- Total reserve - 15.6 Mt at 1.7 g/t = 856,000 ounces of gold.
- Reserve supports an 8.5-year life of mine, assuming a throughput rate of 1.8 Mtpa from the company's 100%-owned Bronzewing processing hub.
- Stage 1 mining scenario - 6.3 Mt at 2 g/t Au = 407,000 ounces of gold.
- Stage 1 operating costs (ASIC) - AU$1,034/oz.
Analyst comment: this is a significant step forward in developing the Yandal Gold Project, as the current reserve gives Echo a firm basis on which to determine commencement of gold production in the new year (TSI estimate - 1H18).
While Echo's Orelia deposits exceeded expectations in terms of total size, the grade was slightly lower than forecast. However, that grade for the total reserves tells only half the story, the company having outlined a Stage 1 production scenario that will see 340,000 ounces of gold at 2 g/t Au mined from the Orelia deposit alone.
As per our forecast, Orelia will provide around 1 Mt of mill feed per annum, with the balance sourced from the Empire district (Julius, Wimbledon, Shady Well and Lowlands); we don't believe the lower- grade ore at Orelia will be mined during at least the first five years of production. At that stage, Echo may well have discovered significant gold reserves beyond the lower-grade Orelia deposit.
Valuation: we increased our valuation for Echo to $0.60/share (previously $0.44 / share), the key driver for this being the increase in mine life and decrease in strip ratio assumptions, in line with the reserve update.
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About Echo Resources Limited
Echo Resources is an ASX-listed gold exploration business with a large and highly prospective ground position in the Eastern Goldfields of Western Australia. We are focused on applying modern exploration methods to establish a high grade gold resource and reserve base at our 100% owned Yandal Gold Project.
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