Larvotto Resources (ASX:LRV) will likely seek to fund the $80 million capex for its low-cost, high-margin Hillgrove gold and antimony project in New South Wales via a conventional debt equity model.
Speaking to Mining.com.au on the sidelines of the Diggers & Dealers Mining Forum in Kalgoorlie this morning, Managing Director Ron Heeks says Larvotto is well-positioned given the low-cost, high-margins of the project amid high prices for both gold and antimony.
The company today (5 August) released the results of a Prefeasibility Study (PFS) on its 100% owned Hillgrove project – just seven months after acquiring the asset.
Financial forecasts at a gold price of US$2,000 ($3,077) an ounce and US$15,000 per tonne antimony, demonstrate the Hillgrove Project will generate net free cashflow of about $390 million (pre-tax) and $252 million (post-tax), with earnings before interest, taxes, depreciation and amortisation (EBITDA) over the life of mine (LOM) of $652 million for a net present value (NPV) (8%) post-tax of some $157 million.
The PFS also shows an internal rate of return (IRR) of 80% (pre-tax) and 50% (post-tax).
Using a spot price of US$2,350/oz gold and US$23,000/t antimony, the PFS highlights the sensitivity to higher prices, with Hillgrove to generate net free cashflow of about $820 million (pre-tax) and $553 million (post-tax), with EBITDA over LOM of $1.08 billion, and NPV (8%) post-tax of some $383 million.
The PFS under this scenario shows IRR of 173% (pre-tax) and 113% (post-tax).
Heeks tells Mining.com.au the PFS results show that Hillgrove is “absolutely a company-maker” for Larvotto, which has “only been in existence for two and a half years”.
“In that time, we’ve raised $30 million, which is not bad for a junior company,” he adds.
All financial and technical objectives have been met and the capital cost of the development is low compared to a greenfields development, with much of the required surface and underground infrastructure already in place, the Managing Director adds.
Larvotto is unlikely to retain financial advisors to assist with funding options for Hillgrove as the company has more than enough skills to undertake the process internally.
“I mean, advisors are brought on at specific times. We have several on at the moment on different things. We’re still going to lock away our offtakes, and that’s progressing really well, a little bit slower than what we’d like, but that’ll be a pretty big boost and kick things along,” Heeks says.
“We’re going to be very aggressive on exploration from here on in. As soon as we get our government permit in, which shouldn’t be far away. We only acquired this project seven months ago. The antimony price has doubled in that time. We have to sell the story.
“It’s a perfect size project for the size of the company we are. We don’t have to go and raise $350 million and build a new project. Our build is six months, not 18 months.”
The price of antimony is currently about US$23,150 per tonne while gold prices have averaged about US$2,200 an ounce in H1 2024, up 15% year-on-year due to strong demand from investors and central banks, according to the Department of Industry, Science and Resources’ (DISR) latest issue of its Resources and Energy Quarterly: June 2024.
Gold prices are forecast to remain elevated throughout 2024 and 2025, before easing slightly in 2026. As of 1 August 2024, the gold price was $3,741 per ounce, according to ABC Bullion.
Larvotto will be bringing Australia’s largest antimony project online in a rising antimony market, driven by its increasing use in solar panel production, whilst production from other global producers becomes stressed, which is a trend that is expected to continue.
This is the first time that gold and antimony will be targeted with equal priority at Hillgrove. Previously, the mine operated for 30 years as an antimony-focused operation, and 100 years prior was a successful high-grade gold mine.
Diggers & Dealers is being held in Kalgoorlie, Western Australia from 5-7 August.
Write to Adam Orlando at Mining.com.au
Images: Larvotto
