Fed tests gold upleg
Gold’s outlook and fundamentals remain really bullish.
Supported by its recently completed definitive feasibility study, Endeavour Mining (LSE, TSX: EDV) has decided to proceed with the expansion of the Sabodala-Massawa mine complex in Senegal. Construction activities will soon begin on the mine site, the company said.
As recommended in the DFS, the Sabodala-Massawa expansion involves supplementing the current 4.2-million-tonne-per-annum carbon-in-leach (CIL) plant with a 1.2-million-tonne-per-annum BIOX plant to process the high-grade refractory ores from the Massawa Central Zone and Massawa North Zone deposits, with first gold production expected in early 2024.
As shown in the DFS report, this expansion project is expected to yield an incremental production of 1.35 million oz. of gold at an all-in sustaining cost (AISC) of $576/oz. over the life of mine. It would lift the Sabodala-Massawa complex to top-tier status, with an expected average annual production of 373,000 oz. per year over the next five years at an average AISC of $745/oz. for the combined CIL and BIOX operation.
Project economics are highlighted by an after-tax internal rate of return of 72% and net present value of $861 million (5% discount), with a 1.4-year payback period at a gold price of $1,700/oz. Annual free cash flow generated over the first five years is estimated at $200 million.
The expansion project has an upfront capital requirement of $290 million, expected to be self funded by the existing Sabodala-Massawa operation.
“Given the robust project economics, which significantly exceed our investment criteria, and the strong exploration upside potential, we are excited to launch this low-capex intensive brownfield expansion project as it will continue to improve the quality of our operating portfolio and contribute to driving the group’s return on capital employed above our 20% target,” CEO Sébastien de Montessus said in a press release.
Upside potential at Sabodala-Massawa has also been noted, as the DFS does not include the conversion of the previously announced discovery of 709,000 of measured and indicated (M&I) resources, which are expected to boost 2023 production.
In total, the combined CIL and BIOX operation at Sabodala-Massawa has 6.88 million oz. of M&I resources, contained within 110.1 million tonnes grading 1.94 g/t gold. With further exploration, Endeavour is targeting an increase of 2.3-2.7 million oz. of indicated resources.
Endeavour acquired the Sabodala-Massawa mine from Teranga Gold in February 2021. It was formed when Teranga acquired the Massawa project from Barrick Gold in early 2020 and combined the Sabodala mill and deposits with the nearby Massawa deposits.
As such, the Sabodala-Massawa mine consists of two mining licenses. Endeavour holds a 90% stake in each licence, with the government of Senegal holding the remaining interest.
