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AISC watch: Low costs are the drawcards for these future gold producers
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While all-in-sustaining-cost (AISC) certainly shouldn’t be the only metric used for investment decisions, it nonetheless provides greater clarity and improved investor understanding into what costs are involved in making gold projects tick.
A low AISC also makes for healthy margins as well as insulation against gold price variations.
There are dozens of gold plays on the ASX, several of which are in the final stages of becoming gold producers.
But just what makes for a good investment as prices are reportedly poised to rally, at least once they break past the US1,900/oz mark?
One way might be to look at the AISC, essentially all direct and recurring costs required to mine the gold, of each project.
Here’s a breakdown of several future gold producers with a definitive feasibility study under their belts, development ongoing or even verging on entering into production.
ASX potential and future gold producers
Bardoc’s namesake project in Western Australia’s Eastern Goldfields region is forecast to produce 136,000 ounces of gold per annum at an AISC of just $1,188 per ounce.
Capital costs are a low $177m and the project is underpinned by a 1Moz ore reserve that is expected to generate pre-tax cashflow of $740m.
A final investment decision is expected in the third quarter of this year with construction to follow shortly after and first gold pour in the fourth quarter of 2022.
After a short dive in March following the release of a detailed feasibility study for its project that did not go down well with investors – on account of the perceived short mine life of 7.4 years, shares in the company have since picked up, though not to the levels it enjoyed last year.
Despite this, there’s still much to like about the project, starting with the AISC of $1,079/oz that places it in the lowest cost quartile.
The project also has pre-tax internal rate of return (IRR) of 58 per cent as well as life of mine earnings before interest, taxes, depreciation, and amortisation (EBITDA) of $1.6bn.
IRR (and its stable mate net present value) is a measure of a project’s profitability.
The Bellevue gold project has a Capex of $255m and payback of just 1.4 years.
The company is targeting a mid-2022 start for gold production at its Warrawoona gold project in Western Australia’s Pilbara region.
Its first stage development is expected to produce 90,000oz of gold per annum at a life of mine AISC of $1,290/oz during the first eight years.
After-tax NPV and IRR have been estimated at $245m and 57 per cent respectively at a hedged gold price of $2,355/oz.
Calidus has already completed the access road, accommodation village and mill foundations while the tailings dam and mine areas are due to be completed in September this year.
Capricorn is closing in on becoming one of Australia’s gold producers with commissioning now under way at its Karlawinda gold project in the Pilbara.
Crushing and milling activities are expected to begin in the middle of this month with first gold targeted for the end of June.
Karlawinda is expected to produce between 110,000 to 125,000 ounces of gold per annum at a targeted AISC of $1,140 to $1,190 an ounce.
This is thanks to the single large, low strip ratio open pit and ore that can be processed using a well-understood conventional gravity and carbon in leach process.
The project currently has an open pit ore reserve of 1.2Moz of gold that forms part of a broader resource totalling 2.1Moz.
What do you get when you combine a robust ore reserve, straightforward development and an attractive fiscal regime?
Answer: One of the lowest costs gold projects that is well on its way towards production.
Emerald’s Okvau project in Cambodia is expected to produce 106,000oz of gold per annum at a very attractive AISC of just US$754/oz.
The other numbers are just as wild, with the project expected to generate NPV and IRR of US$238m and 57 per cent respectively using a conservative US$1,450/oz gold price.
Okvau has a reserve of 907,000oz and commissioning of the gold process plant has already begun while some 245,000t of ore has been stockpiled in preparation for operations to move into full swing.
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Geopacific Resources (ASX:GPR)
Over in Papua New Guinea, Geopacific continues to progress towards financial close for its Woodlark gold project.
Woodlark has a forecast AISC of $1,239/oz over its estimated 13 year mine life.
Post-tax NPV and IRR have been pencilled in at $347m and 34 per cent at an assumed gold price of $2,200/oz.
All this thanks to conventional open pit mining and standard carbon in leach processing.
A low AISC of US$875/oz that positions it in the lower half of the global gold cost curve and post-tax IRR and NPV of 45 per cent and US$388m are just some of the attractions of Nusantara’s 2.28Moz Awak Mas project in Indonesia, Sulawesi.
While this resource is more than sufficient to fuel an estimated 16-year mine life, there is also potential for further growth.
Assays are still pending for its satellite Salu Bulo deposit, which could further increase resources that will in turn form the basis for an updated Ore Reserve estimate.
The project’s economics are due in large part to a combination of open pit mining as well as conventional gravity and carbon-in-leach processing.
The King of the Hills project in WA remains on schedule and on budget for first gold pour in the June quarter 2022.
Red 5’s project currently has a resource of 4.1Moz and an ore reserve of 2.4Moz that remains open along strike and at depth.
Life of mine AISC has been estimated at $1,415/oz while AISC in the first six years is expected to be about $1,339/oz.
NPV is estimated at $726 while Capex is $226m.
Nusantara is not the only company operating in Indonesia with ambitions of becoming one of the ASX’s gold producers.
Sihayo is also spruiking its namesake project in Sumatra with a definitive feasibility study estimating AISC at just US$709/oz.
Mine life is estimated at eight years with 13.7Mt of ore to be produced over this time.
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