Pre-feasibility study of the Dokrupe Gold Project

The Northern Goldfields Limited (NGL) is looking for funds to undertake the Dokrupe Gold Project (DGP) to exploit near surface auriferous deposits at Dokrupe and Baju near Bole in the Northern Region of Ghana. So far, NGL’s exploration programme has established indicated and inferred reserves totaling 3 million tonnes at an average grade of 3.1 g/t. The nature of the deposits and metallurgical characteristics of the ore bodies indicate that the deposits could be exploited using open-pit mining method at a yearly production rate of 635280 t over the next 5 years. The run-of-mine ore would be processed by the Carbon-in- leach (CIL) method to achieve a recovery of 90%. Semafo Ghana Limited (SGL) has expressed interest to enter into a joint venture agreement with NGL. By this agreement NGL would source funds to complete the exploration programme and develop the Dokrupe Gold Project provided the project would be economically viable if the indicated and inferred reserves became proven. This thesis work serves as an independent pre-feasibility study of the Dokrupe Gold Project to establish its economic viability or otherwise, based on the assumption that the indicated and inferred reserves are proven. In carrying out the work, the location of the deposits, the exploration data, the proposed mining system and the processing method have been studied. Consequently, the infrastructure, equipment and manpower requirements have been established. Based on these requirements, the total capital cost and yearly operating cost for the project have been estimated using detailed cost estimation method as well as base cost data from mines operating in similar conditions in Ghana. Likewise the yearly revenues have been estimated using a base gold price of $9.65/g ($300/oz). In order to analyse the economic viability of the project the Ghana Investment Law pertaining to mining have been studied and developed into a computerized cash flow model — ECASHFLOW. This programme has been used to analyse the economic viability of the project using 100% equity and 100% loan (at an assumed Minimum Rate of Return of 12%) as a base case scenario. The Net Present Value (NPV), Internal Rate of Return (IRR) and Discounted Pay Back Period (DPBP) were used as economic indicators to assess the viability of the project. Detailed financial analyses were conducted into the costs of capital, cost of equity and cost of loan, from which optimum capital structure was determined. Based on this the weighted average cost of capital was determined and used as the Minimum Rate of Return (MRR) to assess the economic viability of the project. In addition, sensitivity analyses have been conducted to verify the effect that changes in any of the economic parameters like capital cost, operating cost and revenue will have on the project’s viability. Furthermore, risk analysis was carried out using the Monte Carlo simulation technique which takes into account the simultaneous random variation of economic parameters on the project’s viability. As a result, risk was quantified and the probability of achieving specific returns on the investment also measured. The project was found to be economically viable and financially sound since the NPV was $2 157 862.95 and the Internal Rate of Return (IRR) of (3 6.46%) was greater than the weighted average cost of capital (19.04%) which is considered as the minimum rate of return. The risk analysis conducted revealed a risk of 35% associated with the project. The DGP can therefore be undertaken if the reserves are proven.

Source: KNUST