Expansion to come Expansion is all financed from cash flow....
Asanko Gold to focus on Esaase pit in phase 2 DFS
2016-05-02 09:12 ET - News Release
Mr. Peter Breese reports
ASANKO GOLD REFINES SCOPE OF PHASE 2 DEFINITIVE FEASIBILITY STUDY
Asanko Gold Inc. has provided an update on the phase 2 definitive feasibility study (DFS) for its flagship project, the Asanko gold mine in Ghana, West Africa. The DFS was initiated following a positive prefeasibility study (PFS) released in May, 2015.
Highlights:
- Phase 1 excess plant capacity provides optionality for phase 2 development; DFS to provide for a staged construction scenario;
- First stage -- phase 2A:
- Develop Esaase pit and mine two million tonnes per year of oxide ores only, build overland conveyor, and expand capacity of existing processing facility up to five million tonnes per year;
- Treatment of both Nkran fresh ore and Esaase oxide ore through the existing expanded carbon-in-leach (CIL) plant;
- Targeting plus or minus 280,000 ounces per year over life of mine from phase 1 and phase 2A commencing in the fourth quarter of 2018;
- Capital cost (1) estimated between $100-million (U.S.) and $125-million (U.S.), financed from cash flow;
- Investment decision expected in the fourth quarter of 2016;
- Second stage -- phase 2B
- Expand Esaase pit and mine oxide and fresh ores and convey to existing processing facility;
- Install additional milling circuit and flotation plant to expand processing facility to 10 million tonnes per year;
- Targeting total plus or minus 480,000 ounces per year over life of mine for Asanko gold mine;
- Capital cost (1) estimated at approximately $150-million (U.S.) to $170-million (U.S.), financed from cash flow;
- Successful public hearing clears way for final stages of permitting of both stages of phase 2;
- DFS, including modified scope, on track for publication in the third quarter of 2016.
(1) This is based on phase 2 PFS published on SEDAR June 29, 2015.
Phase 2 prefeasibility study
The PFS envisioned integrating the Esaase deposit with phase 1 to create one large, multipit mine and expanding the existing processing facilities to produce an average of 411,000 ounces of gold per year over a 10.5-year life of mine from 2018. The ore would be mined and crushed at Esaase and then conveyed to the expanded phase 1 processing facility, which would include an upgrade to the CIL circuit with two extra tanks to increase capacity from three million tonnes per year to 3.8 million tonnes per year and the addition of a five-million-tonne-per-year flotation plant.
Opportunity for staged capital development
Following the successful commissioning of phase 1 in the first quarter of 2016, the process plant has demonstrated the ability to operate at greater than 110 per cent of the three-million-tonne-per-year design (see news release dated April 6, 2016). This has presented an opportunity to take advantage of the Esaase oxide ore (representing approximately 37 per cent of Esaase reserves), which is well suited to processing through the CIL circuit. Therefore, the scope of the phase 2 DFS has been modified to include a two-stage approach for the integration of the Esaase deposit with phase 1:
- Phase 2A -- development of the Esaase pit, mining up to two million tonnes per year of oxide ores and construction of the conveyor to provide the additional ore to process up to five million tonnes per year through the existing CIL circuit, which will be upgraded;
- Phase 2B -- mining of both Esaase oxide and fresh ores and expansion of the processing facilities to include the addition of a five-million-tonne-per-year flotation plant to bring the total processing capacity up to 10 million tonnes per year.
Peter Breese, president and chief executive officer of Asanko, said: "The successful ramp-up of the phase 1 processing facility and the additional excess mill capacity has led us to rethink our approach for phase 2. With a hungry mill and a CIL circuit that can be cost-effectively upgraded, we believe staging the development of Esaase is a smarter option that we can fund out of cash flow whilst maintaining our strong balance sheet.
"By focusing on mining just the Esaase oxides initially, which will utilize the mill's spare capacity, we can increase gold production by nearly 50 per cent, thereby reducing our unit cost of production and significantly improving cash flow.
"With Esaase about two years away from production, we will look to advance development of the satellite pits, as well as continue our near-mine exploration program to find additional resources, to keep the mill full until Esaase is brought on line."
Overview of phase 2A
The Esaase deposit contains 60.3 million tonnes of proven and probable mineral reserves (2), of which approximately 23 million tonnes are oxide and transition ores. Phase 2A will develop the Esaase pit, mining the oxide portion of the mineral reserve to provide an additional two million tonnes per year of material, which will be blended with three million tonnes per year of the Nkran fresh ore and processed through the existing processing facility, which will be upgraded.
Development will include construction of mining and crushing infrastructure and a 27-kilometre overland conveyor belt to transport the ore to the existing processing facility. Brownfield modifications will upgrade the existing processing plant capacity from three million tonnes per year up to five million tonnes per year. The upgrades to the processing facility that were originally envisioned to expand capacity from three million tonnes per year to 3.8 million tonnes per year in the PFS are now expected to increase production levels up to five million tonnes per year. The extent and cost of the modifications will be detailed in the DFS. Additional metallurgical test work, undertaken at ALS's laboratories in Perth, Australia, together with operational experience gained from phase 1 to date, has confirmed that metallurgical recovery from blending of the Esaase oxide and Nkran fresh ores will be in line with the PFS recovery estimates of approximately 90.9 per cent (2).
(2) This is based on the phase 2 PFS published on SEDAR on June 29, 2015.
Based on the PFS capital cost estimate and mine plan, phase 2A is expected to take approximately 21 months for detailed design and construction at a capital cost of approximately $100-million (U.S.) to $125-million (2). Production of over 280,000 ounces per year is targeted to commence in the fourth quarter of 2018. The increase in production by approximately 47 per cent is expected to improve the overall unit operating costs as the fixed cost of operations is spread over a larger production base. The operating and capital cost estimates are currently being updated as part of the DFS, which is due in the third quarter of 2016.
Based on the current gold price environment, the company is forecasting that it should be able to finance construction of phase 2A from the cash flow from the existing operations.
Overview of phase 2B
The second stage of the project, phase 2B, will expand the mining operation to mine both Esaase oxide and fresh ores and expand the processing facility with the construction of an additional five-million-tonne-per-year milling and flotation plant for the exclusive processing of Esaase fresh ores. Production is expected to exceed 480,000 ounces per year from 2022 onward, with total processing capacity of 10 million tonnes per year (three million tonnes per year from Nkran and seven million tonnes per year from Esaase).
The capital cost is expected to be approximately $150-million (U.S.) to $170-million (U.S.) (3), and development of phase 2B development will be staggered so that the capital cost will be financed from cash flow.
(3) This is based on the phase 2 PFS published on SEDAR on June 29, 2015.
Permitting
A phase 2 environmental impact assessment (EIA) was submitted to the Ghanaian Environmental Protection Agency (EPA) in June, 2015, based on the revised scope for development of the Esaase project from a stand-alone operation.
A scoping report and a draft terms of reference for the revised project proposal were prepared and submitted to the EPA in August, 2015. Following extensive stakeholder engagement, the company has obtained the necessary support of local stakeholders. This support was formalized in a public hearing held by the EPA on April 19, 2016, at which the local stakeholders expressed their desire for phase 2 to proceed.
A final environment impact statement (EIS) is now being prepared and following submission and review, the company expects to receive its environment permit to start construction of phase 2A in the fourth quarter of 2016.
KEY MILESTONES AND TIMELINES Complete phase 2 DFS Q3 2016 Receive environmental permit Q4 2016 Investment decision on phase 2A Q4 2016 Start detail design and construction Q1 2017 Phase 2A complete Q4 2018
We seek Safe Harbor.