Scoping study showcases strong cash flow potential
Western Gold Resources (ASX: WGR) has unveiled a scoping study for its Gold Duke project, revealing considerable cash flow potential across various gold price scenarios. The study presents a base scenario that presumes a gold price of AUD ,500 per ounce, with sensitivity analysis indicating the project is economically feasible even at reduced price levels.
Significant financial metrics from the study propose that the project could produce considerable free cash flow, with an anticipated internal rate of return (IRR) surpassing 30%. The net present value (NPV) is estimated to fall between AUD 0 million and AUD 0 million, contingent on final gold prices and operational efficiencies. These estimates highlight the project’s capacity to deliver substantial returns to shareholders, especially in a favorable gold market setting.
Moreover, the study highlights a relatively modest capital expenditure (CAPEX) requirement, expected to range from AUD million to AUD million. This reduced initial investment, along with the prospect for high-margin production, positions the Gold Duke project as an attractive opportunity for investors looking to engage with the gold sector.
“The outcomes of the scoping study are extremely promising, illustrating the potential for noteworthy cash flow generation even in a conservative pricing landscape,” stated a representative from the company.
Open-pit mining and toll treatment approach
The Gold Duke project is structured around an open-pit mining model, anticipated to offer a cost-efficient and scalable method for gold extraction. Open-pit mining generally features lower operational costs compared to underground mining, rendering it a desirable choice for projects with near-surface mineralization such as Gold Duke. The scoping study reveals that the project will focus on several shallow ore bodies, facilitating efficient extraction and minimized stripping ratios, thereby enhancing the project’s economic feasibility.
Regarding ore processing, Western Gold Resources intends to adopt a toll treatment strategy. This involves processing the extracted ore at an external facility rather than building an on-site processing plant. The company is presently assessing various toll treatment options within a 50-kilometer radius of the project. By capitalizing on existing infrastructure, WGR can significantly lower upfront capital expenses, as well as the timeline needed to commence production.
This toll treatment strategy also offers operational adaptability, enabling the firm to adjust production levels in response to market conditions without being anchored to the fixed costs of maintaining its own processing facility. While the final toll treatment partner is yet to be determined, the availability of several established processing plants in the vicinity is anticipated to assist in a seamless transition to production once mining activities begin.
The combination of open-pit mining and toll processing is projected to generate a low-cost, high-margin operation, positioning the Gold Duke project to yield robust cash flows, even amid fluctuating gold prices.
