Condor Resources' La India gold project 'technically feasible and economically viable'

Condor Resources' (LON:CNR) La India gold project is, at a conceptual level, both technically feasible and economically viable, according to a study by the firm’s consultants SRK.

SRK's concept study supports the company's decision to complete a scoping study at the Nicaraguan gold project this year as a pre-cursor to a pre-feasibility study, Condor says.

It also told investors that it is aiming to prove up sufficient resources at the La India project to support gold production in the order of 80,000 to 100,000 ounces a year.

This year Condor is setting itself a resource target of 2 million ounces for La India . It follows a successful 2011 in which the resource almost doubled from 868,000 to 1.6 million ounces.

"I am delighted with the rapid resource increase made in 2011 on La India Project and the results and recommendations from SRK's mining concept study and report detailing the recent mineral resource increase to 1.62 million ounces of gold contained in 8.94 million tonnes grading 5.6 grams per tonne.  

“La India project is in many ways ‘de-risked’ as we move to increase the total mineral resources to 2 million ounces gold in 2012. The 12,000 metre to 15,000 metre drilling planned for this year will not only increase the resource but focus on increasing the size of a potential mill. 

“The board's current objective is to prove sufficient resources to support production of 80,000oz to 100,000oz gold per annum."

The SRK study looks at three separate underground mining scenarios, whereby three main gold veins would be mined concurrently - La India vein, America vein and Mestiza vein. The scenarios differ in terms of their throughput and peak output after a three year ramp-up period.

The ‘base case’ sees an annual process capacity of 400,000 tonnes per annum to produce 56,000 ounces a year following the three year ramp-up. A ‘high grade’ case predicts a 360,000 tonne per annum operation which produces an average of 52,000 ounces a year, peaking at 66,000 ounces a year from year three.

Thirdly, an ‘accelerated’ scenario estimates an annual process capacity of 590,000 tonnes a year with average production of 63,000 ounces, reaching 81,000 ounces per year from the third year.

For each of these conceptual scenarios SRK assumes a gold price of US$1,200 an ounce. 

Capex is estimated between US$95 million, in high grade case scenario, and US$120 million in the accelerated, while the base case would cost US$110 million. 

While estimated operating costs are fairly low by current industry standards with the base case estimated at US$442 an ounce, the ‘high grade’ and ‘accelerated’ scenarios have lower operating costs per ounce, at US$226 and US$256 respectively.

SRK estimates a 43 per cent internal rate of return (IRR) for the base case, the accelerated case has an IRR of 41 per cent and the high grade scenario has an estimated IRR of 84 per cent.

Moving forward Condor now intends to focus its exploration work on the three gold veins that were the subject of the concept study.

Through a US$4 million exploration programme it hopes to complete between 12,000 and 15,000 metres of drilling.

This will comprise infill and extension drilling and it will, among other targets, focus on the area between La India and America where the two veins are thought to coalesce. Drilling will also test areas within the newly acquired land packages in the La India district.

The aim is to both upgrade existing inferred resources and to increase the overall mineral resource.

Additionally Condor said it also plans to investigate La India’s open pit potential.