if a project of this magnitude — one of the largest gold deposits held by a junior anywhere — fails to draw the interest of a major, will it signal the end of an era for developing low-grade, high-tonnage gold deposits? After all, such projects have generally had a miserable track record of delivering profits since the price of gold began its decline in late 1996.
A final factor to watch for in the coming years is Romania’s likely absorption into the European Union, possibly in the mid-2000s. Membership has its privileges, and they usually include generous equalization payments that, in the past, have helped develop borderline projects projects in poor regions.
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