Good afternoon depending on where you are in the world today. We are here to talk about the feasibility study that was recently completed at Solaris Norte, a major project in the Gold Fields Group in Chile. Joining me today, I have Lucha Rivera, who is the Regional Head of South America. I have Avishka Nagasa, who is Investor Relations Manager. I have Max Kumbes, who is the Project Director on Solaris Norte.
Francois Swanepoel, who's the Technical Manager on the project and also Diego Uete, the Geology and Exploration Manager on the project.
I'm going to give
a brief introduction as to where we are on the project and maybe just remind you what we announced to the market in the middle of February. We declared a maiden reserve and a feasibility study that was completed and peer reviewed on Solaris Norte and that maiden reserve came out at 21,000,000 tonnes at 5.1 grams per tonne of gold, 57.9 grams per tonne of silver, which gave a declared reserve of 3,500,000 ounces of gold and on a gold equivalent basis that translates to 4,000,000 ounces of gold. Some of the key metrics of the project, this is an initial 11.5 year life of mine and remember we're only focusing here on the Solaris Norte project. There is significant exploration potential around us that we're not covering here today. The annual process plant throughput would be 2,000,000 tonnes a year.
Life of mine production 3,700,000 ounces of gold equivalent, that's actually produced gold. Now that average production would then translate into around about 450,000 ounces a year for the 1st 7 years at all in sustaining cost of under $500 an ounce, around about $4.65 per ounce. And if you look over the 1st 10 years, given that the production is front ended, we're running about 355,000 ounces equivalent gold production over that 10 years. The feasibility study is telling us that the cost at the end of 2018 money terms translates to $834,000,000 to build this project. And what does that mean?
It means that over the life, the all in costs of the project, which includes that upfront capital, will be $7.85 per equivalent ounce. Or if you strip out the upfront project capital cost, we're looking at $5.45 an ounce on an all in sustaining cost basis. As we've mentioned when we announced the results in the middle of February, we're looking here at a return of around about 25% at a $1300 gold price with a payback of around 2.2 years. So very robust project and that gives an NPV at a discount rate of 7.5% of US654 $1,000,000 Just to remind you, it's an open pit operation with contractor mining. There'll be a dual stage processing circuit because of the silver we'll have Merrill Crow and then we'll have a CIP afterwards to capture most of the gold.
We've got more than adequate water. A lot of people have asked us, do we have water for the project? We have more than adequate water that has actually been permitted. So there's no issue on water. We're obviously far from the grid.
So it's envisaged to have an on-site power station. 14 Megawatts is the required power. We will obviously consider renewables down the road. The big issue and the team will talk about it some more is that the environmental impact assessment process is underway as we speak. That was formally accepted for review on the 11th July 2018.
We expect that to be an 18 to 24 month process, which is customary in Chile for these kind of project approval processes. And while we're busy with that, we're doing detailed engineering. Currently, we're at around 35%. And by the end of this year, we're looking to significantly improve that number. Construction of this project, if all goes well, could commence in the spring of 2020.
So that's the introduction. With that, I'm going to hand over to Max Kumbas, who will take you through some more of the detail along with his team. Thank you.
Good morning. Well, I will start talking about the journey we have done with this project since a long time ago. The discovery of this project happened in 2011. Since then, we have been doing a lot of work through the years. We have completed a scoping study.
We have completed a pre feasibility study, then an interim feasibility study, finalizing with a definite feasibility study at the end of last year. Along all these years, also, we have been improving the knowledge of the deposit that ended up with the maiden reserve declaration that Nick just mentioned. In parallel to that, the project has gone through several permitting processes in order to do these studies. And more important, the process of the EIA, which started in 2017 with the baselines and with the presentation of the EIA submission to the government in July last year. At the moment, we are in the middle of that process.
And as Mick mentioned, we expect this process to last between 1 2 years. After we got this approval on the EIA, we call the RCA, we're going to have to obtain the full notice proceed approval from the Board and looking for construction in the Q4 of 2020. This is approximately 2 years of construction, expecting the 1st gold in the beginning of 2023. In the meantime, also we are progressing the detailed engineering and also we started to work on the sectorial permits. Salares Norte is a project that is located in the 3rd region of Chile, Atacama, very close to the border to Argentina and is a project that is located at an average of 4,500 meters of altitude.
It's a very isolated project. It's very far from any of the communities. We are situated in a closed basin, located, as you can see in the map, around 5 hours driving from Copiepo and also very close to El Salvador mine, which we have an airstrip there. I will hand over the presentation now to the geology and exploration manager. He's explained about the geology of the project.
Geology and the district exploration. So Salares Norte is classified as a high sulfidation epithermal deposit. The global distribution of these deposits around the world are shown over this map that we can see. There are several oxide examples in the Miocene between 23000000 to 5000000 years around Peru, Chilean and the Argentinean Andes. There are some giants over the area as well.
So our main focus is to show the ones in Chile and the area. Opposed to the orogenic gold deposit, they are pretty deep on and hold on the geological terrains. We have the epithermal as shown here on the slide on the upper part. So it's more superficial deposits form. Some notable examples of the Andes, some high sulfidation epithermals deposits and districts that they become.
One of them at Celineo, which was in Chile as well. It started producing 'seventy nine. It had initial reserves of 2,500,000 ounces of gold equivalent and at the end of its life produced over 7,200,000 ounces. So it had a reserve growth of nearly 2.9%. La Coipa is another example.
It's more a silver mine than gold, but also it had an initial reserve that nearly doubled over the life of mine. And there's several other examples here in Peru, Yanacocha, that also well, it's one of the giants of the Americas that nearly more than 10x increased the size. Another important one to mention is Veladero as well in Argentina that has well grown nearly 2x. So what we want to show here basically is we started with Salares Norte. These are our district.
