In a news release, Lion One Metals Ltd. (LIO:TSX.V; LOMLF:OTCQX) reported that "it has completed an updated Preliminary Economic Assessment (PEA) for the company's 100% owned Tuvatu Gold Project located on the island of Viti Levu in Fiji."
The company advised that the PEA report was prepared in conjunction with its year-end June 30, 2020, Annual Information Form. The firm stated that "the mineral resource estimate used in the PEA is from 2018 and does not include any new drilling completed by the company in its 2019-2020 drill programs and that the potential development model set out in the PEA is confined to the current mineral resource inside the permitted mine lease area."
The company's Chairman and CEO Walter Berukoff commented, "The PEA for Tuvatu demonstrates robust economic potential for a low-cost, high-grade gold operation with low upfront capital costs, enabling rapid payback of capital even at a gold price of US$1,400 per ounce...We are encouraged about Tuvatu's potential for a near-term development and production opportunity, with further exploration and expansion potential as we continue our current drill programs to extend the known mineralization of Tuvatu and the surrounding Navilawa Caldera."
The firm stated that the results were calculated using a gold price of $1,400 per ounce. The company reported that utilizing a discount rate of 5.0%, the PEA established a pre-tax net present value (NPV) of US$155.8 million and an after-tax NPV of US$121.7 million. The PEA additionally projects a pre-tax internal rate of return (IRR) of 60.3% and after-tax IRR of 50.9%. The mine is forecast to produce 331,369 ounces of gold over five years at an average grade of 8.6 g/t Au. The firm indicated that operating costs are expected to be $503/oz and all-in sustaining costs are estimated at $586/oz on a pre-tax basis. Based upon these production and expense estimates, Lion One Metals projects a 1.5-year (pre-tax) and a 1.7-year (after-tax) payback period on $66.8 million of capex.
The firm explained that the PEA was structured based upon a $1,400 per ounce gold price and that by definition a PEA is preliminary in nature. The company added that the PEA does include Inferred mineral resources that are not verifiable to the extent that they could be economically be classified as mineral reserves. The firm added that as with any forecast, the valuations listed in the PEA are based on assumptions contained in the NPV, IRR and future gold price calculations.
The company noted that should average gold prices rise to $2,000/oz over the forecast 5-year mine-life and all other variables remain constant, the economics would improve significantly and would result in a pre-tax NPV of $307.9 million and after-tax NPV of $243.4 million and a pre-tax IRR of 99.3% and after-tax IRR of 85.0%. The pre-tax and after-tax payback periods would then be reduced to 0.88 and 1.04 years, respectively.
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