Economic evaluation of Awonsu Open Pit Mine: a case study of Newmont Ghana Gold Limited

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September, 2015
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The Awonsu mining open pit deposit is one of several projects being evaluated by Newmont Mining Corporation. The phase one of the deposit has been mined out with some portion being backfilled with waste. Management of Newmont Ghana Gold Limited would like to know if there is any potential layback of the existing pit under the current economic conditions. In other to be able to determine the value or economic feasibility of the project, a pit optimisation process has to be performed on the geologic model by considering the gold price, mining cost, processing cost, selling cost, the geologic model and the geotechnical slopes. In line with this, this research seeks to evaluate the economic profitability of the Awonsu deposit through the pit optimisation process by the use of the Gemcom Whittle 4x ,determine a suitable pit design for the deposit using the Mintech Minesight design tools and use Discounted cash Flow method to determine the viability of the deposit. Results from this research show that the Awonsu phase two design is financially profitable at the evaluation price of $1200. The pit designed out of the selected pit shell produces an ore tonnes of 26 million at an average grade of 1.6g/t and recovered ounces of 1.2 million. The free cashflow of the project is $171 million and when discounted at 8% for six years, results in a Net Present value (NPV) of $60 million. The Internal Rate of Return (IRR) of the project is 14.6% and total cost per recovered ounce is $1053. The Return on Capital Employed (ROCE) is 14% which means for every $1 invested in the project will yield a return of 14 cents. The project breaks even at a gold price of $1129/Oz.
A Thesis submitted to the Department of Accounting and Finance, Kwame Nkrumah University of Science and Technology in partial fulfilment of the requirements for the degree of Master of Business Administration (Finance Option)