PERTH (miningweekly.com) - A definitive feasibility study (DFS)...

PERTH (miningweekly.com) - A definitive feasibility study (DFS) into ASX- and TSX-listed Cerro Resources’ Cerro del Gallo gold/silver project, in Mexico, has proven the profitability of a Stage 1 heap-leach operation.

The DFS outlined an initial 7.2-year mine life, producing 4.5-million tons of ore from an openpit operation. However, Cerro told shareholders that the mine life could be extended to around 14 years through a second stage carbon-in-leach (CIL) expansion.

The second stage CIL expansion would be subject to a separate DFS, which would only be undertaken in the third year of mining.

Under the first stage heap-leach project, the Cerro del Gallo project could deliver some 94 600 oz a year, at an operating cost of $516/oz. A capital injection of $154.8-million would be necessary to get the project to production.

The Cerro del Gallo project had a net present value of some $181-million and a pre-tax internal rate of return of 30.5%.

MD and CEO Tony McDonald noted that the outcome of the feasibility study was an independent confirmation of the technical and financial viability of the project, and illustrated a low-cash-cost project that could sit in the second cost quartile of new gold projects currently being developed.

“The low per ounce production costs of the first stage will lead us into the next stage, where subject to completion of other studies, a CIL plant would be added with the objective of almost doubling the life of the mine to 14 years.”

McDonald said on Wednesday that subject to financing the company and its joint venture partner, Goldcorp Inc would now make a decision to proceed to permit the development of the project. Cerro Resources would also seek Goldcorp’s election of its participation.

The ASX- and TSX-listed Cerro have been in advanced discussions regarding funding alternatives for the project, with some providing construction capital without recourse to issuing additional equity. The Cerro board would now consider all funding options, but has a preference to minimse issuing equity at current market prices, the company said.