Antilles Gold Ltd (ASX:AAU, OTCQB:ANTMF) has completed a scoping study for the La Demajagua open pit gold-silver mine in Cuba, assessing the preliminary mine plan, material scheduling and ore grades from mining engineers to produce a comprehensive report detailing robust financials involved in developing the mine.
Antilles plans to develop the project in the near-term in a 49:51% joint venture (JV) with the Cuban Government’s mining company, GeoMinera SA.
The objective of this JV is to develop the mine and produce a bulk gold-silver concentrate for sale to trading companies or foreign smelters.
Investors have responded strongly to the positive study, sending shares as much as 13% higher intraday to A$0.09.
Financial highlights of study
The scoping study is based on Antilles contributing A$18 million in equity to the project, receiving in return a A$221.4 million share of life of mine (LoM) cash surplus and A$35 million in average annual profits, equalling an eight-month turnaround on the investment.
Overall project development cost is US$75 million with a LoM of six years at an annual production of 100,600 ounces of gold equivalent, earning the project about US$700.5 million in sales revenue over its LoM and culminating in a LoM profit of US$312.4 million (after paying tax of US$12.5 million).
La Demajagua holds a Net Present Value at a discount rate of 8% (NPV8) of US$218.1 million, and a project internal rate of return (IRR) of 43.7%.
Study demonstrates “excellent return”
Antilles Gold executive chair Brian Johnson said that the results of the scoping study were particularly encouraging and demonstrated the excellent return that Antilles Gold could expect to receive on its relatively low equity contribution to the project.
“The returns from the La Demajagua project will increase with cash flow from the underground operation planned to follow the open pit mining for approximately 10 years,” Johnson said.
“The results also indicate that the joint venture company’s first project could become the catalyst for realisation of its aim of developing a series of mines in order to progressively establish itself as a substantial mining company in Cuba.
“The joint venture’s objective is to apply part of the surplus cash generated by the La Demagaua project to fund future developments, and in doing so achieve organic growth while minimising future equity contributions.”
Johnson also said that shareholders could look forward to exciting news this year from the company’s recently formed exploration group in Cuba as it moved forward with a series of geophysical surveys and drilling programs on previously explored deposits that are included in Antilles Gold’s global exploration agreement with GeoMinera.
Antilles says the pipeline of properties with development potential that are available to the joint venture, including La Demajagua, present the company with a novel opportunity for future growth.
About Antilles Gold
Antilles Gold’s strategy is to participate in the successive development of previously explored gold and copper/gold deposits in mineral rich Cuba and on realising the value of assets it holds in the Dominican Republic.
The near-term project of the joint venture company, Minera La Victoria SA, is the proposed development of the La Demajagua gold/silver open pit mine on the Isle of Youth in southwest Cuba to produce gold and silver concentrate.
The objective of the JV is to invest part of the surplus cash expected to be generated by the La Demajagua mine to fund projects that follow, in order to achieve organic growth with minimal additional equity contributions, and with the aim of ultimately establishing Minera La Victoria as a substantial mining company in Cuba.
Minera La Victoria has access to a pipeline of additional projects with development potential including the large Golden Hills volcanogenic massive sulphide (VMS) deposit and the adjacent Florencia and Maclama sulphide gold deposits in southeast Cuba, together with 17 copper/gold deposits that are being reviewed for their prospectivity.