Mexico’s proposed higher mining royalties could block nearly $7bn in investments
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Centerra Gold (TSX: CG) (NYSE: CGAU) has provided an updated life of mine (LOM) plan for its Mount Milligan mine in central British Columbia that would extend the open pit mining and milling operation by four years to 2033. The updated LOM plan incorporates an increased mineral reserve base from the 2021 year-end calculations.
As of December 31, 2021, the Mount Milligan deposit is estimated to contain proven and probable reserves totalling 246.2 million tonnes at 0.37 g/t gold and 0.18% copper, containing approximately 2.9 million oz. of gold and 1 billion lb. of copper. These reserves were classified as approximately 30% proven and 70% probable on a tonnage basis.
Compared with the 2020 Mount Milligan technical report, total payable gold production would increase by 800,000 oz. (from 1.1 million oz. to 1.9 million oz.) and total payable copper production by 191 million lb. (from 560 million lb. to 751 million lb.) from 2022 onwards.
The LOM payable gold production is expected to reach 1.9 million oz. at a production cost of $502/oz., an all-in sustaining cost on a byproduct basis of $756/oz. and all-in cost on a byproduct basis of $770/oz.
According to Centerra, recent inflationary cost pressure will be taken into consideration when the company updates and discloses the Mount Milligan mine’s 2023-2025 production and cost guidance in early 2023. Its 2022 guidance remains on track for year-end.
Net cash flow over the LOM is estimated at $640 million using a gold price of $1,500/oz. and copper price of $3.25/lb., and over $1 billion at prices of $1,700/oz. of gold and $3.50/lb. of copper.
Mount Milligan’s after-tax net present value is estimated at $486 million (using a 5% discount rate) for base-case scenario and $797 million for the higher metal price scenario.
Located 155 km northwest of Prince George, BC, Mount Milligan is a conventional truck-shovel open-pit copper-gold mine and concentrator with a 60,000 t/d capacity copper flotation processing plant.
Mineral resources within the copper-gold porphyry deposit are currently estimated at 189.3 million tonnes grading 0.3 g/t gold and 0.18% copper in the measured and indicated categories, plus 4.6 million tonnes grading 0.47 g.t gold and 0.07% copper inferred.
Centerra believes there exists significant exploration potential at the Mount Milligan mine peripheral to the open pit and within the wider tenement holdings. Ongoing expansion drilling on the west wall of the pit and below the current ultimate open pit boundary has yielded assays of similar or higher grade to the current resource model.