They're very important. There's long lived assets over 15 to 20 years that we're doing the exploration now over the terrain. To show the Maricunga Belt, it's located north in Chile. It had already a total endowment of over 90,000,000 ounces of gold equivalent. All of them except La Coipa, Esperanza and Salares Norte are porphy style.
They are copper gold deposits. They are large, but with low grade. La Coipa is in care and maintained since 2013. And as we saw on the previous slide, produced some over 25 years 7,500,000 ounce of gold equivalent. The Maricunga was suspended in 2016.
It produced over approximately 3,000,000 ounce of gold over 20 years. And then Salares Norte, it was the first discovery in the north and part of the belt, probably 100 kilometers north of La Coipa. The history of the discovery starts way back in 2008, 2009. The initial RC started at Horizonte, which is another project that had positive results in 2009, 2010. That was our follow-up over that area and had interesting intercepts over 100 meters with half a gram.
But then in 2010, 2011 was the first reading program at Salares Norte, and we hit it a discovery hole, which was hole 2, 96 meter, 1.5 grams of gold and 60 grams of silver. It was oxidized and had good withdrawal response to the preliminary leach test done over that period. From 2011-2013, there was a delineation drilling. We had one particular hole was a spectacular hole with 132 meters of 53 grams of gold, 59 grams of silver. We had the 1st maiden resource declaration.
Then from there, 2013 up to now last year, we completed infill and accessional drilling. We've been drilling over 142 kilometers over the project and actually a bit more that included some sorry, some extraization as well. And we had the resource update, it was late on December, of 25,600,000 tonnes at 4 76 grams of gold, 50 3 grams of silver, for 3,900,000 ounces of gold and 43,000,000 ounces of silver. So just to advance a little bit quicker here, we have land consolidation as well over the area. We increased our land holding over 25,000 hectares.
We exercised some options that we have over the area. There are some JVs that are under negotiation as well over the area. And this table summarize over the amount of hectares that we control over the area. The district, what we call is it's around the Salares North deposit area. There's multiple targets that we have.
It's Master 2, master 3, Salares, Salada and Horizonte, they are to the south. The geology of Salares Norte, we started way back in 2011. We identify several domes over the area in Breccia pipes over this area. So this slide here is basically to show the evolution of the drilling over the years. So now we're in 20 13, 'fourteen, 'sixteen, 'seventeen.
And then as you can see, we advanced on the deposits, Berta Pincipao and Agua Marco. If we do a cross section, just playing a little bit the geology over the area, we have on the right side here, it's the Braca Principal deposit. On the left is Agua Marga. As you can see, Rega Pecipao, it's a more vertical deposit and it has a mushroom format here that's very common on this sort of diatreme deposits. On the left, we have Agua Marga.
This one here is showing the alteration that plays a key role on These are just some cross section showing some of the hits that we have over this ore bodies. This is a small geological video that we put together. There we go. So just showing the surface geology. So we got these domes on one side and the other of deposit.
Those are the drill holes. That's showing the lethal types that we have. It's the now we're seeing the hydrothermal breccia, the polymeric breccia on orange, the monomeric breccias, basaltic andesides units. And we go back now showing the pit. Now we're seeing the alteration.
As you can see, there's intense silica alteration on the core of the systems here, which host the highest grades. That one is the alteration showing as well the steam heated that we have on the top of these deposits. And this one here has shown it's the mineral domains that were used with all the geological mapping that was done to generate the model. That's it's the blocks showing the high grade blocks and it completes the view showing the pit. So to advance on the resource and reserves, on the last year, we put a lot of focus on increasing the infill in Agua Marga.
So we did drill nearly 13,500 meters. We also did some close base drilling over at Breccia Principal in Agua Marga. So we added 250,000 ounces in the last update. There was some process cost improvement. The finish off of high grades as well in Agua Marga went through internal and external audits over the year and the last year, so that were completed and passed.
And we have the medium reserve declaration based on the DFS. So the resource is the number that we saw before. We have here again it's a total of 3,900,000 ounces of gold, 43,000,000 ounces of silver. And then for the reserve, we have 21 1,000,000 tonnes at 5.13 grams of gold, 57 grams of silver and for a total of 3.47 1,000,000 ounces of gold and 39,000,000 ounces of silver. So just to show some of the areas, those are recent photos from the project.
On the top on the right top is Maguamarga and on the bottom, Breccia Principal. This is what we call the grade control. So we increased drilling in some sections to take a look at the continuity. So just to show that we were basically increasing the spacing between the holes and we had very positive results. So the ones on red are showing the new results from that infill program.
I have to highlight that the second one of the the 2nd best haul of the project comes from this infield grade control program. So this one is also showing Agua Marga. We confirmed the resource blocks as well and confirmed the grades. So the model is robust as all the progress done over the years. So we had some as well external audits, GeoSpark and saw the other companies and we had external geologists as well doing audits on the geology.
We had the Optiros resource exhumation in January and also the reserve audit completed. This is a we made another video to show the resource model. But well, it's going to be for the mix. Sorry, thank you.
Now I will hand over to Francois Sironopel, who's going to talk us about the design and the technical aspects of the project.
Thank you, Max, and good morning to all. Firstly, starting off with the mine design. This is a conventional facility or conventional mining operation with conventional diesel powered equipment that we're envisaging. The operating model is based on contractor mining, both for the mining and for blasting services. The system is plant constrained.
We've got significant overburden on the ore body, and that's really driving the size of the mining fleet. As a result, we're going to mine the ore and as such with the ore body at a higher rate than the plant can actually take. So there's going to be a significant stockpiling strategy. And that has given us some potential upside in terms of grade streaming. So we plan to stockpile the ore that we mine and then send high grades preferentially to the plants.
