Sumatra halts Tembang development for further drilling, financing talks
PERTH (miningweekly.com) – The price tag of the proposed Tembang gold/silver project, in Indonesia, has increased from $68.1-million to $71.1-million, prompting developer Sumatra Copper & Gold to halt development while further drilling is under way and more funding is secured.
To date, about $15-million has been spent on preproduction activities, with the remaining estimated cost-to-complete set at $35-million.
Sumatra noted on Wednesday that at current forward-pricing and hedging assumptions, the debt capacity of the project would be between $18-million and $20-million. However, the life-of-mine demonstrated that the project could support a targeted $25-million of debt financing, with additional measured and indicated resources.
As such, the Sumatra board has decided to undertake a further three-month drilling programme with the objective of defining additional measured and indicated resource.
As a result, the construction activities at Tembang have been suspended while the drilling was completed.
The drilling was currently earmarked for completion by the first quarter of next year, and was expected to enable Sumatra to finalise financier negotiations to complete the debt funding package and resume construction.
Sumatra said on Wednesday that it had put in place an unsecured convertible note facility of $4-million to fund the company through the proposed drilling programme.
Earlier this year, Sumatra introduced a revised mine plan for the Tembang project, which was expected to substantially improve the cash flow over the first two years of the project life, and to lower cash costs, which should translate into improved project economics.
The plan would see production peak at 44 000 oz of gold and 365 000 oz of silver a year by year three of operations, with C1 cash costs estimated at $556/oz and all-in sustaining costs at $872/oz.
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