(MENAFN- ProactiveInvestors - Australia) Empire Resources Ltd (ASX:ERL) is moving closer to commencing open pit mining at the 60% owned Penny's Find gold mine located 50 kilometres from Kalgoorlie in Western Australia.
The road works remain on time and budget and site earthworks have been completed.
Mining is expected to commence next month with gold ore treatment through the contracted third party processor, Lakewood Mill at Kalgoorlie, anticipated to start in early 2017.
Empire recently entered into a mining contract and payment arrangements with NRW Civil and Mining Ltd (ASX:NWH).
Mine development update
A 1.8-kilometre re-alignment of the road that currently traverses the area of the planned open pit is underway with all clearing done, culvert installation completed and road embankments well advanced.
Site earthworks have been completed for a laydown area for site offices, workshops and for a dewatering dam and water supply.
Electrical generators and magazines for explosives have been purchased and orders are underway for the supply of site offices, workshops, fuel tank, light vehicles and telecommunications.
Interviews for site personnel are currently being undertaken.
Still to be completed in the ramp up phase to mining are the run of mine (ROM) ore pad, site access to roads, and drainage bunds.
Penny's Find
Empire holds a 60% direct interest in the Penny's Find gold project with the remaining 40% interest held by unlisted Brimstone Resources Ltd.
A bankable feasibility study has been completed on the project proposing conventional mining of a single open pit to a depth of 80 metres using excavators and dump trucks with ore transported to a nearby toll milling facility.
The study estimates $1.5 million capex for $7.6 million free cash flow over the open pit mine life of 11 months.
Penny Find's mineralisation extends to 250 metres below surface and remains open at depth.
Both oxide and fresh mineralisation are free milling with 98% and 99% recoveries achieved in recent test work respectively.
There is also a high gravity recoverable gold component, 53% for oxide and 85% for fresh.
Empire recently completed its first round of grade control drilling, which provided further strong confidence in the geological model being used for Penny's Find.
Analysis
Empire remains on track to complete its transformation into a Western Australian gold producer through the development of Penny's Find.
With an average open-pit grade of 4.62 g/t gold to a depth of 80 metres this project is an excellent production opportunity for Empire given the current high gold price.
The Penny's Find bankable feasibility study found that just the open pit operation alone would generate in the order of $7.6 million in free cash flow in less than a year.
Adding interest - this was based on a gold price of A$1500 an ounce. Currently, the AUD gold price is trading more than 10% higher than this at A$1665 an ounce.
For every A$100 increase in the price of gold above A$1500, the open pit expects to generate an additional $2 million free cash flow.
Shares in Empire are trading up over 300% or 4x year to date.
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