Power Metal Resources Plc (LON:POW) has highlighted an update from its 5.57% owned associate Katoro Gold Plc (LON:KAT) which has entered into a deal for participation in a gold production opportunity in South Africa.
Katoro signed a ‘binding conditional agreement’ for the opportunity which envisages the reprocessing of tailings estimated to contain some 1.34mln ounces of gold.
The agreement is for a 50:50 joint venture with Blyvoor Gold Operations (and its holding company Target Mine Consulting). Together they will seek to exploit potentially viable deposits of gold and any other minerals from six gold tailings dams.
"The JV represents a unique and exciting investment opportunity for the company with the possibility of significant near term revenue generation,” said Louis Coetzee, Katoro executive chairman.
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Requisite mining licence and environmental impact assessments are already in place to allow the reprocessing of the tailings, so production will be able to start immediately once a processing plant has been commissioned.
The plan, which remains subject to funding, anticipates initial production from up to 250,000 tonnes of material per month, rising to 500,000 tonnes per month within two years.
At the 500,000 tonnes per month rate, the project is expected to yield around 35,000 ounces of gold per year and have a 35-year project lifespan. All in sustaining costs are estimated, also at the higher rate, to be around US$664 per ounce for the first five years.
Katoro said that the project will use proven mining and processing technologies, and the partners expect recoveries of 56% to 60% will be achievable based on feasibility and test work conducted to date. Albeit, further confirmatory test work is planned to optimise projections and designs for the processing plant.
The company added that it has already had preliminary discussions with potential funding parties, and, it expects that it will be funded at project level.
Coetzee added: "Our initial objective is to rapidly secure the project level funding required to construct and commission the plant to reprocess the tailings in order to start generating revenues.
“I must emphasise that this is financing at the project level and does not represent dilution at the Katoro Gold level.”
Power Metal Resources holds a 5.57% stake in Katoro and has a 25% interest in Katoro’s Haneti polymetallic project in Tanzania.