In pursuit of this goal, the company will leverage its cash balance of $14.9m (as of 31 December 2020), to execute definitive feasibility study (DFS) workstreams and further de-risking, value-adding and exploration opportunities.
This is a simple decision for Boab Metals (ASX:BML) to make given that the PFS for the project outside Kununurra, Western Australia, has projected strong net present value (NPV) and internal rate of return (IRR) of $303m and 46 per cent respectively with payback expected within 1.6 years.
Both NPV and IRR are measures of a project’s profitability.
The project is expected to deliver earnings before interest, taxes, depreciation, and amortisation (EBITDA) of about $75m per annum while pre-production expenditure is estimated at $183m.
“The results of the PFS have confirmed the economic attractiveness of Sorby Hills and given us confidence to launch immediately into the DFS workstreams,” managing director Simon Noon said.
“Furthermore, the capital raised during the period has provided us with sufficient funds to undertake this work and reach a decision to mine on the project.”
He added that the recently completed Phase IV drill program had revealed significant opportunities to materially increase the mining inventory at Sorby Hills and led to the company deciding to undertake a Phase V program to investigate the opportunities ahead of finalising the DFS.
The Phase IV drilling had returned results such as 11m at 4.69 per cent lead and 15 grams per tonne (g/t) silver from 72m and 9m at 4.37 per cent lead and 26g/t silver from 64m, confirming both up and down-dip extensions of mineralisation outside the current resource envelope and open pit designs.
Besides the delivery of the optimised PFS during the half-year ended 30 December 2020, the company is also a step closer towards securing debt funding from the Northern Australia Infrastructure Facility with the assessment process moving to the due diligence stage.
Additionally, institutional and strategic investors demonstrated their support for the project by subscribing for a $10m placement that when combined with the $5m raised through the share purchase plan and option exercise, leaves the company fully-funded for a FID.
More recently, preliminary offtake soundings with a suite of leading base metal customers has confirmed that there is strong demand for Sorby Hills lead-silver concentrate with initial offtake terms sheets received to date offering attractive terms.
Boab plans to kick off a competitive offtake tender process for the Sorby Hills concentrate once the DFS metallurgical program is completed in the second quarter of 2021.
This article was developed in collaboration with Stockhead, an advertising partner of Boab Metals at the time of publishing. For further information and to review the original article click here. This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.