A combination of the increased Australian dollar gold price and substantially reduced diesel fuels costs in the Philippines has resulted in an increase in projected free cash flow, from Aus$30 million to Aus$45 million, for Red Mountain Mining’s Batangas Gold Project.
This is based on an updated interim Definitive Feasibility Study (DFS) financial modelling that incorporates the current Australian dollar gold price of $1600/ounce (as at January 22, 2015) and reduced diesel fuel costs in the Philippines, which are down 25% since the last update in November 2014. Diesel is used for power generation that is a significant component of planned CIL processing costs and also in mining and haulage. The 25% decrease in the Philippines diesel price has resulted in a 5% reduction to forecast mining and processing operating costs.
The company further advises it has now achieved endorsement from 10 out of the 10 potentially affected Barungay (township) Councils for the Batangas Gold Project development and production plan (Declaration of Mining Project Feasibility (DMPF)). The next step is Lobo Municipal Council endorsement prior to the DMPF proceeding to the central Mines and Geosciences Bureau (MGB) for final processing and approval.
Red Mountain Managing Director Jon Dugdale said: “The project is now at a turning point, with the improved gold price, reduced input costs and the new funding partnership giving us the impetus to complete the DFS and permitting and move the Batangas gold project towards production.”
The company holds a 100% direct and indirect contractual right interest in tenements in the Philippines that contain significant gold resources. Total mineral resources at Batangas include 2.97 million indicated tonnes @ 2.4 grams/tonne gold for 227,000 ounces and 3.22 million inferred tonnes @ 2.1 grams/tonne for 218,000 ounces. The company is continuing exploration with the objectives of upgrading mineral resources.
In December the company announced an agreement with London-backed BMVL which includes a two stage funding arrangement totalling US$5.5 million, earning BMVL up to 50% of the currently wholly-owned subsidiary, Red Mountain Mining Singapore, which is the holder of the Batangas Gold Project assets.
Funding under the agreement with BMVL will allow the company to complete a DFS on the project, with initial results confirming low capital and operating costs and recovery of more than 100,000 ounces of gold during the initial five years of production. Final mine development permitting submissions have been lodged with the Philippines Government and are proceeding towards approval.