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Stonewall Resources reveals possible second gold mine

Shares in Stonewall Resources are trading up 75% year to date to $0.028.

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The company is targeting gold production in 2018

Stonewall Resources (ASX:SWJ) has completed the second part of its scoping study into a gold mine development within the TGME gold project located in South Africa.

The updated scoping study combines the Beta gold deposit with the fully permitted Rietfontein gold deposit and estimates a base case net present value (NPV) of US$166 million.

The company intends to commence mine construction and plant refurbishment in early 2018 subject to available funding.

Rob Thompson, managing director, commented: “The low capital and low operating cost of the TGME project means the economics appear very robust, and we are confident as the feasibility work progresses, the project will attract development funding.

“We plan to commence drilling at Rietfontein to upgrade the resource in coming weeks and remain focused on bringing Rietfontein into production in 2018.”


Updated scoping study details

The updated scoping work to include Beta is also developed and modelled on a staged basis where the capital cost of the second stage can be funded internally through cash flow from Rietfontein.

The study indicates a combined Rietfontein and Beta development can produce up to 100,000 ounces per annum from both mines, with low capital requirements.

It should be noted that during this Beta study work, the Rietfontein development was further reviewed and the initial peak drawdown has been reduced from US$31 million to the current figure.

Details include:

- NPV: US$166 million or A$220 million for IRR of 81%;
- JORC resource: Rietfontein 2.55 million tonnes at 11 g/t gold for 905,000 ounces and Beta 4.72 million tonnes at 6.6 g/t gold for 1 million ounces;
- Mine life: 9 years;
- Capital cost: US$64.9 million overall but US$29 million peak drawdown in first year; and
- Operating costs: US$495 per ounce C1 recovered.


Next steps

Preliminary feasibility work into this shallow adit‐entry and low cost mining project is underway, with drilling planned to commence at Rietfontein in coming weeks.

Stonewall intends to commence mine construction and plant refurbishment in early 2018, subject to available funding, with the aim of first ore being delivered to the plant by the end of 2018. 


Analysis

The updated scoping study is another valuable milestone on the pathway to developing Stonewall’s first high grade gold mine.

The study confirms a near-term production target of 2018 targeting lowest quartile C1 cash costs of under US$500 per ounce.

Significantly, the gold mine development will only draw down a maximum of $29 million in capital funding making the project appealing to financiers.

The project also has multi-mine upside beyond the proposed second Beta mine, which already would take annual production to 100,000 ounces gold per year.

ASX-listed gold producers at production rates of 100,000 ounces per annum or more typically have enterprise values of over A$200 million.

At Stonewall’s current share price, it has an enterprise valuation of circa A$65 million, leaving plenty of valuation upside for the company as it takes the project into production.

The advantage of a combined development scenario mainly revolves around the de‐risking of the operation in the event of problems with either of the mines.

The increased cash flow will also allow for further development opportunities to be accelerated within the company’s vast portfolio of assets. 

An additional benefit is the company will have an operating presence in the central and southern areas of the tenement holdings area which will assist in reducing the time to further develop other adjacent assets.

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