Red Mountain Mining has estimated a low $16.7 million pre-production capital cost, attractive IRR of 70% and projected life of mine revenue of Aus$134 million in the scoping study for its Batangas Gold Project. The company’s board has also approved a definitive feasibility study (DFS) based on results from the scoping study to begin immediately.

The scoping study results affirm that Batangas can be moved into production with achievable capex and attractive project metrics. The revenue is estimated over the initial 4.5 year mine life on production of 90,000 ounces of gold while net cash flow is estimated at $40 million. Payback is expected in 1.2 years. Average all-in costs (C3) are Aus$1050 per ounce while C1 cash costs are about Aus$769 per ounce. This is based on the current gold price of Aus$1500 per ounce.

The study is entirely based on a simple open pit mining and carbon-in-leach (CIL) processing of existing, high grade resources, of which 90% of the resources to be mined are in the indicated category.

The processing plant is intended to be located at Lobo, close to the very high grade South West Breccia resource and local infrastructure, about 2km east of Lobo township.

“The results from the scoping study are very positive for us. It shows we can establish the project relatively quickly, generate early cashflow and payback the up-front capital within a short timeframe based only on known existing resources,” Red Mountain’s managing director Jon Dugdale says.

“We’ll continue our exploration drilling campaign testing high grade targets at the Lobo prospect and anything we find there could improve the bottom line even further.”

The study was compiled with assistance of Perth-based Sedgman on process engineering and design, supported by a number of Philippines based consultants and coordinated by management.

Initial production is planned to be open pit mining inventory from the South West Breccia (SWB) resources on the granted Lobo Mineral Production Sharing Agreement (MPSA), following which the higher grade mining inventory from Kay Tanda West resources will be transported from the granted Archangel MPSA, about 15km by road. Low grade mining inventory from Key Tanda West will be stockpiled.

The DFS is expected to cost about $1.1 million with completion expected by December 2014. Based on a successful DFS, funding options will then be evaluated and finalized prior to anticipated start of construction in early 2015.

The DFS will be completed in parallel with submission of an expanded 10-year mining plan to meet the requirements for Declaration of Mining Project Feasibility (DMPF) and related permit applications to be submitted to the Philippines Government Mines and Geosciences Bureau (MGB) of the Department of Environment and Natural Resources.