$CNR.L Whittle optimisation study works wonders at Condor Gold’s La India project
Within the trade, the benefits of the employing Whittle Consulting to enhance the economics of a planned mine have long been recognised.
Jeff Whittle founded his first mine optimisation business way back in 1984, sold it, and then developed another one along similar lines.
It’s all about using the proprietary Whittle optimisation software to enhance the economics of a mine by modelling pit design, scheduling and a host of other features.
But because the main customers tend to be the major mining companies, it’s not often that the full impact of a Whittle study can see the light of day.
Condor Gold (LON:CNR) is one recent exception, and Condor’s chief executive Mark Child is in no doubts about the improvements Whittle optimisation have made to Condor’s plans for the La India gold project in Nicaragua.
“The results have stunned us,” he says. “They are far better than we thought they would be.”
And on many levels too.
Condor’s original pre-feasibility and preliminary economic studies were prepared by SRK Consulting back in December 2014.
These studies outlined three potential development scenarios: a mining project solely focussed on an open pit at La India, a mining project centred on La India but incorporating satellite pits too, and a project incorporating both open pit and underground mines.
Whittle went to work on all of these scenarios, and the results are startling.
The basic open pit, which was originally modelled around 674,000 contained indicated ounces has now been upgraded to 866,000 ounces. Under the Whittle optimisation it will now produce an average of 91,000 ounces over the first five years of production, instead of the 76,000 ounces that was originally modelled.
That’s a production improvement of 20% per annum. over the first five years on a theoretical reserve basis. If a a small amount of inferred material and production is included it rises to 101,000 ounces from a single pit
But there’s more.
The production improvement for the combined open pit plus satellite operations adds up to an even better 25%, as contained ounces jump from 827,000 ounces to 1.06mln ounces, and average annual gold production over the first five years jumps from 94,000 ounces to 118,000 ounces.
For the open pit and underground combined operation the improvement is back at 20%, based on an increase in contained ounces from 1.3mln to 1.55mln and an increase in production over the first five years from an originally projected 138,000 ounces to a newly modelled 165,000 ounces per annum.
How has this all been achieved?
Ah, that would be telling, and the precise workings of Whittle’s software remains a closely guarded secret. They utilise 10 techniques across the mining value chain.
But the modelling is clear enough, the data is held by Condor, and the improvements are there to be made.
Whittle, explains Child, has simply taken ten existing studies and re-worked them with an unremitting focus on the economics.
Thus, under the Whittle modelling although recoveries may not be at their maximum potential, from a cost point of view varying the ratio of recoveries to grinding costs can make a lot of sense.
In the case of Condor’s project, there are several such examples.
“Whittle do their own pit planning and pit phasing,” says Child. “The pit shells have gone deeper. They’re now 30% bigger. Why? – because we’ve got an average 3 gram open pit material that increase in grade at depth. What was previously deemed high grade underground is now open pittable.”
But he emphasises that in spite of the increases in size and mooted output, several other key metrics remain the same.
“The capex is the same,” he says. “The opex is the same. The all-in sustaining cash cost is the same at under US$700 per ounce. An incremental 20% to 25% more gold production per annum goes straight through to the bottom line. The life of mine extends because there is 30% more contained gold. It’s all optimised to money and NPV.”
It is fairly obvious there have been material increases in the NPVs and IRRs, although Child doesn’t quote numbers.
All of which sets Condor up nicely for the ongoing sales process, which the company has initiated and is likely to take 4 to 6 months.
It’s not a given that the company will be sold, but Child has always emphasised that he and his team are not developers.
And having sent out teaser documents soliciting declarations of interest, the Takeover Panel has declared the company to be in an Offer Period.
So be it.
Child doesn’t deny that the company’s for sale.
Indeed, at this point in time a sale is the outright preference compared to some of the other potential scenarios under which La India might get built such as a joint venture or a potentially dilutive equity raise.
“Our focus is on selling the company,” he says. “But there are a number of potential outcomes. We always said we’d probably sell, but we’re not desperate to sell.”
Indeed, there’s money in the bank, and a renewed confidence in the quality of the asset following the Whittle study.
That speaks of a certain strength in depth, especially considering that a number of confidentiality agreements are already in place and a major shareholder has recently topped up its stake.
What happens over the course of the next few months is likely to be very interesting indeed.
Whittle optimisation study works wonders at Condor Gold’s La India project - Proactiveinvestors (UK)