Key focus areas during the feasibility study was to optimize the SMU and the bench height study. We really want to get to the ore zone as fast as possible, and we've made significant advances since the previous phases of the study in that regard. The phase design and sequencing for the mine has been finalized. We've defined a really achievable ramp up schedule, which we'll talk about a bit later. And then finally, we verified the ore mining strategy, where, as I explained, that we're going to mine the ore at a high rate and the plant connection process.
So in terms of the actual mine configuration, we've got the 2 deposits adjacent to each other. Firstly, the Brecher Prince pulp sector, and we see right to the north of that, Agua Marga. So in the end, these two pits actually merge when we mine it. We've got 2 waste storage facilities. Firstly, the one to the south, that will be used for pre strip.
That waste will be used to construct platforms for our dry stack tailings facility as well as the ore stockpiles. And then all operational waste will report to the north once the pre strip has been completed. So it's a fairly compact site. In terms of project physicals, the DFS results on waste is 308,000,000 tonnes. Pre strip is approximately 50,000,000 tonnes, and we really worked hard to reduce that number to the current values.
All mined, 22,200,000 tonnes over life of mine. That gives us a life of 11.5 years. Of that, 18,800,000 tonnes plus the 2,300,000 tonnes of marginal material is all in the indicated category. We've got 1,100,000 tonnes of material in the inferred category. This gives us a strip ratio of approximately 14:one.
The gold grade for the study was at 4.96 or close to 5 grams per ton and the silver grade 55.6 grams per ton. So there's a significant amount of silver associated with this facility, and that really influenced the process flow sheet, which we'll come to in a second. So in terms of the mining schedule criteria, what we're really trying to achieve in the feasibility study was to get the pre strip done in 2 years, and that really is to match it with a plant construction schedule, which is also roughly 21 months. So we're really aiming to get the pre strip done by the time the plant we commission the plant. We also aim to have at least 5 years of continuous mining activity at the peak rate in order to be able to negotiate reasonable contracts on the mining side.
And then we the aim was to reduce the peak mining rate to lower than 50,000,000 tonnes per annum. We don't want to stress the contractors in this regard. And we wanted to make sure that the plan is operable in terms of traumatic conditions, achievable in terms of ramp up and so forth. And then if we look to the at the actual schedule that we came up with, we can see we've got a reasonable ramp up, during year minus 2, minus 1, those are the 2 pre strip years, and then we're going into production. We've managed to get the peak mining rate down to 44,000,000 tonnes per annum, and we're really maintaining about 7 years between 40,000,000 and 44,000,000 tonnes over life of mine.
So it gives us a nice period to optimize the investment in the mining fleet, in this case, through the contractor. So moving on to metallurgy. So we've performed extensive metallurgical test work. We've done test work on more than 200 samples. We've done the full process flow sheet testing.
In the end, what we found was the metallurgical recoveries is only dependent on head grade and on mineralization, whether it's oxide or sulfide material. The ore is free milling and amenable to cyanidation. The ore is predominantly oxides, more than 98%, so that's really driving the recoveries. We've got excellent recoveries over life of mine. Gold 92.7 percent and silver 67.5%.
So this is really behaving really well from a metallurgical perspective. In terms of the metal production profile over life of mine, this graph just shows the gold to silver ratio. So we see we at the peak, we're probably producing around about 550,000 ounces of gold. But on top of that, we've got quite a significant amount of silver that we need to deal with and hence, the need to have dual metal extraction processes in terms of metal chrome and then carbonate pulp that's acting as a scavenger stage. So moving on to the process flow sheet.
This is just a schematic diagram. It's very conventional upfront with a single stage jaw crusher. We've got a SAG and bull mill, conventional pinion and ring gear driven. And then from that point, we move to the leaching in tanks. So it's leaching cyanide leaching in agitated leach tanks.
We move on to the Metal Pro circuit. After the Metal Pro, where we removed most of the metal, about 85% of the metal, We have after that step, we've got a CIP scavenging stage. So we've got 8 CIP tanks to clean up the tail for us and make sure that we get optimum extraction in the circuit. So I'm just going to point out what's different to a conventional circuit that one would expect. So firstly is the dual circuit, the metal probe portion.
Then we've got a cyanide detox step. The aim is to get the cyanide to levels below 15 ppm before we deposit on the TSF. We've got a mercury retort facility where we recover some elemental mercury. And then finally, something that we felt very strongly about since the initiation of the project is we wanted to introduce filter dry stack tailings for this project. So we've got 3 tailings filters at the tail end.
These filters will produce filter cake, which will be transported with trucks before it's placed and compacted on the dry stack facility. So processing the processing infrastructure side, just physicals, how this actually looks. This is an overview of the site. Again, very compact. You can see the plant is located very close to the mine.
And in terms of we located at an altitude of 4,500 meters above sea level in the Andes. But despite that, the topography is very forgiving. We're quite fortunate. This shows what train we have to deal with. Firstly, I'm indicating where the truck shop is going to be.
Secondly, the process plant. Thirdly, we've got the crusher location, the filtered dry stack tailings location and the dry stack. So it's fairly good terrain to that we have to construct this project. The next is a diagram of what the actual facilities will look like. I just want to highlight that it's a fairly compact site.
We're really focusing on integrated operations. So the administration buildings and all the facilities are located very close to each other, and we're really driving integration as far as possible with this particular project. Maybe just pointing out, in the northeastern corner, we've got the on-site power station and the fuel facilities. As Nick mentioned earlier, this will be on-site power generation due to the distance to the national grid being that far. Moving on to tailings filtration and the actual deposit.
