Shore Gold (SGF-T) is a step closer to developing Saskatchewan’s first diamond mine with the release of a positive prefeasibility study on its Star and Orion South kimberlites.
The project includes Shore’s 100%-owned Star diamond project and the Star West and Orion South kimberlite which fall within the adjacent Fort la Corne joint venture held between Shore (60%) and Newmont Mining (NMC-T, NEM-N) (40%).
George Read, Shore’s senior vice president of exploration and development, says he is pleased with how the study shows that combining two open-pit mines into one project can be economical.
“The ore from those mines will be processed through one processing plant, so by doing that we significantly reduce our costs,” Read says.
The study put reserves at 279 million tonnes with an average grade of 12.5 carats per hundred tonnes containing 35 million carats and an average carat price of $226 per carat.
Diamond production would be 35 million carats over 20 years. The net present value (NPV) of the project is estimated at $1.3 billion (using a 7% discount rate), while the internal rate of return (IRR) would be 16% before taxes and royalties. After taxes and royalties, the NPV is estimated at $786 million and the IRR at 13.5%
Preproduction capital costs are estimated at $1.6 billion with total capital cost of $2.5 billion with a payback period of 4.6 years. Shore and Newmont have not discussed how the capital commitments would be divided.
Read compares last year’s prefeasibility study on the Star diamond project on its own, noting the significant improvement. “The economics are much stronger on the combined project,” he says.
The earlier study looked at producing 20 million carats over 12 years. The project had an after-tax NPV of $291 million (using a 7% discount) and an IRR of 10%.
The combined-project mine would operate at a rate of 40,000 tonnes per day and production would likely begin in the first quarter of 2016.
Shore hopes to complete a feasibility study on the project by early 2011.
The company has $40 million in the bank and has a burn rate of about $1 million per month.
The project is 60 km east of Prince Albert, Sask., in the Fort la Corne forest. The forest is surrounded by agricultural land and was not developed because the soil is dominantly glacial outwash sand from the retreat of continental glaciers 5,000 years ago, and thus not ideal for agriculture.
The project site is accessible year-round via paved highway and gravel roads and is 21 km west of a 230-kilovolt power line.
Be the first to comment on "Shore Gold’s Quest For Diamonds"