Xtract Resources PLC (LON:XTR) has had its decision to develop the Manica mine in Mozambique backed up by an independent study.
Consultant Minxcon was appointed to complete optimisation modelling and has concluded that an open pit is the best way forward.
Previously, a high grade pit followed by underground mining had been one option, but this has been rejected due to the heavy bolstering needed for the operation below ground.
Minxcon’s recommendations would mean an open pit mine with a seven-year life with 480,000 tonnes per annum (40 000 tpm) of ore processed each year.
The estimated average grade is 2.26 g/t mined with the a stripping ratio of around 7.2.
At that rate, the optimisation break even all-in cost including capital recovery is US$908 per oz.
At this level, Xtract said it make a positive return but the final net present value will be determined during the DFS update.
Several other targets also lie within the Manica concession, which have not been fully explored.
Discussions are still underway with the Manica vendor Auroch concerning the US$1.65mln outstanding payment with an agreement expected by the end of the year.
A decision over the alluvial rights is expected to be finalised shortly.
Colin Bird, executive chairman, said: "I am pleased to report that the Manica project shows all the signs of a robust open pit gold mining project which can be developed by us or with others, whichever route provides the best shareholder value against risk.
We are currently reviewing these options. The exploration potential, if successful, could lead to extended mine life with the processing plant paid for.
The same could apply for any underground extension which would be justified on its own economics.
Daan van Heerden of Minxcon said: "Further optimisation will be directed towards re-designing the pit and firming up capital and operating cost for the plant.
“Once commissioned and mandated we expect to produce an updated DFS in short time."