Shares in gold explorer Stonewall Resources leapt higher after initial mine studies indicate that its open pit Theta gold project in South Africa could be a cash cow.

The Stonewall (ASX:SWJ) share price — which has traded between 0.7c and 2.1c over the past year — jumped 25 per cent in morning trade to 1c.

Stonewall believes it can produce 67,000 ounces a year for over seven years at a very low all‐in sustaining cost (AISC) of $800 per ounce.

AISC is a comprehensive way to assess if a project is profitable or not, because it considers all the costs associated with production – from mine maintenance and exploration, through to administration and other corporate expenses.

Most mines of this size produce at an AISC of well above $1000/oz.

The basic study shows a post-tax net present value (NPV) of about $214 million.

NPV is a metric used to assess the profitability of a project; the higher the NPV, the more profitable a project will be.

The Stonewall Resources (ASX:SWJ) share price over the past year.
The Stonewall Resources (ASX:SWJ) share price over the past year.

The development needs about $22.5m to get into production, which Stonewall expects to pay back within 8 months.

Most of the infrastructure needed to restart gold production is already in place, including the fully permitted tailings dam, roads, power and water, according to the company.

Stonewall repositioned itself from a potential underground gold producer to focus on low-cost open-cut mining after feedback from investors “that the likely lower risk profile would be viewed more favourably”, it said.

The company plans to kick off a more detailed feasibility study to improve confidence in the gold resources, associated costs, and de-risking the technical aspects of the project ahead of a planned development decision in 2019.