A +$US1,700/oz gold price makes Awak Mas even more attractive to investors
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Special Report: Work completed since a 2018 project study – and a booming gold price — has significantly improved the economics of Nusantara’s low cost, high return Awak Mas project in Indonesia.
In October 2018 Nusantara (ASX:NUS) released a definitive feasibility study (DFS) on the flagship Awak Nas gold development.
The $US146 million, 11-year mining operation would boast a low all-in-sustaining costs of ~$US750/oz, a net present value (NPV) of $US152m and an internal rate of return (IRR) of 20 per cent.
Both NPV and IRR are metrics used to assess the profitability of a project – the higher the number is above 0, the more profitable it will be.
Those numbers were based on a gold price of $US1,250 per ounce.
A newly released DFS addendum now shows considerably improved economics as the gold price sits comfortably above $US1,700/oz.
Higher confidence reserves have now increased by 34 per cent from the 2018 estimate to 1.53moz, driven by successful exploration results, improved mine planning, and this higher gold price.
The all-important gold recoveries are up from 90.9 per cent to 93.3 per cent. Mine life has been extended to 16 years and production increased in the first four years to 127,000oz per year, up from 106,200 ounces in the DFS.
NPV (after tax) has improved markedly from $US152m to $US517m. Post tax IRR is now 45 per cent up from 20 per cent.
Upfront capital requirements have increased from $US146m to $US156m, but Nusantara now expects to pay that back in 1.8 years, down from four years in the DFS.
Nusantara is also studying the possibility of expanding the capacity of the processing plant from 2.5mtpa to 3.9mtpa.
Cumulatively, this makes the economics very attractive as Nusantara pushes to finalise debt finance this year ahead of construction in 2021.
“This outstanding economic assessment update provides a compelling case for advancing Awak Mas through the debt process towards construction development early next year,” Managing Director Neil Whitaker says.
Nusantara is looking to finance Awak Mas through a combination of project debt, mezzanine finance and equity.
That includes a further investment of $US25m by partner Indika Energy to take its ownership interest to 40 per cent.
Following the updated DFS project economics, Nusantara will engage an independent technical expert report to aid prospective financiers.
“Discussions continue to advance with these parties for funding the development of Awak Mas, with the improved production profile anticipated to increase the Awak Mas debt capacity, with circa USD140M now being sought,” the company says.
Meanwhile, Nusantara is cashed up to significantly progress Awak Mas predevelopment activities over the remainder of the year.
This includes a drilling program, now underway, to lift the resource category to the higher confidence ‘Measured’ status in the initial mining areas.
This closer spaced drilling also has the potential for an uplift in grade through the intersection of additional higher-grade vertical zones that are pervasive through the Awak Mas (Main) and Salu Bulo deposits.Longer term, Nusantara believes there is potential to further extend the proposed pits and will revist known near mine targets that could further enhance the mine plan
There is also opportunity to extend the mine life or to support expansion with the possible inclusion of the ‘Tarra’ deposit and other known exploration targets.