Capital & Operating Costs

Capital Costs

Pre-production capital costs are approximately $18M, and include $8.4M of capitalised operating costs prior to commencement of production, $7.3M for plant and equipment refurbishment, and $2.0M for initial store inventory.  The capitalised operating costs are estimated as a percentage of costs once in operation and assume a three-month build-up prior to recommencing full mining and milling operations.

Life-of-mine capital expenditure, inclusive of pre-production costs, mining capital development and sustaining property, plant and equipment (PP&E) capital needs, but excluding closure costs, is estimated to be $234M (Table 1).

Capital costs for major mobile items such as haul trucks, underground loaders, development jumbos and production drills are based on recent supplier quotes or actual delivered costs for the same equipment already at Savannah. Timing of the acquisition of new equipment is based on the modelled production schedule and standard Savannah equipment replacement practices.  It is assumed that major mobile equipment items will be acquired using finance leases, as has been the recent practice at Savannah.

Refurbishment costs required prior to, or within the first year after recommencement of production, are detailed estimates built up by Panoramic management based on actual or expected condition of plant and equipment at restart.

Costs for major capital works, including primary ventilation for Savannah North and tailings storage facilities are based on one or more recent contractor quotes.

General sustaining PP&E capital after the first two years is estimated to be in line with recent Savannah PP&E expenditure.

Capital costs are exclusive of GST.  The cost estimates exclude contingencies.

Capitalised mining costs are forecast to average $2M per month for the initial 18 months of operation, due largely to the costs associated with raiseboring of the Savannah North primary ventilation (approximately $11M, excluding site preparation, mobilisation and demobilisation), and eight months of lateral development to the commencement of Savannah North production ($12M). Thereafter, mine capital development expenditure averages $10M per annum.

General sustaining PP&E capital expenditure is estimated to average $10M per annum and $98M over life of mine.  Leasing and major refurbishment costs on underground mobile equipment comprise the majority of this expenditure totalling $42M over life of mine.  Major one-off capital items include:

  • the primary ventilation fan and associated works for Savannah North ($6.3M);
  • construction of future tailings storage facilities ($9.2M); and
  • capping of TSF 1 and reshaping the North Waste Dump ($7.0M).

The life of mine capital estimate does not include any allowance for closure costs apart from capping of TSF 1 and reshaping the North Waste Dump.  Any outstanding lease payments on mobile equipment at end of mine life are assumed to be offset by receipts from salvage of this equipment.

The estimated annual capital expenditure profile is shown in Figure 1.

Table 1 – Savannah FS – pre-production, sustaining and LOM capital cost estimates ($’M)

1 pre production sustaining lomFigure 1 – Savannah FS – Annual capital expenditure profile

2 Annual capital expenditureOperating Costs

Operating costs for the major consumable items (e.g. diesel, explosives, cement, ground support, processing reagents) were estimated from a detailed build up using historic Savannah unit consumption rates from July 2013 to December 2015 prior to the decision in January 2016 to transition the operation to care and maintenance, combined with the most recent supplier invoice prices.  Fuel cost is the estimated landed price at Savannah based on a long-term oil price of US$50/bbl, and includes the diesel fuel rebate, where applicable.

Manning levels, salaries and rosters are derived from detailed activity modelling, and benchmarked back to recent Savannah manning schedules for the same activities.  Manning costs include estimated redundancy provisions at the end of mine life.

Forecast maintenance requirements are based on detailed equipment performance records achieved for the same or equivalent equipment at Savannah.

Costs for contractor services are based either on the most recent contract terms or recent tender quotes for these services at Savannah, prior to the mine being placed on care and maintenance.

Costs for items of a general nature were factored either on a per tonne or per month basis, as appropriate, from recent Savannah costs for the same cost categories.

Royalties to the WA state government and traditional owners are included in the model.

Average cash operating costs on a per tonne milled basis over life of mine are estimated to be $116/t, comprising $58/t for mining, $22/t for processing, and $36/t for other cash operating costs (Table 2, Figure 2).

Table 2 – Savannah FS – Life of Mine Unit Cash Operating Cost ($/t milled)

3 Life of Mine Unit Cash Op CostFigure 2 – Savannah FS – Unit Cash Operating Cost Summary

4 Unit Cash Op CostEmployment-related costs comprise the largest single item at over 25% of total operating costs.  When flights and contractor costs relating to camp services are included, labour and associated employment costs comprise over 30% of total cash operating costs. Power and fuel expenditure, largely due to diesel consumption for on-site power generation, together comprise 16% of costs.  Maintenance costs average 8% of total cash operating costs.

Annual unit operating costs per tonne ore milled and total operating costs are shown in Figures 3 and 4.

Figure 3 – Savannah FS – Annual unit operating costs per tonne milled

5 Op Unit RatesFigure 4 – Savannah FS – Annual operating costs

6 Annual Op cost