Kin Mining aims to start production at its Leonora gold site in 2018 after a feasibility study suggested the project would be a low-risk, high-margin operation.

Investors yesterday welcomed the news, pushing the stock (ASX:KIN) up 21 per cent to 29c.

Leonora, which lies in the Northeastern Goldfields of Western Australia, is expected to generate $167.9 million in case based on a $1600 per ounce gold price. Revenue would hit $596.1 million over an initial 7-year life of the mine.

The project had a low capex of $35.4 million with a short payback period of 11 months.

Kin Mining estimates it can mine 8.6 million tonnes at 1.5 grams per tonne, delivering 372,000 ounces of gold.

The project contains “indicated” and “inferred” resources of 22.3 million tonnes at 1.4 grams per tonne gold for 1.02 million ounces. Mineral resources are categorised in order of increasing geological confidence as inferred, indicated or measured.

Development would be based on three open pit centres which would supply 1.5 million tonnes per annum to its Lawlers processing plant.

The feasibility study demonstrated the technical and economic strengths of Leonora and provided the opportunity to build a significant new Australian gold production company, Kin managing director Don Harper said.

“Kin is now on a clear pathway to cash flow and plans to be producing gold in the second half of 2018 in the heart of one of WA’s richest gold-mining districts,” he said.

The study also considered the proposed new Western Australian gold royalty tax of 3.75 per cent.

Kin is seeking to expand the mineral resources at Leonora with a 15,000-metre drill program targeting high-grade extensions at three key deposits.

Kin has a market cap of $50 million.