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- Ramelius Resources (RMS) presses pause on its Edna May project in Western Australia as it determines operating costs outweigh potential returns
- RMS says cost increases across the WA mining sector eroded the returns on its stage three open pit project to a point where it would not meet internal hurdles
- Despite an increase in the price of gold, a pre-feasibility study estimated an all in sustaining costs of $1977 per ounce, a 28 per cent increase from scoping study estimates
- Environmental permitting will continue at the project to enable a “quick re-start in a lower cost/higher gold price environment in the future”
- Shares in Ramelius drop 0.46 per cent to trade at $1.08 at 12:40 pm AEDT
Ramelius Resources (RMS) has put its Edna May project in Western Australia on hold as it determines operating costs outweigh potential returns.
The company said cost increases across the WA mining sector have eroded the returns on its stage three open pit project to a point where it would not meet internal hurdles.
According to Ramelius, mining contractor pricing had increased “significantly” since a scoping study was completed for the project, and higher estimated operating costs increased the cut-off grade, resulting in a smaller overall pit.
The company’s pre-feasibility study for the project estimated all in sustaining costs of $1977 per ounce, marking a 28 per cent increase from the scoping study estimate of $1540 per ounce.
While the price of gold has increased 13 per cent to $2600 per ounce from the scoping study base price of $2300 per ounce, RMS said it was still outweighed by the operating and capital cost increases.
Managing Director Mark Zeptner told investors the company’s focus would remain centred on delivery of cash flows from current operations.
“Ramelius has a number of development options elsewhere in our portfolio and we will instead look to deploy capital in those directions for better financial returns at a later date”.
While the company board decided to put the project on pause, environmental permitting will continue to enable a quick re-start in a lower cost/higher gold price environment in the future.
“The ounces at Edna May are not lost but we will not mine them merely to fill out a production profile when the financial returns don’t meet our hurdles.
“However, by completing the permitting the company maintains optionality,” Mr Zeptner said.
The company said its three-year production outlook remains unchanged as its Edna May Stage three project was not included.
Shares in Ramelius Resources dropped 0.46 per cent to trade at $1.08 at 12:40 pm AEDT.
