Following the completion of the Pre-Feasibility Study ("PFS") in mid-2005, design work commenced on the Feasibility Study ("FS"). The mining plan for this study will be based on the Measured and Indicated Resources from the 2006 estimate. The study will also use environmental, hydrological, geotechnical and metallurgical data collected from Maoling during 2005. The increase in Measured and Indicated Resources is expected to have a significant positive effect on the size of the mineable reserve, mine life and overall economic robustness of the project.
A highly qualified professional team is undertaking the FS on Maoling. They include Ausenco Limited, Golder Associates Pty Limited, Beijing General Research Institute of Mining and Metallurgy and China Non-Ferrous Engineering and Research Institute. This group has the extensive technical capability and country-specific experience to work with Mundoro to transform what is currently China's largest undeveloped gold resource into China's largest operating gold mine.
Various trade-off and optimization studies are being conducted to take advantage of any opportunity to improve capital and operating costs through grind and reagent consumption optimization studies; the purchasing of a higher proportion of capital and consumable items from Chinese suppliers rather than from offshore; and water and tailings dam location and design. Furthermore, the project's peak demand for mining equipment, as depicted in the PFS, could be met by using Chinese contract miners, thus reducing the size of the owner-operated fleet required.
Consulting Teams
Ausenco Limited (Feasibility Study Process Design and Management) is an international engineering firm that has developed specific mining expertise within China, and is currently involved in the construction of Sino Gold's Jinfeng gold mine in China.
Golder Associates Pty Limited (Resource Modeling and Estimation, Mine and Tailings Facility Design, Hydrology and Geotechnical Studies) is an international group of consultants that is a recognized world leader in the design and management of mine tailings storage facilities. Golder has been involved in the design and construction of the tailings facilities for Sinogold's Jianchaling and Jinfeng gold projects and Eldorado's Tanjianshan project in China.
Beijing General Research Institute of Mining and Metallurgy ("BGRIMM") (Environmental Management, Community Engagement & Project Permitting), has been operating in China since 1999, providing expertise in research, strategy development, engineering, environment, health and safety and social sciences. The firm is the representative of the World Business Council for Sustainable Development in China and has undertaken or managed over 1,500 Due Diligence or ESIA projects in a wide variety of industries throughout the country.
China Non-Ferrous Engineering and Research Institute ("ENFI") (Mining Permit Feasibility Study for Chinese Regulatory Authorities) is considered one of the most accomplished engineering design groups in China with considerable experience in the design of gold mining operations throughout China. ENFI will be responsible for detailed engineering and the Chinese feasibility study.
In June of 2005, a pre-feasibility study ("PFS") was completed on the Zone 1 deposit by Mundoro's independent consultants AMEC Americas Ltd. ("AMEC"), demonstrating the viability of developing a large-scale, open-pit mine at Maoling. This study was based on Indicated Resources defined for Zone 1 in the 2004 estimate by AMEC using a 0.5 grams gold per tonne cut-off grade. The PFS resulted in a statement of Probable Reserves that is included in the table below:
Maoling Probable Reserves - Pre-Feasibility Study
at 0.50 grams gold per tonne (g/t) cut-off grade
Tonnes
(millions)
Grade
(Au/gt)
Contained Gold
(Ounces (millions)
Probable Reserves
Zone 1
89
0.99
2.8
Mining operations envisaged in the PFS are from an open-pit at an initial rate of 20,000 tonnes per day expanding to 35,000 tonnes per day after the second year of production. Ore is to be processed by conventional crushing and grinding followed by leaching and carbon-in-pulp (CIP) gold extraction. The processing plant will be constructed to enable a seamless expansion of capacity after the first two production years. Over its estimated eight-year mine life the PFS has projected an average annual production of 328,000 ounces of gold from Zone 1.
A blend of Chinese, North American and global costs is used in the PFS for all capital equipment purchases. The procurement, construction, installation and commissioning phases for the 20,000 tonnes per day operation as described in the study are estimated to cost a total of US$235 million, including a contingency of US$30.9 million. The plant expansion to 35,000 tonnes per day requires an additional US$63 million in capital expenditures.
The PFS includes a net present value ("PV") analysis of the project including cash inflows of gold sales based on a US$400 per ounce price, and cash outflows such as capital and operating costs to arrive at annual cash flow projections. The NPV analysis was done on a pre-tax project basis, using un-escalated costs assuming 100% debt financing:
The PFS indicated economic sensitivities to various factors as illustrated in the following table:
The Company also believes that, using the PFS as an economic model, if the mineable reserve is ultimately doubled the internal rate of return will rise to 24.9% and the pre-tax NPV (at a 0% discount rate) will rise from US$244 million to US$784 million.
All of the work completed to-date indicates that the project compares favorably to similar producing properties around the world.
