Oromin tables limp prefeasibility study for Sabodala

After three years of grassroots drilling at its Sabodala project in Senegal, Chet Idziszek’s Oromin Explorations (OLE-T, OLEPF-OTC) has a prefeasibility study in hand that shows it would be barely profitable even at a US$950-per-oz. gold price.

Situated some 650 km east of the capital Dakar, the project is beside Mineral Deposits’ (MDM-T, MNLDF-OTC, MDL-A) new, unrelated Sabodala gold mine, which is on track to produce 160,000 oz. gold this year from reserves pegged last November at 1.63 million oz. gold in 24.3 million tonnes grading 2.1 grams gold per tonne.

For its part, Oromin’s project hosts total indicated and inferred resource of 64 million tonnes grading 1.5 grams gold per tonne, or just shy of 3 million oz. gold.

Oromin’s prefeasibility study, prepared by the Canadian arm of SRK Consulting, concluded that exploiting indicated resources over 13 years would generate an internal rate of return of just 4% and a net present value of US$54 million using a 0% discount rate and a gold price of US$950 per oz.

Capital costs including contingency are estimated at US$279 million, and operating costs are pegged at US$580 per oz. gold.

Amazingly, in its 10-page press release discussing the prefeasibility study, Oromin doesn’t state how much gold the mine would conceptually produce either annually or in total. But it does state that 19 million tonnes of ore would be mined over the 13-year mine life from three pits at Golouma West and South, Kerekounda and Masato, and from underground at Kerekounda.

Oromin plans to keep drilling in the months ahead, especially in newly discovered higher-grade zones, and expects to have an updated prefeasibility study ready in the second quarter of 2010.

Oromin caught the wider market’s attention on June 19, when Iamgold (IMG-T, IAG-N) announced it had bought 16.1 million Oromin shares at C$0.70 per share for a total investment of $11.26 million, or 17% of Oromin. That helped lift Oromin’s shares as high as $1.43 in mid-July before they fell back into the 90-cent range.

In afternoon trading on Sept. 10, Oromin shares traded at 93 cents in Toronto, with 94.6 million shares outstanding.