Belo Sun revises Volta Grande's mine plan


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Belo Sun Mining (TSX:BSX) has gone with a start-small-but-finish-big approach in a new preliminary economic assessment (PEA) for its Volta Grande gold project in Brazil's Para state.


The PEA, replacing a May 2013 prefeasibility study (PFS), envisions developing Volta Grande in two phases to alleviate the funding and start-up risks surrounding large tonnage projects. The new study proposes running Volta Grande as a 3 million tonne per year operation for the first seven years of production, before doubling throughput to 6 million tonnes a year from year 9 to the end of mine life.


This staged approach has more than doubled the mine life to 21 years while halving the average production rate to 147,900 oz. a year. In comparison the PFS contemplated a 7 million tonne per year operation producing 313,100 oz. gold a year over a 10-year life.


But the initially smaller project has two considerable advantages. First, it reduces upfront costs to US$328.7 million from US$749 million previously. Second, it slashes the project’s total capital expenditures, including expansion and sustaining costs, by more than a third to US$637.1 million.


Belo Sun has swapped higher initial throughput for reduced capital expenditures and higher grade for lower life-of-mine waste-to-ore ratio, writes BMO analyst John Hayes in a note. 


The PEA assumes a life-of-mine resource grade of 1.14 grams gold per tonne, down 23% from 1.48 grams gold previously, as higher grades will be mined earlier on in the mine plan. But on the plus side, stripping ratio has dropped 38% to 4.3-to-1.


Other key benefits identified in the PEA includes Belo Sun recovering more ounces over a longer mine life. The new mine plan anticipates recovering 3.5 million oz. over 21 years compared to 2.6 million oz. over 10 years, Hayes notes.


The analyst adds the gold ounces will also cost less to extract. If you divide the total ounces recovered over the mine life by the total capital costs, that number in the PFS was US$374 per oz. gold produced compared to US$182 per oz. in the PEA, he says.


Hayes concludes the PEA “appears to present a better opportunity than the project as originally envisioned in the PFS; capital costs are far more manageable and capital efficiency is higher.”


Response to the PEA was rather muted as the stock closed Feb. 21 relatively flat at 49¢.

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