Maybe under-owned by some generalists and investors. What would you tell a fund that has never looked at the country?
Well, Morocco is absolutely unique. If you think of a country which has got more tourists than Egypt, has got better surfing and sailing than all of Europe, it has got camel rides like nowhere else in the world, it has got fantastic food, and it has got the best party town in the world called Marrakech, and that is where you work.
You are not in Val-d'Or, you are not in Ouagadougou, you are in Marrakech, going up the mountains to your sites, coming back. It is a country that has been in mining for 2,000 years and more because our first mine was discovered 2,000 years ago by the Roman. They have the largest phosphate production in the world, and they still have 700 years of mine life for coal, pure silver mines, gold mines. It is all there. Antimony. They like mining. It is not they tolerate mining, it is okay. They like mining.
Mining is part of one of their strategic development concept, like values, and they push you to go faster. They want you to invest. They give you a mining permit on a PEA. Once you are permitted, you are permitted for life. Every 10 years, you have to do a report, but it is just an automatic renewal. When you have all of that, it is a tier 1 mining asset. There is no royalty except we bought two properties from the government, from not the government, the development company of the government. So we have a 3% royalty, but that as part of our investment agreement. If you get permits from the state, which we have many, the royalty is zero. The free carried interest is zero. The tax rate on Boumadine over life of mine is 22%. It is a mining culture, it is a mining country.
In an environment where prices are going to be coming up, and not today or yesterday, but commodity prices are coming up, you need a country where mining is not 75% of their revenue. Because then they look at you and you are on the menu.
Like Mr. Carney would say, "If you are not on the menu, you have got to be at the other side of the table." If you are 75% of their revenue, you are on the menu. Mining in Morocco is less than 1%. So there are no changes coming. It is a mining country, and they have schools of mines because of OCP Group with 26,000 employees and 20 mines, and Managem with 10 mines, I have not counted recently, and 8,000 employees. So you have got very, very good people. You have got amazing geology. You have got a tier 1 country that is similar to North America, to Australia.
But there, and I am going to close on that, there was a panel in London not long ago. All the ministers of mines were there. It was a big panel. The final question was, "To you, minister of mine of Canada, how long for permitting?" "7-12 years." "You, mister minister of mine in France, how long?" "Well, 20-25 years." "And you, so many years. And you, madame, the minister of mine from Morocco." "Well, us, it is from two to three months." And it is true. So it makes all the difference in the world. Construction is great. The quality of construction is great. Go and visit Marrakech. It is an open-minded country. It is an open-minded country. It has got 6% GDP growth. It has got bullet trains that we do not even have in North America. It is going to have the FIFA World Cup in 2030.
So look, where else do you want to be? I did Ouagadougou, Conakry, Abidjan, and Bangui, and many others. You know what? I prefer Marrakech.
Yeah. Well, I think we are watching Aya, and we are certainly You are educating us on the merits of operating there. I think Aya, as we have said before, is well-positioned with a first-mover advantage in the country as you grow your relationship with the government there. So maybe now we will shift over to your operating portfolio. Of course, Zgounder, being the flagship operating mine right now, is distinguished by being the only TSX pure-play silver operator. So maybe if you could, you are now heading into this post-expansion, and so what has this ramp-up taught you? Why is there still room on throughput recovery and costs?
Well, it is all about geology. When we arrived, there was 10 million ounces in the resource statement, plus or minus. We did drilling and we have drilled a lot, and we have moved this from 10 million ounces to 100 million ounces. The geology is there, and it is just massive drill programs to come up with your resource model. Then you look at who can build. Locally, the contractors are fantastic. We build at Zgounder a power line that is 72 km long. In Canada, it would have And we did it for CAD 6 million in Morocco. So what we know in Morocco is you trust the local contractors. You do have your engineers of reference and all that, but the local people have built mines. They have built major complex.
Because Morocco is not an open-pit country, we had to train them on open-pit, so we had a bit of dilution at the beginning. The blasting wasn't perfect. We had to bring in expert because they are very good underground miners, like very, very good. Open-pit, but we're back now to where it should be. Look at the construction. We built it in 18 months on time and on budget, maybe even a little bit below budget. Nameplate capacity is 2,700 tons a day, and right now we are, a year later, at 4,000 tons a day. It just shows you the quality of the construction and anybody who's been to site, you've been to site, it's really very well done. Zgounder has got 11-year mine life. It will produce 6 million ounces of silver per year.
