“There are no red flags at La India”, says Condor Gold’s Mark Child. “We’ve recently completed a Prefeasibility Study and two updated Preliminary Economic Assessments”
In fact, the latest NI 43-101 compliant, independent economic studies from Condor’s La India gold project in Nicaragua presents a very favourable picture indeed, always assuming that the gold markets don’t completely crater.
The company took the slightly unusual route of working up two preliminary economic assessments alongside a smaller-scale pre-feasibility study in order to lay out several possible development scenarios and demonstrate the relative attractions of each in turn.
The absolute base case scenario involves developing a single open pit at La India which will produce an average of 79,300 ounces of gold over seven years, with a further two years of mine life mining at a lower rate. For this scenario all-in costs are estimated at an attractive US$690 per ounce.
Under the second, slightly larger proposition, the company proposes that the development of the open pit be combined with the development of feeder pits to take total production up towards 100,000 ounces per year. For this scenario all-in costs are likely to be slightly lower, at US$685 per ounce.
Finally, under the third proposed route to production, the company could combine the underground potential at La India with the open pit and feeder pits to produce a total of 1.2 million ounces over a 12 year life with production averaging at 137,500 for the first eight years. For this scenario all-in sustaining costs are set at US$697 per ounce.
It is expected that production can be increased by 10,000 oz gold per annum for each of the above scenarios by processing high grade artisanal miners ore.
So what are the pros and cons of each option? For a start, there’s the capital cost. The open pit-only operation would cost only US$110 million to build; the open pit with feeder pits US$127 million; and the all-encompassing operation including underground US$169 million. In all three cases the payback period is less than 4 years after which the project is a cash cow as long as gold stays above the all-in sustaining cash costs of circa US$700 per oz gold. Mark points out that the 3 producing gold mines in Nicaragua have each produced gold on a continuous basis for over 80 years and it is highly likely that the life of mine can be extended significantly beyond the 8 to 12 years shown in the studies.
For a junior miner looking to get a gold mine into production, none of those projected capex numbers looks particularly prohibitive. It’s not so long ago that juniors were bandying around gold development projects with price tags of double that and more. But times have changed, the gold price is weaker, and markets have grown more cautious.
Mark has no illusions about this, and that’s why he’s laying out different options from the outset.
“What we’re trying to do is show the upside for the future and for potential buyers”, he says. “In the event that we do go down the route of doing this ourselves, we’d do the open pit, not underground, but it would make sense to do it with the feeder pits.”
That’s one option. But there are plenty of others. “We’d look at a joint venture”, says Mark. “And we could look at doing a sale. Our job as directors is to maximise shareholder value. A build period takes time, there’s execution risk, and there’s massive dilution involved in any build. In a joint venture we’d contribute the project and someone else would contribute the capex. It probably makes sense to chat to a few people.”
But Condor still has a little time to weigh its options. The next move as far as economic studies are concerned would be to press the button on a full-blown bankable study. But Mark is also keen to demonstrate that La India is part of a wider area play.
“We’ve got such a good district”, he says. “We would want to continue on the strategy of showing the upside of the district which progressing the PFS to a BFS.”
With that in mind, drilling is planned both for the open pit and on other targets. “The high grade ore shoots within the pit are open at depth”, says Mark. “And the La India vein is completely open to the south. That’s low hanging fruit and very easy for us to show the upside. But what we haven’t done is gone for big, additional discoveries. And really, that’s the next exploration phase.”
All of this means that Condor Gold now begins to have several strings to its bow. There’s the potential to develop a low cost gold mine for a relatively low capital outlay. Then there’s the potential to add an underground operation and boost production further. And then there’s the possibility of working up an area play and delivering another step change in the company’s valuation as a result.
There’s all to play for, and in spite of the difficult markets, Mark is feeling confident. “This is low capex to get cashflow”, he says. “Gold could be at US$1,200, US$900, or US$2,000 and we’ll still be making lots of money.” It’ll be interesting to see what happens next.