We can see on this map again, it's all quite close to the other infrastructure. The tailings filtration plant is approximately 1 kilometer away from the processing facility. The tailings will be transported hydraulically to the tailings filter plant, where it will be filtered. And then from that point, it will be handled with conventional trucks and placed on the tailings storage facility. So the main criteria for the TSF, the first thing we wanted to do was to avoid the site being not the first thing.
This was important for us to avoid the site being tailings constrained, and we wanted to limit the footprint. So from that perspective, filter tailings was the best option for us. We wanted to limit or eliminate completely any infrastructure downstream this particular facility, which we've managed to do in the layout. We wanted to avoid any upstream piling storage facilities. We know that a high portion of failures are associated with this particular construction methodology.
So we went for something that we believe is the best available technology in terms of tailings deposition, which deals with the use of vertical plate filters for tailings compression. This allows us to improve geotechnical and geotechnical stability of the tailings in the short and long term post closure as well. Using filter tailings allows us to reduce water consumption, and I am very happy to say that the water requirements for this plant is about 12 liters per second, so it's extremely low. So we're in an area where water is quite scarce, and we're really trying to optimize the use of that water as fast as possible. So just for some of those on the call who may not be familiar with filtered dry stack tailings, I've just got a couple of photos here, the first being conventional hydraulically placed tailings, and we can see that, that is contains a lot of water.
On the top right hand side, we can see an operating dry stacking in Chile, and you can see you can easily maneuver on that with heavy mechanized equipment. On the left bottom, you can see filter cake. It's soil like in nature. And then we've got some of our test results. So that shows the largest mortar tailings at moisture content of 15.7%.
So this is really going to be quite a geotechnically stable facility over long term because there's no we're trying to reduce the moisture and water content as fast as possible. It's just a schematic of what the actual tailings filtration plant will look like. We need 2 tailings filters to deal with the capacity, but we've decided to that we will install a third filter just to make sure that we've got sufficient redundancy in the system to deal with any eventualities. This also response also decoupled from the primary facility, the process facility. We've got surge capacity, so this can continue to operate independently of the actual processing plant.
Some design details. So the TSF has been designed with a for a capacity of 24,100,000 tonnes. And overall, the height of this facility will be less than 40 meters. And again, I just want to highlight that it's compacted. We've got a liner installed.
So this is really a best available technology design. In terms of access roads to sites and distances from the airport and port facilities from the firstly, the main the capital city of the Otacama province, and we're about 3 30 kilometers away, and that's from Copiapo. We're 180 kilometers away from El Salvador Airport. The port of Angamos, which will serve as the main entry point for especially for the construction phase, is about 850 kilometers away. But there are also other port facilities that are located a bit closer, like the Wasco, the port of Wasco.
In terms of the site access road, all of this is existing, so there's no big expenditure required to construct access roads. The only thing that we need to focus on as part of the project is internal roads. So there's no significant expenditure in that regard. Moving on to power and fuel. So the power station and fuel station is in the top right hand corner of this slide, and it's quite a modular design.
Initially, we'll focus on diesel generators. The objective is to get this plant away with a technically proven solution. And from that point, we'll start to introduce renewable energy as per our strategy that we've developed. We're more than 100 kilometers away from the grid. We believe that nonconventional renewable energy is a very, very likely option for us.
But regardless of this, we need 100% thermal generation capacity to operate this plant during night, obviously. So the base case considers diesel power station, of which we'll install about 17.5 Megawatts. That's installed capacity. Then the actual requirement is close to 13 Megawatts, 12 to 13 Megawatts on an average basis, and that will be operated under boot contract modality. And then we'll continue with staged introduction of nonconventional renewable energies, starting with nonprocess loads.
So this is the renewable energy strategy, and we can see we following the plant ramp up with the amount of renewable energy we plan to incorporate for the project. Our final target being to generate about 20% of total energy consumption by renewable energy sources, approximately 2 years after we commissioned the plant. Okay. So there are various benefits for going with the secure the stage approach, and that is basically that we're not the intent is not to complicate the actual construction of and commissioning of the processing facility. We want to get that away and afterwards start with the construction of the renewable energy facilities for the project and just quickly move through this.
We envisage energy savings of approximately $0.75 per tonne once we have this strategy fully implemented. And that's not that hasn't been considered in the actual project financials to date. In terms of water supply, we dependent on groundwater. That's located approximately 12 kilometers away from the processing facility. We've already got water price granted at 114 liters per second.
The current demand for the plant is only about 30 liters per second. The water will be sourced from 2 main wells. And the water quality is generally of good conditions. TDS is below 1,000, so we're quite fortunate in that regard. For portable water, we plan to install a reverse osmosis plant.
For sustainable development, I'll give it back to Max.
Okay. Thank you, Francois. Okay. In terms of safety and health management, we have been working in preparation to this project for many, many years. We have had exploration activities and also early construction activities at site for a long time.
Therefore, it has allowed us to experiment the conditions of the site and the conditions of the altitude. So we got a very mature risk management process in place. We got a very good clinic facilities taking care of, in particular, the altitude problems. We have an emergency brigade already in place. And also, we have incorporated in the last year the proactive measures and practices with our workforce.
So we are working with 1st class contractors or integrators like Fluor. So we have already integrated a safety manual for the project, taking into consideration both companies' high standards. In terms of environmental, we have focused mainly in the baseline studies in recent years to feed our EIA feasibility study. We have also built a very robust hydrogeological model. A lot of activity and a lot of drilling has been done at site to understand very well the groundwater.
And we have been also setting the foundations for climate change management. And that has been incorporated into the technology we are including in the project. And of course, we got the day to day management of environmental management, like waste management and compliance to the permits we have already in place. In terms of the EIA process, as I mentioned before, we have introduced or submitted to the authority the EIA document last July. Since then, we have received the reason to introduce the EIA is an alteration and loss of the Chinchilla habitat.
