PERTH (miningweekly.com) – Optimisation work on ASX-listed developer Southern Gold’s Cannon project, in Western Australia, has delivered a number of positive outcomes, including a reduction in the forecast cash costs.

A 2013 prefeasibility study (PFS) had concluded that an openpit and underground mine could deliver about 484 000 t/y at an average grade of 4.4 g/t gold for 68 200 oz/y of gold.

The project was estimated to have an initial mine life of three years, with C1 operating costs tipped at A$1 051/oz.

Southern Gold said on Thursday that the updated PFS incorporated industry-wide cost reductions, optimised haulage routes and discussions with contractors, which resulted in lower forecast operating cost and improved free cash flows.

Operating costs for the Cannon project have now been reduced to A$964/oz, with some A$12.4-million in free cash flow expected, at a gold price of A$1 400/oz.

The miner told shareholders that the reductions in operating costs also had the potential to lower the economic cutoff grade of the mine development, which meant that additional ounces could be added to the mining inventory over and above the 68 200 oz currently expected.

A reduction in the number of key cost inputs also suggested additional savings as project optimisation and development progressed.

MD Nanette Anderson said on Thursday that the company’s key focus was to unlock the value of the Cannon deposit as soon as possible, with the development expected to be a catalyst for the next stage of growth.

“With the planned development of the Cannon deposit targeted to start in the first half of this year, our key objective is to generate an early cash flow from a toll treatment operation,” she said.

“This will then pave the way for the restart of exploration programmes on the many attractive exploration targets we have identified in the region, which offer the opportunity for us to build on our resource base and establish a foundation for building longer-term growth and value.”

Project permitting for Cannon remained on track.