West Wits Mining earlier this week released an updated Definitive Feasibility Study (DFS) for the Qala Shallows project, part of the Witwatersrand Basin Project in South Africa. The company said the revised study shows a 58.00% increase in forecast revenue, now estimated at US$2.70 billion. Chairman Michael Quinert sat down with Proactive to discuss.
Highlights
Key drivers of the uplift are:
- A revised long-term gold price of $2,850/oz (previously $1,850/oz).
- Lowered cut-off grade allowing more mineable material early in the project.
- Free cash flow is forecast to rise by $461 million, reaching $983 million.
- Production at peak rate of 70,000oz per year is extended from 9 to 12 years.
- Operating cost estimates have risen slightly to $1,288/oz.
- Quinert said the updated figures are mostly based on actual contracted terms.
- Mobilisation is underway at site, with contractors and equipment deployed.
- The company is preparing to move into full production in the near term.
Two changes reflect uplift
West Wits has put its uplift down to two primary changes: a higher long-term gold price assumption and the ability to lower the cut-off grade. The gold price used in the updated study was set at US$2,850 per ounce, up from US$1,850 in the prior version. The company noted this remains below current spot prices, which recently approached US$3,400 per ounce.
Quinert said the change in assumptions also allowed for more material to be economically viable, particularly in the early stages of the project. This, in turn, drove a near US$1billion increase in overall project value.
Free cash flow is expected to almost double, reaching US$983 million, an increase of US$461 million. While operating costs have risen modestly to US$1,288 per ounce, the company said margins remain strong due to favourable pricing.
The company highlighted that many of the cost inputs used in the revised DFS are now based on contracted terms, improving confidence in the study’s accuracy. “They’re all based on actual contracted numbers or most of them are now,” Quinert said.
Peak production extended
An additional outcome of the updated economics is the extension of peak production at 70,000 ounces per year. The company said this phase will now last for 12 years, up from nine years previously.
Operational mobilisation has already begun. The company confirmed it has deployed a load-haul-dump vehicle and personnel to site. It said preparations are underway to move into full production in the near term.
Quinert said earlier capital raised had enabled the company to initiate this activity ahead of final development milestones.