Chinchilla is a specialty that is an endangered species declared in Chile. Therefore, that triggered the reason to enter an EIA. We have received the first document of questions and observation from the authority last October. Since then, the team has been working to answer all these observations and questions. And in the meantime, we have also in January, there's been declared indigenous consultation by the authority.
We want to consult with some of the indigenous community that is close by the road we're going to use if they are in agreement with the project and the measures we are implementing for them. The indigenous consultation was finally closed last week with a letter from the community indicating that they have already negotiated or agreed with us what are the measures and activities they're going to do together. We got a long term agreement with this community. So therefore, that was a unique case in Chile where indigenous consultation is closed by the request of the same community. We as I mentioned before, we are ready to present the addendum of the first questions and observations.
And if everything goes well, we're going to be introducing this by the end of this week. In terms of project execution strategy, just a quick overview of the schedule of the project. As Nick mentioned, we intend to go to construction in the Q4 of 2020 if we got all the permits already in place. And we have work a schedule. I'm not going to go into the detail, but this is a schedule that takes into account the weather conditions and the altitude and also the construction strategy that we have designed for the project that is mainly basically in modularization and doing as many activities as we can outside of the project.
As we mentioned, considering all the contingencies, we are expecting to have the first gold in the Q1 of 2023. In terms of the results of the business case, as it's been mentioned, the CapEx is $834,000,000 December 2018 money terms. This is a split of the CapEx. As we can see, around 20% of the CapEx is related to the pre stripping, and the process plant is 38%. The rest is the different facilities, owner cost and utilities.
In terms of the all in sustaining cost, there is also a graph of the split where the cost is. I'm not going to go into that detail in the presentation. In terms of metal production, as we mentioned before, we got the 1st 7 years with very, very high production. And after that, we are producing we are taking the stocks with lower grade. And you can see that during these first 7 years, we got also a very low all in sustaining cost.
In terms of we have also included here the predevelopment cost. We're going to spend $80,000,000 between that was between January this year until the sanction of the project, which is after that is $834,000,000 The all in sustaining cost, as I mentioned, it was $545,000,000 And the all in cost, including the initial CapEx, $7.85 per equivalent ounce. Free cash flow margin of 46%. And the NPV, that is based in $1200 gold. This is our deck for the project, not taking into account today's gold price.
The NPV will be $510,000,000
and the
IRR close to 22 percent at $100 gold and $17.5 receivable. If we consider the discounted NPV at today's or that was January, it's $402,000,000 still a very robust project. That's including the $80,000,000 of Pirugel. I will hand over to Nick to talk about the next steps.
Thank you very much, Max. So obviously, there's been a lot of work ongoing to get us to this point. But clearly, as you can see, we're still around about 18 months away from what we'd hope to be a construction start. And as Max has mentioned, there's obviously permits and so on. There's the feedback from the authorities on the EIA.
So we're working through that but so far so good. So the first and most important milestone for us to get to is to get that EIA approval. As we mentioned earlier, it was formally accepted in July of last year. So we would expect to have that in place or be well by middle of next year. In the meantime, we'll continue doing all of the preparatory work so that we can do a construction start.
And key towards that is doing the detailed engineering to make sure that we really firm up all of the activities, the sequence of activities, and also make sure we understand the detail behind all of that. That will de risk the project significantly and make sure that we can hit the schedule that Max briefly talked about when he showed the project execution plan timeframes. That will be the work that is included in that $80,000,000 or so that Max has talked about to get us to that point where we can start the construction of the project. In addition, obviously, a lot of people have asked us this on the road when we first put out the feasibility study results in the maiden reserve. How are we going to fund this particular project?
As you can see from the project, the good news is it's very robust. I think you'll find that this project still looks pretty good at prices below 1200. You can see it's a short payback period. Because of the accelerated mining strategy, we are able to preferentially feed the higher grade in the earlier part of the mine schedule. So from a financial perspective, there shouldn't be a high risk project to finance.
So the good news there is that this is something that I think even at fairly conservative prices, we should be able to come up with a funding strategy that works for us. We don't know exactly what that strategy is going to be at this stage. What I can share with you is that we are evaluating a number of different strategies. We may bring in a partner to partner with us. That doesn't necessarily mean it has to be a fully fledged joint venture.
It could be a passive partner. It could be a strong technical partner.
We're going to look at
all of these options. So we haven't locked ourselves into that. But clearly, as we prepare ourselves for a final board approval, which would obviously incorporate a funding strategy. We're going to be working through that. We've got time.
Bear in mind that the EIA, as I've mentioned, we're still a year away at least from getting that approval in all likelihood unless of course we get it earlier, but that would be a good issue to deal with. It wouldn't be a bad issue to deal with. So we've got time to work through these issues and we'll figure out the best strategy and obviously taking into account where Goldfields is as a company, what it wants to do. But certainly, this is the kind of project and I just want to reiterate what Max and the team have said here today. This is the kind of project that ticks all of the boxes in terms of the Goldfield strategy.
It's a long life operation. It's 10 years plus. It's low cost. It's in a jurisdiction that we like and we've been busy in for over 10 years. We've been in Chile now for a good 10 years or plus.
So we've really started to learn a lot about the jurisdiction. As you've heard, it's in a belt that is very prospective and contains multimillion ounce deposits that just got bigger over time as Diego pointed out to you earlier in the presentation. So the funding strategy is key. We'll have to decide whether we go it alone or whether we go with a partner or we look at other innovative financing techniques. But there's a team working on that in tandem with all of the work that Max and his team are doing to get this project ready for a construct decision.
