Cost estimation for Martabe gold project soars
Tuesday, May 3 2011 - 07:12 AM WIB
?This increase is a result of the recent US dollar decline of +20% against most currencies, rising fuel and commodity prices, as well as some specific project scope increases such as the realignment of the tailings storage facility, two sedimentation control dams instead of one, a much larger water treatment facility, more complex water diversion structures, and structures to manage the old plant site slippage,? the company said in its quarterly report..
Of this total capital cost, $217m has been expended to date with $359m remaining from 1 April, it said.
During the quarter, the company engaged a third party consultant to review the overall capital costs to complete the project. Placing of most of the remaining equipment orders and most of the contracts, the completion of the detailed design of the dam facilities and the significant advancement in earthworks enables a closer assessment of costs to complete the project, it said.
All the construction published milestones have been achieved and work is progressing on all fronts. The level of activities and the advancement of procurement and contract awards has supported a detailed review of the overall project schedule.
Whilst the schedule is challenging, the target remains to be commissioning and producing first gold by the end of December 2011. Sustained bullion production will be ramped up during the first quarter 2012. The team remains focused on achieving production of gold and silver as early as possible.
Engineering and procurement activities have now reached 95% completion with only limited works outstanding.
In the last few weeks, a number of contract and equipment awards have been made including aggregate and concrete supply to PT Duta Graha Indah, steel tank supply and installation to PT Epiterma Mas, structural steel work to PT Lintech, field piping and concrete works to PT Leighton Indonesia, award of project and operations mobile equipment, award of equipment such as the water treatment clarifier, the low voltage switch-rooms and erection of operations and other buildings and much more. The total value of these packages is greater than $60m.
In coming weeks the final three key contracts will be awarded, being mill installation, steel/mechanical/piping installation and the electrical/instrumentation installation.
Despite sustained daily rainfall in late March, progress on site has been good. Earthwork activities on the plant site, tailings storage facilities, water dams, equipment storage areas and roads are progressing well. Blasting of rock at the plant site commenced early in the quarter, yielding good construction materials for other areas of the project. Concrete activities commenced in mid March with the first concrete batching plant in operation and the second larger batching plant due to be in operation within two to three weeks. Pouring of concrete at the plant site has commenced as well as in other infrastructure areas of the project.
All construction office facilities are now built. Permanent offices, workshops and warehouse erection will commence shortly.
Development access to Purnama/Pit 1 has commenced and access to the commencement of the first mining area has been achieved, it said.,
The Company will complete the project and provide for working capital, exploration, expansion studies and other expenditure using a combination of existing cash and a project debt facility. As at end March 2011, the cash balance and liquid assets stood at $210m.
The Company is continuing with its aggressive exploration programme on the 1,639 km2 Contract of Work area. In 2011, the Company will spend approximately $15m on near mine and regional exploration programmes.
An initial Reserves Statement for Ramba Joring is expected in the next few days. The Ramba Joring Deposit is adjacent to Purnama/Pit 1.
The near mine exploration program is currently active at Tor Uluala and Horas targeting sufficient drilling to produce maiden resource statements on both these deposits in 2011.
The Company has mandated a leading bank to arrange a $225m simple project debt facility plus a $25m over-run facility. This combined with the current cash is expected to be more than adequate to cover the capital expenditure to completion estimate of $359m plus other commitments to first quarter 2012.
The proposed facility is likely to be a revolving credit arrangement with no hedging requirements. The facility is scheduled to be in place in June for drawdown availability during the third quarter.
Cash flow from operations is expected to commence in first quarter 2012. At current gold and silver prices and projected operating costs and output, Martabe will generate strong cash flows. (romel)