Pre-production and ramp-up capital costs in the Updated FS (Base Case) are $36M. The ramp-up period is assumed to cover the first three months of production, during which time all operating costs and revenue would be capitalised. Life-of-mine capital expenditure, inclusive of pre-production costs, mining capital development and sustaining property, plant and equipment (PP&E), but excluding closure costs, is estimated to be $235M (Table 6). The estimated annual capital expenditure profile is shown in Figure 5.
Costs are as at September 2017. PP&E capital estimates are mostly based on current supplier quotes. Fixed plant refurbishment costs are based on recently obtained estimates provided by reputable engineering firms. Costs for the Savannah North primary ventilation include contractor quotes for raiseboring, mobilisation and site works, and the cost to dismantle, transport and reinstall the Deacon primary fan from Lanfranchi. Costs for the underground mobile fleet include estimates from an independent maintenance supplier to refurbish the existing fleet, and finance lease costs for new equipment. General sustaining capital after the first two years is based on Savannah historical PP&E expenditure. No contingency is applied.
Operating costs used in the Updated FS are generally based on recently obtained pricing from reputable suppliers and service providers, and are as at September 2017.
Operating costs for the major consumable items (e.g. explosives, cement, ground support, processing reagents) are based on recently obtained pricing from suppliers. Fuel cost is the estimated landed price at Savannah based on a long-term oil price of US$55/bbl, and includes the diesel fuel rebate, where applicable. Unit consumption rates are based on historical performance at Savannah for the same equipment or activity.
Employment levels are derived from detailed activity modelling. Rosters are generally on a 15:13 basis, in line with past practice at Savannah. Salaries have been benchmarked to current WA mining industry levels, based on reports provided to the Company from labour hire and recruitment firms. Labour costs include statutory superannuation and payroll tax requirements, and 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 the major contractor services (ground support / production drilling, camp services, laboratory, power) are based on existing contract terms or recent proposals for these services.
Costs for items of a general nature were factored either on a per tonne or per month basis from recent Savannah costs for the same cost categories, adjusted for price inflation where appropriate.
Royalties to the WA state government and traditional owners are included in the model.
Unit site operating costs on a per tonne milled basis in the Updated FS are estimated to be $97/t compared to $99/t in the February 2017 FS, a reduction of 2% (Table 7). Total life-of mine site-based operating costs in the Updated FS are reduced to $730M, compared to $800M in the February 2017 FS.
Employment-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 almost 15% of costs.
Annual unit operating costs per tonne ore milled and total operating costs for the Financial Base Case are shown in Figures 6 and 7.