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ABM Resources: Low Cost, High Profit Gold Mine Highlighted In Scoping Study At Old Pirate

ABM Resources' (ASX: ABU) Old Pirate Gold Deposit can be developed into a low cost, highly profitable gold mine, results from a Scoping Study into a first stage open pit operation have shown.

What is so impressive about the potential production from Old Pirate is the low total operating costs of around A$511 per ounce, which includes a cash cost of A$383 per ounce.

This would make ABM a low cost producer, and provide the company with a potential margin of around A$1000 per gold ounce.

Gold recoveries of up to 95% can be derived from the 308,000 ounce gold resource for Stage 1, and a total 261,000 ounces is expected to be recovered.

Multiplied by the A$1000 margin this would deliver ABM $261 million in profits, based on current prices.

The Scoping Study also offered a Net Present Value of $257 million, based on a 0% discount rate, or $228 million with a 9.8% discount rate.

Managing director Darren Holden said the Scoping Study had plenty of room for upside.

"The study presents the potential for a low-cost and highly profitable open pit mining operation," Holden said.

"Considering that the Scoping Study neither takes into account possible underground development nor is optimised to include known gold-bearing veins outside the resource, we are considering this as a first base case, with upside yet to be factored in."

Gold prices and cash flows

Figures in the Scoping Study were based on a gold price of $1600 per ounce. Due to the low operating costs of the project, a sensitivity analysis was run for a $1200 per ounce gold price which also showed strong cash flows.

Exploration upside

ABM has exploration underway on a further three kilometres of prospective strike length of sedimentary horizons and Old Pirate, targeting gold bearing vein material.

Holden told Proactive Investors that the project has room to grow, with exploration concentrated on just one part of the deposit.

"What is exciting is that the resource is currently confined to just the central part of Old Pirate," he said.

"We have extensions to the currently sampled veins as well as at least 6 other key shale horizons containing high grade veins that are yet to be tested with trenching and drilling.

"We now believe we have cracked the code at Old Pirate."


Relative to its market cap and enterprise value and its peers, ABM is currently trading at a third of its peer group average.

Until a feasibility study is complete the economics of monetising the system cannot be known precisely. However, in comparison to other bulk tonnage deposits such as Kinross Gold's (NYSE:KGC, TSE:K) Fort Knox Mine, ABM's three mineralised systems in the Northern Territory compare very favourably to many large scale bulk mining operations at comparative stages.

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