So final board approval of course would be when we get the final environmental impact assessment. We'll have to update our numbers obviously because as you heard the project is stated in quarter 4 2018 terms. So when we take it to the board for final approval, we'll have to assess whether there's any impact of any escalation or other changes, which obviously we can't discount between now and when we have a construction approval and a construction start. Lastly, let's just bear in mind, Solaris Norte is only a small part of the total land package that we have here. And as we've mentioned earlier, there was a slide you can see that we have a lot of ground around us that is very prospective.
So whilst we're doing all this work and getting the project ready to go, at the same time, we're also doing district exploration. We're actively drilling a number of targets. It's early days, but so far it looks encouraging. And I think over time, there's every reason to believe that we'll add to this project. And certainly from where I sit and the team, we see Solaris Naughty as the first step in what will be a much bigger land package that is exploited for the benefit of Goldfield shareholders over time.
So with that, I think it's probably a good time for us to close and leave now the time that we do have. We've gone through this in a reasonable amount of time, just about an hour. We'd like to leave time now for questions. Bear in mind, Lucho Rivera is here as well, who is the regional head, in South America. He's based here in Lima, of course.
Abhiscar is here. Max and, Francois and Diego you've heard from of course from myself. So with that, we're going to hand it back to questions which possibly Avishka will monitor for us. I will.
I'm going to ask them 1 at a time, I suppose, is the best way. Firstly, James Bell from RBC. I see the study metrics and reserves used 17.50 silver, which is above the spot price of 15 $17 If you run 1300 gold and spot silver, how do the metrics look? Is the project sensitive to moves in silver price? Max?
Silver at the study prices account for approximately 10% of the overall project value. So I think there's probably about a 15% change between the study price we've used for silver and spot. So therefore, it's not sensitive. So it wouldn't move the project metrics in any significant way.
Okay. Can you talk about the trade off between contractor versus owner mining given potential mine life extensions that projects or that deposits like this have? Are they contracts that are successfully operated El Gio Solaris and Rotating Engineering?
Yes. So firstly, we need to realize that goldfields doesn't have any active operations in Chile. So that was a key factor in our decision to go with contractor mining. That, coupled with the fact that we wanted to keep initial CapEx under control, led us to contract the mining. In terms of contractors operating at this elevation, Chile is a mining country with significant copper deposits in the Andes.
So there are a number of contractors operating at similar altitudes, and it's something that the industry here is really good at operating at those sort of altitudes. So no, we're definitely not outside the envelope as far as that's concerned.
Okay. And last one from James Earl. How much project debt do you think the project can handle versus the initial capital? Can you also talk about the potential terms you would consider as acceptable to Goldfields and partnering with another miner?
Okay. I'll answer that question. Certainly, if you looked at conventional project financing, probably with a degree of commodity hedging put in place, this project could probably be financed through conventional project financing. Given the fact that there's a 2.2 year payback, we wouldn't think that that would be a challenge for us. And certainly initial indications from the market here in South America is there'd be an appetite to finance a project like this.
But I think
what we have to do here is not just look at the project, but look at the impact on the greater Goldfields and the fact that we need to consider what other commitments we've got. So that's why we're going to be looking at other opportunities. So certainly it could be project finance and we're not saying that we're discounting that as an option. In terms of how much would we give away and what sort of deal would we want, that can only be assessed once we and if we test the market. So one of the things we may consider is to determine what we think the market might value this project at some point over the next 6 months.
But at this stage, we're not going to commit to any particular route or to any particular outcome. I think it's fair to say, James, that the work is all ahead of us. And once we've done that, we'll come back and give a better indication. The point is we've got time. It's not something I think that has to be sorted out in the next 3 months.
But certainly from my perspective by the end of the year, we'd need to have a strong indication as to where we are. Thank you.
Okay. I've got 2 from Yathesh at Macquarie. With the SMA taking a hard stance on Kinross and Barrick's operations on polluting the environment, How confident are you in terms of your environmental management plans with a specific focus on water management? What measures are in place to circumvent any pollution of groundwater?
Okay. That's a good question. Of course, during this project study, we have taken into consideration where we are. I mean Atacama is a region, is a desert. I mean, the water is a big issue.
So we have taken this very, very seriously. I just want to point out some key differences here. The project you just mentioned are located in a different basin, and they are located on top of the basin of the Copiapo River. And Copiapo River feeds into downstream into the farming and also into the city. It's a very, very sensitive area.
They have some issues there related to infiltration and some other acquisitions. In our case, just to differentiate is that we are located in a closed basin up in the Salar Grande. This is a basin where we are the only one sitting in that basin. There's no other commercial activity or no human activity in the basin. The closest or the near community people is 65 kilometers away in a different 2 or 3 basins downstream.
So with regards to water, we are the only users. We have obtained the water rights and also deal with the authority to protect that basin in terms of being the owners of all the rice. As Francois mentioned, we are using very, very small quantity of water. We're going to use we got 114 liters per second water rights already obtained. We are asking for 30 liters per second for the necessities of the plant and the different activities like the mine and other infrastructures.
We have also included the latest technology, as also mentioned here, in terms of tailings filtration. In order to reduce the minimum possible water. We have included without the need to do it just to avoid having any issues with the recent experience. We have included a membrane underneath the stacked dry and compacted tailings. So which is it wasn't necessary from the pure technical point of view.
And also we have done a lot of work in terms of geochemistry in our waste dumps to prove and we got very well developed models to prove that there is very, very, very low probability of impact in the ground work.
Okay. One more from Yatish. In years 45, would there be potential to consider an underground transition, given the ore body is open at depth? If so, is there implications from a processing perspective, if you transition from oxides to sulfides? Is the plant being constructed on a modular basis?
You want to answer that?
Yes. At this stage, the process flow sheet caters for oxide ores only. The ore, as I mentioned, is 98% oxide, so it's entirely driven by that. If we were to I think at this stage, what we require for the sulfides would be some deep drilling. So there's more geological information that would be required for us to make any reasonable assessment of that.