Cash cost at about $16, so AISC at $19. It is a machine that will generate, at the current price, $250 million a year of operating cash flow.
Yeah, that's great. Certainly that throughput has been very robust. But the flip side of the story here then is on the resource. What's the exploration story at Zgounder, and do you think that's a conversation that will increase in 2027?
Yeah. We are one of the largest explorer in the world of mining. We have 400 people in geology and in exploration. We have 20 drills turning. We spend $60 million a year . At Zgounder, we're spending $15 million. We have regional play, we have larger play, and we have very close to the mine. We believe that we have extension to the west, to the northeast, and we've done all the work. We've done the geophysics, the geochem, the satellite imagery, and now we're using a lot of AI. We have actually two firms that have all the data and that are reviewing all of the data to give us targets that our team has already, some identified, some not, and we're just going to go and be drilling them. The mine is generating $250 million a year.
We're going to give it CAD 15 million, CAD 20 million a year budget, and we would like to increase the resource past the 11-year mine life to 13, 14, 15. Also, we always look at increasing throughput because right now it's 4,000 ton. We could take it to five, we could take it to six if the resource is there. But we have a very large land package, and it's never been walked. It's never been looked at. You saw recently we bought 10 permits from a family. Sadly, they had spent CAD 15 million on it. They did all the infrastructure. They were looking for manganese. Totally forgot to look at the silver content, copper content, gold content. We paid the family CAD 3 million, no royalty, no payment on resources, CAD 3 million at closing. Got the 10 permits, all the infrastructure, the trucks, the building, everything.
It's 30 km away from Zgounder, and we're seeing already some very interesting silver structures. This is what Morocco is all about, is you got to look at what is there. It's 1,600-km-long default, like the Cadillac Break, and 65% of it has never been walked by a geo. So families are there doing a little bit of artisanal mining, which is by right, so it's sand, it's little quarries, and we can buy a lot of ground and position ourselves. So yeah, Zgounder has got a beautiful exploration story.
Then, moving on to Boumadine. I mean, the company's in the unique position of having a ramped-up cash flowing mine paired with a very promising development project. Of course, at Boumadine, the updated PEA moved the NPV up materially from the first iteration. Can you walk us through what actually drove that and was it price or what are the elements that you were de-risking during the engineering of the resource?
Yes. So Boumadine is a teenager athlete. It's like Coco Gauff at 16 playing in the U.S. Open. She's good, she'll get better, stronger, and she'll win all the tournaments. It's exactly that. Boumadine is a three-year-old project. It has received 320,000 m of drilling. It is a tier 1 asset because it's got 15 billion of in situ value of the resource net of recovery. That's rules definition, net of recovery. What we did is we did a first pass last year, but we were missing 190,000 m of drilling. So we did a first pass where we had drilling but not enough. It was already a mine, but we did 190,000 m additional. We did a new resource update, and we verified the CapEx. So the CapEx have moved up 4%. We verified the OpEx.
We looked at a tighter model for the mine plan, and we changed a little bit the price. Yes, there was a price effect because we doubled the NPV from 1.7 - 3.5. We've increased the internal rate of return from 40 - 93, and that's at the base case, at $3,500 gold and $50 silver. Also because it's a VMS system, it's a volcanic system with a lot of massive sulfide in the concentrate. Massive sulfide or sulfide in the concentrate is sulfuric acid. It's 43% of the rock material. When we sell our pyrite concentrate to Europe, to Asia, to maybe one day North America, they'll produce the gold, they'll produce the silver, lead, and zinc, and they can also produce sulfuric acid. Sulfuric acid went from $100 a ton - $1,000 a ton recently. That's not even in the model yet.
