Hana Mining has released the first economic study on its Banana zone and zone 5 at its 70%-owned Ghanzi project in Botswana.
The company is looking to build a 31,000-t/d conventional open pit copper-silver mine in the northwest region of the country with a 13-year mine life.
The mine is expected to produce 66.4 million lb of copper and 878,000 oz of silver per year at head grades of 1.02% Cu and 12.13 g/t Ag for life-of-mine production of 863 million lb of copper and 11.4 million oz of silver. The company plans to produce a clean copper-silver concentrate grading roughly 46% Cu.
Using US$3.40/lb for copper and an 8% discount rate, the financials of the project work out to an after tax net present value of US$262 million and an internal rate of return of 19.3%. The after tax rate factors in the country’s 22.5% corporate tax rate as well as a 3% net smelter return royalty for base metals and a 5% royalty for precious metals. Payback is estimated at five years.
Initial capital costs come in at US$285.5 million, while pre-production, sustaining, and deferred costs bring the total to US$399 million. Life-of-mine cash costs come in at US$1.48 per lb of copper net of by-product credits. The costs come in at US$1.62 per lb for the first five years because the company will not yet be linked to the national grid and so has factored in using heavy fuel until the country extends the grid.
The life-of-mine strip ratio comes in at 6.8 to 1, with an average pit depth of 183 metres in the four pits. The company has factored in contract mining rates but will consider an owner operated model in the feasibility study.
Other potential improvements in the feasibility study include linking to the power grid earlier, improving the resource with 2012 drilling, optimizing the pit design, and adding an underground mining operation.
The Banana zone currently hosts 40.9 million indicated tonnes grading 0.87% Cu and 12.5 g/t Ag for 780 million lb of copper and 16.4 million oz of silver, plus 191.6 million inferred tonnes grading 0.6% Cu and 7.1 g/t Ag for 2.7 billion lb of copper and 44.7 million oz of silver, all using a 0.4% Cu cut-off. Zone 5 hosts 16 million inferred tonnes grading 1.47% Cu and 13.2 g/t Ag for 520 million lb of copper and 6.8 million oz of silver.
Mineralization on the project is characterized by a near surface oxide zone containing chrysocolla, chalcocite, and malachite, plus trace azurite and native copper, with the base of the zone lying at between 40 and 50 metres vertical depth; then a thin transition zone ranging from 3 to 10 metres in thickness separating the oxide and sulphide zones; and finally a sulphide zone at depth, where copper occurs as bornite, chalcocite chalcopyrite and minor native copper.
Hana, with $20-million in cash, plans to continue drilling the project in 2012 as it works towards a feasibility study. The company closed at $1.29 on the day it released the study after market close.
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