I think there's definitely a critical mass of oxides to get this project underway, and I think the sulfides option will be explored further down the road.
Can I just add to what Francois said? And it's coming back to the district exploration. You know given the fact that we have a number of concessions within 20 kilometer radius to the plant with good terrain and topography It would be more logical for us to look for shallower oxides around us than to go deeper below the existing operations. So if anything, the greater likelihood is for us to be adding incremental oxides from the concessions around us and that speaks to the district exploration program and that would probably be the first preference for us and I think there's a lot there that could keep us busy for many years if we're successful in the exploration work that we're currently busy with. Thank you.
Okay. I've got a whole bunch of questions from Victor Flores. I'm going to ask them one at a time because they're quicker that way. Could you please provide nominal plant capacity in tonnes per year?
Yes. The plant capacity is 2,000,000 tonnes per annum, so it's a fairly small front end to the plant. Maybe just on the back end, there's going to be a significant amount of ounces coming out. So the plant's been designed to push out about 5,000,000 ounces of gold and silver combined, but it's 2,000,000 tonnes per annum.
And then can you provide unit costs in terms of mining cost per tonne moved, processing cost per tonne processed and then G and A in dollars per year?
So firstly, in terms of mining cost, life of mining cost is $2.28 per tonne. The processing cost is $35 just over $35 per ton of life of mine. And then finally, G and A an average basis is $25,000,000 per year.
Sustaining capital, dollars 1,000,000 per year over life of mine and then closure costs in dollars 1,000,000.
Sorry, just to add that what Francois said, these are based in interim quotes.
In terms of sustaining CapEx, sustaining CapEx is just below $70,000,000 over life of mine, and closure cost has been estimated at $78,300,000 And I just want to point out that number is heavily influenced by the amount of rainfall or lack of water on-site. So there's no effluent from site. So we don't have large water treatment requirements at end of life. So that definitely impacts the closure burden. As I said, that's $78,000,000
Okay. Assumptions on ore hardness and assumptions on power cost?
Okay. All hardness, we've done extensive combination circuit test work. The ore is classified as between medium to moderate hardness. So if we look at A cross B type values, it's in the 40 roundabout the 40 ranges. So it's definitely not a challenge.
It's nothing like we have at some of our other operations, I'm glad to say, in West Africa, for example. So it's quite manageable. In terms of power cost, the study was performed with 100% diesel power, and the cost we used for the study considers diesel at $70 per barrel Sorry, yes, oil price of $70 per barrel, which roughly translates to $0.70 per liter of diesel, and that gives us a power cost of $0.28 just over $0.28 per kilowatt hour, yes.
Okay. And then last one for Victor. What proportion of cost is U. S. Dollars versus other currency?
[SPEAKER UNIDENTIFIED
COMPANY REPRESENTATIVE:] The current estimate is that between 35% 40 percent is U. S.-based and the remainder will be mostly CLP of Chilean peso.
Thank you, Victor. Rich Howard, question from him.
That's the sale of the royalty. Well, this process is independent to us. But just to mention that we currently conserve the same rights we have before the sale of that royalty, which is a 2% NSR. Is that NSR? NSR.
And to divide the 1% by,
I think, $6,000,000
once we are in production. And so basically it's that. So we are concerning the same contract structure we have before the selling of that.
Yes. I think the point is there's no commercial impact on us.
Yes. That's included in the financial model.
Okay. Then Patrick Mann, what is the biggest risk to project delivery?
Well, I would say that, and this is already considering the schedule, is always permitting. Chile is we've got a lot of regulations and a lot of permits that we need to go through. From the technical point of view, I think we've got a very good project. It's very mature. We've been in Stylen for more than 3 years.
We've got very first class contractors and consultants, and we've been advancing detailed engineering. So I think we're going to be in the unique position compared to other projects. When we go to construction, we're going to have most of the engineering already done. So from the technical point of view, I think we are I think the risk is low. So the biggest risk is the delay on the permitting, I would say.
Okay. Then I've got a hold out again from Adrian Hammond, Standard Bank. Does this project represent growth or replacement for Goldfields?
Yes. So Adrian, I would say that we've mentioned before that we have a solid profile over the next 10 years of about 2,000,000 ounces for Goldfields. That does not include Solaris Norte. That's just on the existing operations with Gruyere coming into production in June and with the demand ramp up which is happening as we speak and of course the base load from everywhere else. So that 2,000,000 ounces over 10 years did not assume that Solaris Norte went ahead.
So if Solaris Norte went ahead and if we did 100% ourselves then as you can see particularly in the 1st 7 years you'd be adding over 400,000 ounce a year of production to the base. And obviously, if we did a deal that was say fifty-fifty with somebody else, then obviously, you'd be adding half those ounces. So essentially this would be a growth in the production ounces for the group if we go ahead with this.
Would Gulf is lift its net debt to EBITDA threshold to help fund the project and to what level?
Yes. So the beauty of this project is that essentially the big dollars only start happening from the beginning of 2021. And as you've heard from Max and the team, the project build is just over 2 years. So we'd be spending of the order of that $800,000,000 at a rate of about $400,000,000 a year roughly. By that time, we have finished all of the project work at Damang.
We've finished all the project work at Korea. Capital would be less. And so we'd be in a good position in terms of lower capital to absorb this. In addition, as we've mentioned before, we would expect Goldfields all things being equal, assuming that the market prices are roughly where they are now, We would expect goldfields over the next 18 months particularly when Grier gets into production second half of the year to be cash positive and for us to be able to reduce our debt between then and when this project starts to be funded. So I think we'll be in a good position to assess.
