Mariana Resources (LON:MARL CVE:MARL) may soon have a stake in one of Europe’s most profitable gold mines after an independent study estimated the potential returns from Hot Maden at just shy of US$1.4bn.
Glen Parsons, the AIM-listed group’s chief executive, said the preliminary economic assessment (PEA) had finally revealed the real potential of the project in Turkey.
"We have always believed Hot Maden to be a world class deposit and, with a potential post-tax NPV [net present value] for the base case mining scenario of US$1.37bn and post-tax IRR of 153%, this is certainly proven correct.”
The study was based on processing 7mln tonnes of ore over nine years, which at a grade of 11 grams per tonne amounts to production of 2.79mln ounces.
As well as gold, the PEA also included 166,000 tonnes of copper, which took the gold equivalent total to 3.43mln ounces.
“The high grade nature of this resource and relatively low capital (CAPEX) and operating (OPEX) costs should result in the delivery of considerable cashflow and a short payback period (around 2.1 years [or 153% IRR], including underground mine development) on initial investment,” said Parsons.
Upfront costs were estimated at US$169mln, which rises to US$261mln over the mine’s life.
The PEA also included a 2.6% state royalty, a 2% royalty to NSR Sandstorm and tax at 20%. The gold price used was US$1,250 per oz.
Hot Maden is a joint venture beteen Turkish firm Lidya (70%) and Mariana (30%) and Parsons said the PEA results justified the decision to move quickly to development, especially with the significant cash flow generation potential illustrated in the study.
“The result is expected to be a low cost, low environmental footprint, but highly profitable mine.”
But there may be more to come, he added, as Lidya and Mariana will drill a further 20,000m this year to beef up the resource base especially to the south of the Main Zone within the old "Russian Mining Area”.
The two companies will now work on firming up the PEA conclusions into pre-feasibility study that is expected to be completed in the third quarter of 2017 and include “higher confidence level mine designs, mineral processing scenarios, and costings.”
Shares rose 6% to 82.5p valuing Mariana at £103mln.