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Highbank Resources Ltd. (TSXV:HBK) released its Preliminary Economic Assessment (PEA) for the Swamp Point North Aggregate Project, south of Stewart in northern British Columbia. The PEA indicates a net present value of C$24.3 million after tax, discounted at 8% p.a.
As quoted in the press release:
Revenue forecasts are based on sales of 2,785,000 tonnes of aggregate at an average price of $34/00/tonne FOB Prince Rupert, and 285,000 tonnes of coarse material at an average of $21.45/tonne. The cash flow forecast is based on in-pit measured and indicated resources with 1% of the total being an inferred resource within that pit. The mining production schedule assumes Highbank’s application to increase its existing permit will succeed.
Overall, with total cash operating cost of $16.71/tonne and royalties of $2.35/tonne, the production forecast provides an operating margin of around 44%. At an annual discount rate of 8%, the base case cash flow for the three operating years evaluates to an NPV of $24.3 million. The project is least sensitive to capital costs, mainly due to most of the required capital investment having taken place prior to start of the cash flow period.
This preliminary economic assessment is preliminary in nature and there is no certainty that the assessment will be realized. Inferred mineral resources are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves.
The Company advises that while it has made the decision to put the Project into production, the Company is not basing its production decision on a feasibility study of mineral reserves demonstrating economic and technical viability. There exists an increased economic and technical risk of failure associated with such a production decision.
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