Gold exploration and development company Chaarat announced the results of the JORC-compliant feasibility study for its 100% owned Tulkubash Oxide Gold Project on Monday, which was based on mining a 16.0 million tonne reserve at an average grade of 0.91 g/t gold over an initial 3.75 year mine life.
The AIM-traded firm said ongoing exploration would be carried out in parallel with the project development.
It explained that it was confident that future exploration results would add "significantly" to the initial mine life ahead of first production, to enable Tulkubash to become a long-term cash generator to sustain the organic growth of Chaarat.
Looking at the results, Chaarat said the initial reserve base contained 16.0 Mt ore grading 0.91 g/t gold, containing 470,000 ounces of gold with 76.5% recovery via heap leaching.
Average gold production was put at 95,200 ounces per annum, with peak production during steady state operations in excess of 100,000 ounces per annum.
Annual post tax free cash flow would be $58.6m during the steady state operational period, with an average cash operating cost of $726 per ounce.
All-in sustaining costs were put at $831 per ounce, including all taxes.
Chaarat's initial capital expenditure of $132m would be paid back over 3.2 years, the study suggested.
The initial post-tax net present value for Tulkubash, using a 5.0% discount rate and a long-term gold price of $1,300 per ounce, totalled $12.1m with an undiscounted total cash flow of $36.7m.
Those metrics were expected to be "significantly enhanced" as ongoing exploration extended the reserve base along strike.
"The reserve and resource for the current mine life is derived from approximately 2.2km of a defined 24 km strike length for the Tulkubash trend, with mineralisation remaining open along strike," the Chaarat board explained in its statement.
"Numerous occurrences of outcropping ore-grade gold mineralisation and high-grade gold in soil anomalies have been defined along this trend within the existing Chaarat mining and exploration licences."
During 2017 a total of 17,240m of drilling was completed, adding 287,000 ounces of gold to measured and indicated resources, over a strike length extension of 1km, at an average all-in discovery cost of under $20 per ounce.
Extensive exploration was planned in 2018 and 2019, with a total budget for 60,000m of drilling over the next two drill seasons.
The company said it anticipated an ongoing drill budget of 15,000m to 20,000m per year after that.
Chaarat said it saw the potential to more than double the existing Tulkubash resources prior to the first gold pour in 2020, and believed that exploration success would continue to add gold resources for "years" after that.
The company's upcoming and ongoing drill programs would be designed with the intent to maximise the ratio of resources converted to reserves, using enhanced understanding of the geologic controls on mineralisation and economic constraints on reserve classification as defined by the feasibility study.
"We are very pleased to have completed this key step in implementing our strategy to make Chaarat Gold the leading gold company in Central Asia," said non-executive chairman Martin Andersson.
"The feasibility study has confirmed our belief that the Tulkubash project has the potential to deliver strong operational cash flow over several years.
"With ongoing exploration, Tulkubash can help fund Chaarat's organic growth through the development of the 5.4 million ounce high-grade Kyzyltash Resource."
Andersson said the board was confident that the strong operational cash flow delivered from the Tulkubash feasibility study justified proceeding with the construction of Tulkubash.
"We firmly believe that the intensive exploration that is planned for the 2018 and 2019 field seasons will add significantly to the Tulkubash mine life ahead of the first gold pour in 2020.
"Our objective during the two upcoming drill seasons is to add at least 100% to 150% to the existing Tulkubash resources, which we consider a conservative objective.
"This would be expected to significantly enhance mine life and therefore the project economics."