Orezone Gold (TSE:ORE) has said it will be completing the definitive feasibility study on its Bombore gold project in Burkina Faso using a heap leach scenario instead of the carbon-in-leach plant previously contemplated in a bid to lower upfront capital costs and make it more "financeable".
Indeed, tumbling gold prices and the current state of capital markets for Canadian companies have seriously taken their toll on mining juniors. Orezone said that the carbon-in-leach scenario is not financeable for a company of its size given the current financing environment.
In a statement last night, the company indicated that the work completed so far on its definitive feasibility study shows the carbon-in-leach scenario capex would be similar to that outlined in the preliminary study from August 2011 of $500 million. By comparison, the heap leach plan, which would only use the oxide portion of the total 4.56 million ounce resource, in the same preliminary report had a capital cost of $205 million.
In a research note by Jennings Capital analyst Dan Hrushewsky released Thursday, he notes that the August 2011 report showed that the unfinanced net present value is roughly equal for both the carbon-in-leach and heap leach scenarios, as the positive effect of a lower capex from the heap leach is offset by lower recovery and less mineable material.
"However, a financed NPV would likely show a higher NPV for the heap leach option due to the lower equity dilution associated with a lower upfront capex fund requirement. We will await further clarity on cost parameters before revising our company valuation," Hrushewsky concluded in the note.
Futures catalysts for the comapny include the updated preliminary economic assessment reflecting the heap leach scenario in the third quarter, as well as the definitive feasibility study anticipated in the first quarter of next year.
Orezone said last Friday that it will be removed from the GDXJ (Junior Gold Miners ETF) on June 21, due to its market capitalization dropping below $75 million, which is expected to result in a sale of 6.5 million shares on or just before this date, the analyst wrote.
Jennings has a speculative buy rating on the gold junior, with a 12-month target price of $2.65. Shares are trading at 39 cents Thursday afternoon, down more than 6 per cent.