JOHANNESBURG (miningweekly.com) – Following the receipt of a positive independent definitive feasibility study (DFS), precious metals producer Pan African Resources has decided to proceed with the construction of the Elikhulu tailings project, in Mpumalanga.

Pan African noted on Monday that the DFS results had shown “excellent” recovered grades and gold production, attractive financial returns and a low execution risk, with the DFS results surpassing the expectations of previous technical and financial assessment.

The DFS estimates a net present value of R1.1-billion and an internal rate of return of 23.1%, with a payback period of less than four years on an assumed gold price of $1 180/oz. Elikhulu is expected to have an all-in sustaining cost (AISC) of $523/oz over the life of the project.

“Operating low-cost tailings plants has become an important business for Pan African in recent years,” CEO Cobus Loots said in a statement on Monday.

He added that the project was expected to materially enhance the company’s production profile and support its continued focus on low-cost, high-margin gold ounces.

The project would lift the company’s production by 25% and reduce its AISC profile.

“Elikhulu is expected to firmly establish Pan African as a leader in long-life, low-cost tailings retreatment and possibly unlock other opportunities in the sector. We expect the project to reduce the group cost profiles and generate robust cash flows and attractive returns for our shareholders.”

The project entails establishing facilities and infrastructure at Pan African’s Evander mine, to retreat gold plant tailings at a rate of one-million tonnes a month.

This is in addition to the production from the Evander Tailings Retreatment Plant (ETRP), which will continue to operate independently of the Elikhulu project for the next 13 years. Three existing tailings storage facilities will be reclaimed.

The project is expected to yield 56 000 oz/y of gold for eight years and then decrease to 45 000 oz/y for the project’s remaining five years from processing the Winkelhaak tailings storage facility.

The first phase will require an investment of some R1.74-billion. Pan African has secured a R1-billion underwritten five-year debt facility with Rand Merchant Bank to fund the project’s development and is evaluating other funding proposals to fund the balance of the initial project capital.

The initial investment will be followed by R313.1-million and R113-million for phases 2 and 3 respectively.

Phases 2 and 3 will entail the re-establishment of the hydromining infrastructure to the Leslie and Winkelhaak tailing dumps. These phases will be funded from project-generated cash flows.

The environmental-impact assessment and water use licence processes are under way, with approvals expected by late 2017.

The first gold is expected to be produced in the final quarter of the 2018 calendar year and full commissioning will occur in December 2018.

Pan African said the experience gained in the construction and operation of the Barberton Tailings Retreatment Plant (BTRP) and the ETRP, also in Mpumulanga, positions it to successfully execute the construction and operation of the Elikhulu project.