It is reported that a magic mix of gold and iron ore projects has not done much of late for the Brazilian focussed ASX listed junior Crusader Resources. But that could be about to change with the expected released of a pre-feasibility study by Crusader in to its Borborema gold project in the mining friendly state of Rio Grande do Norte in north-east Brazil.
The project is shaping up as a company maker for Crusader which last traded at USD 1.18 a share for a market capitalisation of USD 135 million. Assuming the PFS confirms that there are no show stoppers with the project, the market will have to take another look at its treatment of the stock because by most measures, Crusader is about half-way to where it should be.
When the PFS is released the company has said previously it would be released by the end of September it is expected to confirm Borborema potential as a 120,000/130,000 ounce a year gold producer at a cash cost of less than USD 600 an ounce.
Now gold has retreated to 2-week lows of USD1834 an ounce. But it is still some 47 per cent higher than it was one year ago. So there should be no disappointment that Crusader prospective margin has been squeezed to only USD 1,200 an ounce. Multiply that out by 120,000 ounces and you come up with an annual cash margin figure of USD 144 million.
That would be based on a start up operation treating 3 million tonnes of ore annually. But it could end up bigger. As it is, Borborema has an inferred and indicated resource that was last put at 44.65 million tonnes at 1.3 grams of gold a tonne. That was only limited by the amount of drilling done when it was released back in June. The mineralization remains open in all directions and Crusader has been flat chat drilling for extensions.
A resource update is due at the end of October. Another 500,000 ounces would not surprise, nor would an eventual march to a 3 million ounce resource total. More to the point will be the conversion to reserves of one million ounces of gold to underpin a bankable feasibility study into a development.
Assuming all goes OK, first production could be possible by mid-2013. It's a bit of a lark to wonder if Crusader will have its Posse iron ore project in Brazil Minas Gerais state in production by then.
The project has been all dressed up and ready to go for some time but is still waiting on the all clear from the regulators. It is a process that cannot be rushed in Brazil. The company is nevertheless hopeful that it will be producing its first iron ore by the end of the year. It is not a big show but does have the potential to throw off some USD 20 million a year in earnings for an initial 7 years. That will come in handy in helping to fund the much bigger Borborema project.
(Sourced from www.theage.com.au)
