Prefeasibility gives Passendro thumbs-up

A prefeasibility study for Axmin (AXM-V, AXMIF-O) on the Passendro gold project in the Central African Republic says a 200,000-oz.-per-year gold mine would be profitable.

The study, by consulting firm GBM, put the capital cost of the project between US$74 million and US$110 million, depending on whether a mill is built, and pegged cash operating costs near US$200 per oz. Passendro, part of the Bambari-Bakala permit area, is about 280 km northeast of Bangui.

Passendro’s development plan calls for a set of five open pits, feeding either a conventional mill with gravity and carbon-in-leach recovery circuits, or a heap-leach complex. The conventional mill would have a higher capital cost, but it is known to provide an average 88% recovery on the oxidized and fresh material in the Passendro resource. Early stage metallurgical testing of heap leaching has shown promise, but its potential at Passendro is less well known.

It is also possible a heap-leach plant could be added to a mill to process lower-grade material.

The five pits have a reserve of 13.7 million tonnes grading 2.6 grams gold per tonne if the mill option is chosen; in a heap-leach operation, which could take lower-grade ore, the reserve grows to 15.3 million tonnes grading 2.4 grams per tonne. In both cases, the cumulative stripping ratio of the pits is just over 5:1.

About 10 million tonnes of the reserve is made up of oxide material, including all the reserve in the largest pit, the Main Zone.

Regulatory work on Passendro has already made considerable progress. The government signed a mining convention with Axmin earlier in the year that gives the project a 25-year permit. The government receives a 10% carried interest with an option to buy in for another 10% as a working interest, and it also gets a 2.25% royalty on gold sales. The company has a 5-year holiday on corporate income tax (normally 30%) and exemption from withholding taxes on dividends, repayments and interest. There are also exemptions from value-added tax on fuel, equipment, consumables and fees for contractors on the project.

A preliminary environmental study did not identify any significant problems with developing Passendro, and environmental base line studies are under way. An impact assessment is scheduled to go to the government in 2007.

GBM put the internal rate of return on the project at 41% and the net present value at US$136 million (at a 5% discount rate), based on development of a mine and mill. A heap-leach project, with the lower capital cost, showed an internal rate of return of 53% and a net present value of US$145 million. The mill project would pay back in three years; the heap-leach project, in just over 30 months.

In a separate development, Harmony Gold Mining (HMY-N, HRM-L, HAR-J) will fund a US$4-million program of exploration on Axmin’s Sonkounkou, Sabodala Northwest, and Heremakono permit areas in eastern Senegal. Harmony can earn a 50% interest over three years while Axmin remains the operator.

The permits are in Birimian Kenieba belt rocks on the west side of the Senegalese-Malian border, where reconnaissance exploration by Axmin has outlined a number of geochemical anomalies in soil. Sabodala Northwest adjoins the Sabodala property, where Australian junior Mineral Deposits Limited (MNLDF-O, MDL-A) is developing a gold deposit in joint venture with the Senegalese government.

Harmony earns a 10% interest by spending US$800,000 in the first year, a further 15% by spending US$1.2 million in the second year, and US$2 million in the final year to earn another 25%. The 10% interest is extinguished if Harmony does not complete the second year’s obligations.

T.N.M. Nugget

AXMIN — PASSENDRO GOLD PROJECT

PROJECT

Part of Bambari property, Central African Republic

RESOURCE

18.6M t, 2.5 g/t gold

RESERVE

13.7M t, 2.6 g/t gold; expands to 15.3 Mt grading 2.4 g/t if lower-grade heap-leachable material is processed

MINE

Five open pits, mainly in oxide material

PLANT

Conventional gravity-cyanide mill and heap-leach options, 200,000 oz/yr

CAPITAL COST

US$74 million for mine and heap-leach; US$110 million for mine and mill

PRODUCTION COST

“Below” US$200 per oz.

ECONOMICS

IRR 41%, NPV US$136M (at 5% discount rate)