TORONTO (miningweekly.com) – Toronto-based Dundee Precious Metals (DPM) expects to start construction of its 85 700 oz/y Krumovgrad gold project, located in southern Bulgaria, as early as the third quarter, the company said on Monday.

In its latest project update, the TSX-listed miner reported a $14.2-million increase in capital expenditure at $178.2-million for the project, citing higher levels of definition resulting from the substantial completion of detailed engineering during the first quarter and detailed operational readiness planning.

Operating costs based on processing an average of 775 000 t/y of ore, producing on average 85 700 oz/y of gold and 38 700 oz/y of silver over an expected eight-year mine life, remained relatively unchanged from previous estimates, as added leasing costs for the mine fleet had been offset by a favourable change in the US dollar/Euro exchange rate, the company advised.

The higher initial capital would be partially offset by the savings associated with leasing the mine fleet, which had also resulted in a significant decrease in the estimated sustaining capital requirements, compared with previous estimates.

According to DPM, the project economics remained robust with a 25% after-tax internal rate of return at a $1 250/oz gold price and $15/oz of silver. Krumovgrad had an estimated after-tax net present value, at a 5% discount, of $187.6-million.

"The updated economics on Krumovgrad continue to support the commercial and economic viability of the project and enables DPM Bulgaria to build on the success we have already built at Chelopech," stated president and CEO Rick Howes.

The company planned to submit its construction permit early this month in the hope of receiving approval before the end of the quarter. Subject to completing financing arrangements and board approval, construction could start as early as the third quarter, with first production pencilled in for the second half of 2018.

At current prices, the project could be funded from internally generated cash flow, supplemented with available lines of credit under DPM's revolving credit facility, the company stated, adding that, in addition to the capital generated from the recent sale of the Kapan mine, the company continued to assess several options that would support the funding of this project and reduce the risk of a potentially weaker commodity price environment during construction.

DPM’s principal operating assets included the Chelopech operation, in Bulgaria, and the Tsumeb smelter, in Namibia.

The company also held interests in a number of developing gold properties in Bulgaria, Serbia and northern Canada, including the Krumovgrad project and interests held through its 50.1% owned subsidiary, Avala Resources, as well as its 11.8% interest in Sabina Gold and Silver Corp.

DPM's TSX-listed stock had more than doubled since the start of the year and on Monday morning gained 2.5% to change hands at C$2.78 apiece.