JOHANNESBURG (miningweekly.com) – Aim-listed resources and development company African Consolidated Resources (AFCR) has signed a conditional agreement with New Dawn Mining subsidiary Falcon Gold Zimbabwe to buy the Dalny mine, in Zimbabwe, for $8.5-million.

It would also raise about $18-million through a mixture of debt and equity to fund the transaction; to bring its Pickstone-Peerless gold project, in Zimbabwe, into production; and to support general corporate purposes.

AFCR pointed out that the Dalny mine had an operational processing plant and ancillary infrastructure that could serve as a central processing plant for its Pickstone operation.

This would fast-track the start of gold production at the operation, potentially to before the end of the fourth quarter of this year, while also eliminating construction risk through the use of existing infrastructure and lowering Pickstone’s upfront capital expenditure to $14.3-million – nearly half of the prefeasibility study estimate of $27.3-million.

Further, incorporating Dalny into the company’s internal financial model, generated a net present value of $76-million over a 19-year mine life, with cash costs and all-in costs of $701/oz and $855/oz respectively over the mine life.

"This is a potential game-changer for AFCR with considerable blue-sky opportunities. We have already identified a high-grade, low-cost gold resource at Pickstone and I am encouraged by our low-risk profile due to the low cost of production and conservative mining methods.

“Subject to financing and completion, this acquisition will further enhance the already attractive economics of Pickstone, and strengthen our existing platform so that AFCR can play a meaningful role in the resurgence of the Zimbabwean gold sector,” AFCR CEO Roy Pitchford said.

SP Angel said in a note to clients that it was concerned about grade issues at the Pickstone-Peerless mine. Further, it warned that the cost of mining ore underground at Pickstone-Peerless and the cost of trucking this ore to Dalny couls limit margins.