Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
Aris Mining (TSX: ARIS) has released an updated mineral resource estimate and preliminary feasibility study (PFS) for the Marmato expansion project, which includes significant growth and refinement over the previous PFS dated March 2020.
Aris operates the Marmato gold mine located in Colombia’s Caldas Department, approximately 80 km south of Medellin. This underground operation comprises two mining areas: the upper mine between 1,000-1,300 metres and the lower mine below 1,000 metres.
A modernization program is currently in progress, targeting increased production and lower costs at the Marmato upper mine.
The Marmato expansion project includes the development of a new underground mine and 4,000 t/d processing facility to add to the current 1,250 t/d upper mine. Total recovered gold ounces are estimated at 3 million. The deposit remains open at depth and along strike, and has a high expansion potential from future underground drilling programs.
The construction capital is estimated at $280 million as detailed the PFS, and the project economics are inclusive of the stream financing from Wheaton Precious Metals, which has made upfront deposits of $53 million and will make another $122 million during construction to purchase metals at reduced prices.
“We are very pleased with the results of the 2022 PFS, which includes an updated Marmato lower mine construction capital estimate of $280 million that will be partially funded from $122 million of remaining committed stream financing, for a net construction funding amount of $158 million,” CEO Neil Woodyer said in a news release.
Using a base case gold price of $1,600/oz., the after-tax net present value of the Marmato expansion project comes to $341 million (at a 5% discount rate), with an internal rate of return of nearly 30%.
The 2022 PFS incorporates an expanded mineral resource (inclusive of reserves) of 61.5 million tonnes at 3.0 g/t for 6 million oz. of gold in the measured and indicated category. The previous M+I resource was 39.4 million tonnes at 3.2 g/t for 4.1 million oz. of gold. Inferred resource has also increased to 35.6 millon tonnes at 2.4 g/t for 2.8 million oz.
The higher reserve base – now estimated at 3.2 million oz. (2.0 million oz. previously) – would allow the Marmato mine life to be extended by a further six years to 20 years.
“Following construction of the new lower mine and based on the current mineral reserve, the Marmato mine is expected to deliver average production of 162,000 oz. per year over a nearly 20-year mine life at AISC of $1,0031/oz.,” Woodyer said.
“We are nearing completion of the process to amend the existing environmental permits at Marmato to facilitate the expansion, and we plan to quickly enter the construction phase of the lower mine expansion project,” he added.
Shares of Aris Mining rose 6.2% by 11:40 a.m. ET Monday following the PFS update. The company previously known as Aris Gold and recently merged with GCM Mining (TSX: GCM) now has a market capitalization of C$439.5 million ($330m).
