Gemfields (LON:GEM) this morning unveiled an updated JORC resource statement that points to the huge potential of its Kagem emerald mine in Zambia as well as outlining the robust economics of an underground operation there.
SRK Consulting estimates Kagem’s indicated resource at 2.75 million tonnes of ore, or an impressive 1 billion carats of emerald and beryl at 365 carats a tonne. The inferred resource is put at 223,100 carats.
Possibly more interesting to investors is results of the work carried out to discern whether it would be economically feasible to extend the open-pit operation into an underground mine.
An operation with a 20-year life-span has a the potential to produce 34 million carats a year at an average cash cost of 62 cents per carat, according to the Gemfields-commissioned study.
It would generate US$885 million over the two decades, and SRK projects a net present value for the new underground operation of US$372 million at a 10 per cent discount rate.
The capital costs are estimated to be a relatively modest US$55.1 million over the first five years and US$113.2 million over the life of the mine.
Gemfields said it is to commence accelerated underground construction and development in the financial year 2014-15.
Chief executive Ian Harebottle added: "Today we have achieved a key milestone in the continual development of Gemfields.
“The study shows that extending the current open pit mine at Kagem to a large-scale underground operation will be economically enhancing to the company and to our shareholders.
“The study covers only Kagem's existing principal pit on the Fwaya-Fwaya belt, which is one of several known emerald bearing belts available within the Kagem licence area.
“The study shows that the existing pit can be further developed as a high grade, low cost mine with robust project economics and a rapid payback period.
“The company currently caries no value for the resource but with today's updated estimate will look to correct this in due course.
“We will now look to accelerate the development and implementation of a large-scale underground project at our flagship operation on the Fwaya-Fwaya belt, while continuing to assess the potential future development of the additional belts available within the greater mining licence area."