(MENAFN- ProactiveInvestors)
() has been delivered a 50% increase to the free cash flow forecast for the Batangas Gold Project in the Philippines due to improved Australian gold prices and reduced fuel costs.
The updated interim Definitive Feasibility Study increased projected free cash flow to A$45 million from A$30 million.
Projected operating cash flow was increased to A$67 million in the first 5.2 years of production.
It also received endorsement from all 10 of the potentially affected Barungay (township) Councils for the Batangas Gold Project development and production plan.
The next step is Lobo Municipal Council endorsement prior to the Declaration of Mining Project Feasibility proceeding to the central Mines and Geosciences Bureau (MGB) for final processing and approval.
Other key metrics from the updated study include Capex of A$22.7 million Opex of A$873 per ounce IRR of 65% and NPV of A$28.5 million and net revenue of A$165 million.
“The project is now at a turning point with the improved gold price reduced input costs and the new funding partnership giving us the impetus to complete the DFS and permitting and move the Batangas gold project towards production” managing director Jon Dugdale said.
Updated Interim Definitive Feasibility Study
The updated interim DFS financial modelling incorporates the current Australian dollar gold price of A$1600 per ounce and reduced diesel fuel costs in the Philippines.
Diesel which is down 25% since the last update in November 2014 is used for power generation that is a significant component of planned CIL processing costs and also in mining and haulage.
This has resulted in a 5% reduction to forecast mining and processing operating costs.
Other input parameters remained unchanged including:
- Mining Inventory for 5.2 years totalling 1.03 million tonnes at 3.3g/t gold 10.3 g/t silver; and
- Production target of 100000oz gold and 250000oz silver from processing of 1.03 million ore tonnes.
Funding
In December Red Mountain signed a binding Strategic Financing Partnership Agreement with London backed BVI registered private company Bluebird Merchant Ventures Ltd which will provide US$5.5 million (A$6.86 million).
The company has already received an initial instalment of US$200000 of the US$1 million Stage 1 funding.
The remaining US$800000 will be received on the admission of BMVL to the market in London expected late February 2015.
Stage 2 funding of US$4.5 million is subject to conditions precedent including final mine permitting and completion of the DFS and will part fund the development of the Batangas Gold Project.
The company is also carrying out a one-for-four non-renounceable rights issue to raise up to $900000.
This includes one attaching option exercisable at $0.012 each expiring on 31st March 2016 and one option exercisable at $0.006 each on or before 30th June 2016 for every two shares subscribed.
Analysis
Proactive Investors expects ’s share price to be significantly re-rated on the enhanced project metrics as these will propel a higher valuation than currently on offer.
The strategic financing from BMVL provides some insight given that it values Batangas at around A$13.4 million. This compares with RMX’s market cap. of circa $4.5 million on the current share price of $0.004.
Increasing the projected free cash flow forecast by 50% to A$45 million significantly improves the attractiveness of the Batangas Gold Project.
This also has the effect of improving IRR to 65% NPV to A$28.5 million and reducing Opex to A$873 per ounce.
There is further news flow ahead with work underway to complete the Definitive Feasibility Study final mine permitting and additional resource/reserve delineation.
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