The completed pre-feasibility study (PFS) on Red Mountain Mining’s flagship Batangas Gold Project in the Philippines confirms that it will be a low-cost project generating an estimated $A46 million in free cash flow during the first seven years of production.

The PFS for the project, which is 120km south of Manila, confirms low C1 operating costs of US$ 735 (A$999) per ounce. The free cash flow capital and pre corporate tax has been estimated using a gold price of A$ 1700 (US$ 1250) per ounce at a C3 all-in-cost (AIC) of US$ 914 (A$1243) per ounce, excluding corporate tax and administration).

The PFS includes a maiden probable ore reserve for the project of 1.44 million tonnes @ 2.6 grams/tonne (g/t) gold and 9.0 g/t silver, containing 128,000 ounces of gold. This includes high-grade gold ore of 746,000 tonnes @ 4.0 g/t gold and 9.2 g/t silver containing 100,000 ounces of gold.

The probable reserve is derived from optimised open pit designs based on indicated resources only and represents a mining and production schedule that is expected to recover 116,000 ounces of gold during the initial seven years of production.

The PFS has added 26,000 ounces of recoverable gold when compared to the scoping study that was completed in March 2014.

Initial mining is planned to be ore from the high-grade South West Breccia and Japanese Tunnel open pits at Lobo, grading 6.6 g/t gold for the first two years, then Kay Tanda open pit(s) ore grading 2.2 g/t will be transported and processed at Lobo CIL plant for the subsequent five years of initial operations.

The Batangas Joint Venture partners, Red Mountain and Bluebird Merchant Ventures, have approved the PFS and the immediate transition to Definitive Feasibility Study (DFS).

Financing of the project will require a certain level of debt financing, particularly for the new CIL processing plant and associated infrastructure. Discussions with potential debt financiers are ongoing and will be advanced, targeting financing agreements in parallel with completing the DFS.

Red Mountain’s managing director Jon Dugdale said: “This is the culmination of the detailed work undertaken by both the company and the team of high-quality Australian consultants during the last 18 months.

“This pre-feasibility study demonstrates the low operating costs, high margins and strong cash flow potential of the Batangas Gold Project.

“The high initial ore reserve grades from surface, averaging over 6.6 g/t gold for the South West Breccia pit, will allow this project to achieve strong early cash flows and a high rate of return on initial capital.

“In addition, there is potential to expand ore reserves through drilling of the over 320,000 ounces of additional, mostly inferred, resources and upside potential remains to be tested within the 14km of identified epithermal gold structures at Lobo.

“The JV partners now aim to complete the definitive feasibility study on the project by the end of this calendar year.”

www.redmm.com.au

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