Brio Gold Inc.'s preliminary economic assessment for an underground operation at the Santa Luz gold project in Brazil estimated a posttax net present value, discounted at 5%, of US$103 million, and a 27% internal rate of return.
The company said Dec. 7 that the underground operation will add an additional value of about 50% to the project, as a feasibility study for the open pit operation estimated a posttax net present value of US$208 million.
Using a base case gold price of US$1,300 per ounce, the underground mine is estimated to produce an average of 62,000 ounces of gold per year for a mine life of nine years for total output of 511,000 ounces.
Total capital expenditure for underground development is expected to be US$74.1 million, including a 35% contingency. Sustaining CapEx for the life of mine is estimated at US$23.2 million.
Average cash costs are estimated at US$738 per ounce, with all-in sustaining costs of US$778 per ounce.
The plant capacity will be the same as the open pit feasibility study at 2.7 million tonnes per annum, and the company plans to start production from the underground operation in 2021.
Brio said its currency hedges for the 2017 to 2019 period are expected to reduce the exposure and risk to its Brazilian cost structure, including the costs associated with the Santa Luz project.
The company intends to conduct 5,000 meters of drilling in 2018 to convert the inferred mineral resources at the underground mine to the measured and indicated category.