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Discovery Metals reports strong cash balance ahead of Boseto copper-silver project construction

Discovery Metals (AIM: DME, ASX: DML) reported a strong balance sheet ahead of the commencement of construction work at the Boseto copper-silver project in Botswana, where significant progress has been made over the past quarter with the resource up 68% and the BFS (bankable feasibility study) components completed.

The BFS components are currently being prepared for board review and external presentation, while the company has already selected EPC (engineering, procurement and construction) contractor, which has been engaged for 9 week front end engineering and design work.

The company finished the quarter with a cash balance of A$34.3 million with the full capex (capital expenditure) to build the project is estimated at US$150 million, though this could get adjusted after the elements of the BFS are reviewed by the board. Fairfax expects Discovery to cover the rest of its funding needs through a combination of 60% debt and 40% equity.

The resource at Boseto has recently been upped to 102.8 Mt (million tonnes) at 1.4% copper and 17.3 g/t (grammes per tonne) silver containing 1.439 Mt of contained copper and 57 Moz silver, marking a 68% improvement over the previous estimates. Fairfax noted that 22% of it was in the measured and indicated category and that it is of “magnitude greater than that needed to support a 10 year 25ktpa operation.”

The company is following up on targets beyond the current resource, which include Quirinus some 15 km (kilometres) from current resource, Nexus near to current resource, and Nyx around 10 km from Zeta. Fairfax said that all of these should follow to newsflow and may outline an economic resource. Other three targets have bene identified by regional soil geochemical exploration work.

Discovery is looking to develop Boseto into a 24-25 ktpa (kilo tonnes per annum) copper in concentrate operation and start production at the end of next year.

The management is currently investigating the potential to expand Boseto to a 3 Mtpa (million tonnes per annum) operation that would take production to around 38ktpa copper in concentrate, assuming the same grades 1.5% Cu into the mill.

Fairfax concluded that the quarterly update “showed considerable progress” and the current targets identified within the tenement package hinted towards “exciting” newsflow in the months ahead with the company moving towards construction at Boseto.

Disclosure: The author holds no positions in the company