Study gives thumbs-up to Nord in PNG

Albuquerque-based Nord Pacific (NPF-T) has concluded that the proposed Simberi Island gold mine in Papua New Guinea (PNG) can make money.

Results from an in-house update of a previous feasibility study estimate cash costs for the small-scale operation would approach US$175 per oz.

The improved economics are a reflection of a doubling of existing reserves. Last year, Nord completed 21,000 metres of drilling, boosting the resource to 1.5 million oz. The resource included 740,000 oz. of oxide mineralization within 19.7 million tonnes of highly weathered saprolitic material grading 1.2 grams gold per tonne. Beneath the oxide zone are 747,000 oz. of sulphide mineralization within 9.3 million tonnes grading 2.5 grams gold.

The updated feasibility points to minable reserves of 292,000 oz. using a higher cutoff grade and based on a redesign of the open pit. The stripping ratio for the open pit would be zero.

Based on production of 40,000 oz. gold annually over eight years, cash production costs would be a robust US$175 per oz., the study concludes, compared with US$205 per oz. as outlined in the original feasibility study.

The project also benefits from favorable exchange rates in Australia and PNG. Nord would spend Australian dollars and PNG kinas to mine the gold and receive more valuable U.S. dollars in return.

Capital costs for the operation are projected to be US$16 million, with an internal rate of return of 27% on an unleveraged basis. The company is seeking financing for the operation and anticipates making a production decision by year-end.

Nord already has a mining licence from the government of PNG, and all other permits are in hand. Construction is expected to last 10 months.