West Wits Mining Ltd (ASX:WWI) welcomes a scoping study of the Witwatersrand Basin Project (WBP) in South Africa that delivers robust outcomes and demonstrates the potential for WBP to be the cornerstone project in WWI’s strategy to become a mid-tier gold producer.
A financial analysis of the study has confirmed sustainable profitability for WBP that is maximised by incorporating the optimal development model.
Optimal scenario
The study considered four phased scenarios identified through financial analysis for investment feasibility based on five development stages of the WBP with scenario four recognised as being optimal.
It delivers a 27-year Life-of-Mine (LOM) with an estimated 16.1 million tonnes at a Run of Mine (ROM) grade of 3.11 g/t gold for 1.61 million ounces from the mining of Stages 1-4.
The financial modelling results at a gold price of US$1,750 per ounce (based on RBA US$/AU$ exchange rate of 0.7182 on 28/02/2022) include:
- Free cashflow of US$511 million (A$712 million);
- NPV7.5 – Pre-tax of US$227 million (A$316 million) and post-tax of US$160 million (A$223 million); and
- IRR – Pre-tax of 33% & Post-tax of 29%.
A sensitivity analysis has confirmed profitability - at a low gold price of US$1,500/ounce, the project remains viable while at a gold price of US$2,250/ounce, the NPV more than doubles.
“Excellent and robust results”
Managing director Jac van Heerden said: “These excellent and robust results from the scoping study confirm our clear strategy to advance the WBP into a significant gold production operation targeting 65,000 ounces per annum over a long life of 27 years at highly attractive economics.”
Financial modelling by Bara Consulting Pty Ltd’s was undertaken with a phased scenario approach, to frame the financial feasibility of investment for each of the target areas in the WBP:
- Qala Shallows (Stage 1) – DFS complete and Early Mining Initiative underway;
- Main Reef Package (Stage 2);
- Bird Reef East (Stage 3);
- Qala Deeps (Stage 4); and
- Bird Reef Central (Stage 5) is excluded from the analysis due to its lower recovered grade profile and standalone infrastructure costs.
Of the four scenarios identified, Scenario 4 presents the most beneficial all-inclusive financial outcome which involves mining Stages 1-4 and excluding Bird Reef Central (Stage 5).
The key baseline financial metrics for Scenario 4 at different gold prices.
Production rates
The scoping study outlines the following gold production rates:
- 65,000 ounces per annum over 25 years - average ROM gold production;
- 76,500 ounces per annum in years 5-16 - average ROM production; and
- 92,000 ounces achieved in year 6 - maximum annual ROM production.
There is also further upside potential as the production schedule does not include Bird Reef Central, which is subject to the recently updated Uranium Exploration Target, providing the potential opportunity to become a standalone gold and uranium project.
The Main Reef and Bird Reef East areas are also constrained to <200 metres below surface with areas >200 metres below surface to be introduced on the completion of engineering studies to determine access below the water table.
WBP's key production metrics.
The study provides an AISC of US$ 1,138/ounce for stages 1-3 combined (production above 800 metres) which increases to US$ 1,198/ounce with the inclusion of Stage 4 (Qala Deeps), which is below 800 metres depth and ramps up from year 14 as ore from the Qala Shallows is depleted.
Project 200 initiative
“The team has also commenced a new initiative, Project 200, which aims to increase production at WBP to 200,000 ounces per annum by increasing the Qala Adits throughput capacity,” the MD said.
“Stage 1 is well-advanced with the completion of the Qala Shallows DFS and commencement of the Early Mining Initiative which aims to achieve early cashflow from estimated production of 5,000 - 8,500 tonnes of ore per month from April 2022.
“This will provide an excellent production springboard as we ramp up Qala Shallows production and advance Stage 2 and 3 feasibilities.
“The recent Uranium Exploration Target highlights the potential for uranium as a by-product to gold at the WBP which could add significant value to our operation, benefiting the company’s growth and shareholder value.”
Improved cashflow
The WBP Scoping Study’s ROM production schedule in annual ounces of gold by stage over the WBP’s 27-year LOM.
The financial analysis’ estimated free-cashflow of US$511 million for the WBP represents an increase of 113% on the Stage 1 DFS of US$240 million and a 51% increase from the post-tax NPV7.5 of US$106 million to US$160 million.
A DFS has been completed for Stage 1 and development is underway on the WBP’s Early Mining Initiative at Qala Shallows, with first ore produced in February 2022.