Exeter Resource's Caspiche project has cash cost of $524/oz, more than 34% IRR

Vancouver-based explorer Exeter Resource Corp (TSE:XRC)(AMEX:XRA) announced Monday the results of its prefeasibility study (PFS) on the Caspiche project in northern Chile, with cash costs of just $524 per ounce of gold and a net present value of more than $329 million.

The study was based solely on the near-surface oxide portion of the Caspiche deposit, which was considered a standalone mine as the more than 100 metre thick oxide blanket would be removed from the large, underlying sulphide resources at the project.

Exeter plans on assessing both the oxide and sulphide resources in a combined study due out in the fourth quarter of this year.

The Caspiche project is a gold-rich porphyry system with significant copper and silver credits. It sits in-between Kinross Gold (TSE:K) (NYSE:KGC) and Barrick's (TSE:ABX) (NYSE:ABX) Cerro Casale gold deposit and the Refugio Mine, also controlled by Kinross.

According to the economic report released today, the oxide portion of the deposit will produce an estimated 210,000 ounces of gold and 364,000 ounces of silver annually over a five year mine life, at a cash operating cost of $524 per ounce of gold, after the silver credit.

Based on a gold price of US$1,320 per ounce, the standalone mine returned a pre-tax net present value of US$329.5 million, using a 5% discount rate, generating a 34.4% internal rate of return (IRR), and a payback period of just over three years from initial construction. Estimated initial capital costs are US$335.6 million, the company said.

At a gold price of US$1,500 per ounce, the IRR jumps to more than a whopping 46%, with a net present value of $488 million.

"The purpose of the Oxide PFS was to demonstrate the commercial viability of the Caspiche oxide deposit as a relatively low capital cost, low risk mine producing over 200,000 ounces gold annually," said chairman Yale Simpson.

"The oxide ore body leaches exceptionally well by industry standards and will be an important cash flow generator, whether it is developed independently to provide cash flow over a five year mine life, or in concert with the development of the main sulfide deposit."

Indeed, Simpson went on to say that the company's engineers advised that an increase in the size of the secondary crusher at the project, where primary crushed product is further reduced, could increase mine throughput at a relatively modest increase to capital costs. Currently, the heap leach processing rate is estimated at 62,000 tonnes of ore per day, with an average gold recovery of 78%.

"On the basis of the economics set out in the PFS report, the company can now consider mine permitting and development of the oxide project well in advance of the larger scale and more capital intensive sulfide project," Simpson added.

The NI 43-101 compliant study assumed total proven and probable reserves of 1.35 million ounces of gold, at an average grade of 0.41 g/t, and 5.36 million ounces of silver, at a grade of 1.64 g/t, contained within 101.74 million tonnes of ore.

However, the report did not include inferred resources of 50,000 ounces of gold, and 300,000 ounces of silver, contained within 6.21 million tonnes of ore, Exeter said.

The company, which has cash reserves of $80 million, also said that there are several opportunities to boost the current economics of the project, including the supply of power from the grid, which was not included in the latest report.