A scoping study, completed using a A$2300/oz gold price, was based on the mining of eight open pits - four new and four cutbacks of existing pits - as is seen as an initial way of generating cash, although the company's future hopes are based on defining additional shallow resources in the historical gold field, and in the higher-grade underground potential.
CEO Ed Turner said the study was "a milestone moment in the short history of Kingwest", offering near-term production with attractive profit margins, with total up-front capital cost of only $20 million.
Kingwest aims to recover 147,200 ounces over 31 months, by trucking the higher-grade oxide, transitional, and fresh ores to a mill within 100km of Menzies, for which negotiations are underway.
Assuming a 95% recovery and operating costs of $1688/oz, the project is expected to generate net revenue of $330 million, with net cashflow of $64-95 million.
Menzies would be cashflow positive after 10 months, however, if the gold price falls to $2000/oz, the time to first free cash doubles to 20 months.
The project has a breakeven price of $1700/oz, and every 10% change in the gold price delivers a $25 million difference to cashflow.
Low-grade ore will be stockpiled at Menzies, which is 130km from Kalgoorlie, for treatment in the future, possibly via a newly built plant at Menzies, Kingwest suggested.
Mining will initially start at Pericles and Yunndaga, two largest sources of material, while the smallest pits at Lady Harriet, Warrior, and Selkirk are late in the schedule with the aim of increasing resources towards the end of the project life.
Kingwest recently increased total resources at Menzies to 447,000oz, with 315,000oz defined as near surface. The company also owns the Goongarrie project to the south, along the Goldfields Highway.
A prefeasibility study is planned.
The company started the year with $5 million in cash.
Shares in the company dropped 8% on the news to 11.5, less than half its October peak of 25c. At current levels, the company was worth $17.7 million.
The stock was trading at 7.3c a year ago.