But at the same time, we would take a very hard look at this project before we committed to doing 100% of it on our own. We'd look very carefully at where the market is, where we are and make sure that we can comfortably do this with headroom to spare. We would never fund this project by pushing the limits here. We do this in a way that we could comfortably do. And we've got time.
The beauty here is we've got time. We don't have to make that call today. We'll make that call I'm pretty sure in the next 12 to 18 months before we start and that will be determining the right answer for us going forward.
Okay. Have you approached potential partners? And if so, would you want to remain the operator? We
have not followed an active process at this stage of soliciting interest from potential partners. But what I can tell you is there's been no lack of interest unsolicited that is from companies that would wish to partner with us. So I don't think this would be a challenge in finding a partner. In terms of operatorship, I think our preference would be to operate. But that said, if we get the right technical partner, we would obviously have to look at all of the commercial aspects in any kind of deal where we are not the operators.
But I think our first prize particularly given the fact that we see Solaris as being the start of something much bigger in the district, it would be preferable for us to be operators. But again, there's no hard and fast lines in the sand at this stage.
Okay. Max, I'm not sure if you want to add to this. What are the key project risks identified? Do you want to talk more about it?
Well, at this stage, most of the project risks identified are related to the EIA process the delay that this can cause into the process. And they are mainly related to the questions and observation we are receiving from the authority related to how we're going to handle the Chinchilla impact, how we're going to handle the community, the indigenous communities, and questions about water. So these are the main risks. We got other risks, of course, associated the altitude and the weather conditions that are being built into the project execution strategy and also into the scale. The main risk, the number one risk, of course, in our list is related to safety and related to the long distance we need to drive to site.
And that's related to potential accident transporting people. So there is no any specific or high risk other than those.
Okay. Other costs provided net of silver credits?
The costs are reported on a gold equivalent basis, so Solvay is included.
Okay. Potential upside to reserves within the next 2 years?
Well, we're still as we could see, even some sections that we went through, Agua Marga still have potential. It's still open, the deposit. But obviously, I'm very close to what we call near mine around Salares. There's a couple of targets that can provide some additional resource first and then reserves to the project, the life of mine.
Yes. The thing is year on year, we have been improving the project. The more we drill, the more we find, As Diego mentioned, we need to close this for the EIA, for the feasibility study at some point in time, but still high potential to grow this in the future years.
Okay. Tax and royalty rates?
That's what you
want to
say. So the corporate income tax in Chile is 27%. On top of that, there's a mining tax, which really functions as a royalty. The second part of the question is the royalty, yes. We've put a 3rd party royalty on the project, but there are no government imposed royalties.
That royalty third party royalty is 1% on the project that will that's after having bought back the additional 2nd percent, as Max explained earlier.
Okay. And then what contingency is built into the CapEx schedule?
We got yes. Within the contingency or the capital, the schedule you mentioned?
Capital. Quantip.
Okay. I think we got $160,000,000 is around 15% contingency.
Okay. And that's it from Adrian. And the last lot of questions I have is from Tanya at Scotia. Some of them have been answered already, so I won't go to those. Why is the tailings filter facility separate from the processing plants?
That was a deliberate design point. What we wanted to do is find the optimal site for tailings filtration on the property, and we've done that looking at geology, hydrogeology. And then the next point was to see what is the best means of transporting tailings to that particular point. We had 2 options, either install the tailings filtration plant at the processing facility, but then we had to truck the tailings over native soil to the tailings storage facility, and we thought it was a much better option to pump it hydraulically to the tailings filter facility, filter it there and then that being right adjacent to the facility, limit the transport of the actual dry tailings to the minimum amount possible. So we definitely think it's the best design option for us.
Okay. And the other unanswered one from Tanja is what currency assumption have you used? And how sensitive is it to currency change?
Yes. We have been using 6.51 basis per dollar. Yes, we mentioned more than 60% around the cost of project is in Chilean pesos, so it is it has some sensitivity on the machinery.
Okay. And just a reminder, if you want to ask a question, please send them to the webcast on the website. And then Andrew Williams from Sun Valley, he's asking, are there any contractor mining cost benchmarks that are comparable to the 2.28 you quoted? And is any of the material free dig?
Firstly, the question of free dig. Yes, we've got quite a significant amount of steam metered alteration, which is a weak alteration. We've got about 40,000,000 tonnes between Bridgeprinspoal and AguaMarwa combined, and most of that material will be free big. In terms of benchmarking, we've done a number of studies. Firstly, in the first instance, we invited fixed and firm quotes from multiple contractors.
Secondly, we prepared a shadow bit with our mining consultant. And thirdly, we had an independent peer review by an expert with a significant database of mining cost in Chile. And we're quite confident that the values that we're using in the model is representative of current pricing in Chile.
Okay. That's it from the webcast. If you have any other questions, please email me and I will get the team to come back to you. Yeah. Well, I
just want to say thanks, everybody, for dialing in and for all of the very good detailed questions that we've had as a follow on from the presentation. We believe that this is one of the more exciting projects in our portfolio and certainly it represents something that will be something we can add on to I guess over time. We really don't see this project as being what you see is what you get. We see this as being the first step in a growth strategy in a district that has a lot of potential. A lot of work ahead of us of course.
We got to get the project now to a point where we can get it to a construction decision. A lot of work there. As Max has said, we're doing a lot of work planning the construction and in particular adopting a strategy of making sure that we can do as much work off-site in terms of fabrication as opposed to doing it on-site. That's going to make things easier, cheaper and less risky. So the team is working on all of those activities between now and hopefully when we can start building the mine in the spring of next year.
So with that, I just want to thank everybody for joining us today. I want to thank the team that have come up from Chile, from Santiago to present. Lucho and his team here in Lima in providing all of the overall support and of course Avishka for helping us to coordinate this. With that, we want to say thank you very much. Have a great day.