PanAust Ltd’s Frieda River Copper-Gold Project may cost about US$1.7 billion to develop but less if the company takes a staged approach to the development. This figure was determined in a review prepared for the project, which is a joint venture between PanAust (80%) and Highlands Pacific (20%).

Due diligence project parameters reported by PanAust on November 1, 2013, as part of its acquisition of Glencore’s stake in Frieda River, have been superseded through further data analysis and the development of a definitive scope for the feasibility study and a base case development concept.

The base case demonstrated a higher value outcome than previous studies with a development concept comprising an open pit and a single process plant module incorporating a SAG mill and two ball mills. This concept leverages off the experience gained at PanAust’s Phu Kham Copper-Gold Project in Laos, which has a similar process plant configuration and compact footprint, and is located in very similar terrain.

The preliminary capital cost estimate for the base case is about US$1.7 billion excluding mining fleet and power station and assumes power is supplied by intermediate fuel oil generators (IFO). Preliminary analysis indicates that the base case development concept would be robust as a copper price of US$2.80 per pound (and gold price of US$1300 per ounce).

Life-of-mine mill feed is estimated to be about 600 million tonnes, a 36% increase over that contemplated in the due diligence evaluation, with an average annual processing rate of 30 million tonnes over a 20-year mine life to produce average annual copper and gold in concentrate of 125,0000 tonnes and 200,000 ounces respectively.

Relatively soft ores are expected to be processed in the first five years of operation allowing mill throughput rates of more than 20% above the life-of-mine average. Thereafter the ore is scheduled to become progressively harder leading to throughput rates of about 20% below the life-of-mine average in the final years of operation.

PanAust will consider a staged development approach which would require lower initial capital expenditure with a deferred capital expansion of the processing facilities in years three to five.

In addition, a feasibility study will also evaluate a hydro power operation with renewable power generated by utilizing the positive water balance within the tailings storage facility (TSF) catchment, thereby augmenting IFO generated power. The lower cost of hydro power compared to IFO generated power will be weighed against the capex required to install turbines and the accelerated construction of the TSF in order to store water for hydro power generation.

A feasibility study and an application for a special mining licence will be completed before November 2015.

PanAust is the target of an Aus$1.1 billion takeover approach from China’s state-owned Guangdong Rising Assets Management Co, which holds 23%. Guangdong’s proposal of Aus$2.30 cash a share was rejected and PanAust is seeking other offers from interested groups by October. www.panaust.com.au