We haven't put that in the model, the value of the acid. It's only the gold, the silver, lead, and zinc, which we recover at 96% through the smelter, and we have an 83% payability. One of the elements that changed in the PEA is the payability. At the first PEA, we were at 73%. The second PEA, the offers were in at 83%. We crush it. There's a ball mill. We float it. We have a pyrite concentrate, a lead concentrate, and a zinc concentrate, which we sell to the end user, which is the smelters. They need that. They need that in the smelters right now all over the world, and we get a good price. That's why it's so robust, because the payback of Boumadine at the base case, the payback is seven months. At the spot price, it's five months.
We're going to invest CAD 500 million. It will give it back to us in six months, five months, and then it will make CAD 1.1 billion a year for currently 14 years mine life, after we've drilled less than 1% of the property. The structure that we're putting into the model, we track it in geophysics for almost 8 km. We've only drilled it on 5.4 km, and we've drilled it down to 600 m knowing that it continues. The best drill hole of the story is as a parallel zone to the main zone. We went through the main zone to the parallel zone. At 700 m, we hit 51 m of 890 g silver equivalent. Boumadine means the father of all deposit in the native language. That's what it means, and that comes from 2,000 years ago.
They knew that this was the biggest deposit probably of the Atlas Mountain, I guess so. But it is a very large system. It's Steffi Graf or Coco Gauff at 16 year old getting better, stronger and playing in the top tournaments.
Well, it's an interesting comparison because actually I had a chance to see Coco Gauff this summer in Toronto. Well, I guess to put it briefly, she won. When you have something good like Boumadine, you don't want to waste any time getting started. We see here that you're looking at targeting construction start in Q4 this year.
Yes.
Yet the feasibility study is not till H2 2027. Why start before the FS, and how are you managing the risk associated with that?
Well, so we've already made the investment decision. It's so good that we've already made the investment decision, but there's certain things that need to be done, like tighter grid for the resource. We need to do this to make sure it's a little bit tighter to make sure we don't have dilution. Then the infrastructure, the power line, the water line, the tailings dam, the camp, the infrastructure, we can start that now. Again, another example, we're building a 92-km power line. We have power at sites, but we have to go high voltage, 50 MW. That is going to cost like CAD 18 million. In Canada, it'd be CAD 150 million. The tailings dam, life of mine tailings dam, how much? For 50,000 ton a year of movement, CAD 8 million life of mine in Morocco. Why? There's a valley where we have permission to use the valley.
We're going to build a wall, and we have life of mine tailings to go there, unless we increase capacity, which we probably will. That's what Morocco is all about, is your water pipeline would cost CAD 200 million, CAD 300 million in North America. There it's going to cost CAD 30 million. The power line will cost CAD 18 million, let's say CAD 20 million. The tailings dam will cost CAD 8 million. The plant is of course going to be not normal because a lot of things are manufactured in Morocco, but we're going to go out on an international RFP. We're going to get bids from Europe, from Morocco, from even China, and then we'll decide what we're going to take. We're starting construction in Q4, in next month on the infrastructure while we're finishing detail engineering to have long lead items purchased mid-year next year.
We are finishing the drilling to have a very tight grid to be able to have a very tight mining strategy because it is going to be 55% open-pit, 46% underground. We need that to be very tight because what have we learned from Zgounder? Very tight drilling because it is not the same geology as Zgounder. It was disseminated, so it was a bit more difficult to follow.
There, the structure is dark, almost black, because it has 4.2% specific gravity, so it is very heavy. It has 4.1% or 4.1 g of gold equivalent per ton, and it is dark compared to the rest, which is pinkish. It will be much easier to mine long-hole. We will increase throughput, and our goal is to really build a 10,000 ton per day nameplate and then do over time what we did at Zgounder, which is increase it 20%, 30%, 40%.
We can pay, and that is the next question. I am sorry, I am jumping your question. All that is funded by Zgounder.
Yeah, that was my next question.
Yeah. All that is funded by Zgounder. We have currently about CAD 200 million in the bank. Zgounder is generating net of all expenses about CAD 170 million a year. We have 2026, what is left? 2027, 2028. The big payments are going to start in 2028, 2029. We also have our banker, EBRD, the European Bank for Reconstruction and Development, which is a DFI bank, so it is extremely nice to deal with them as they are all ESG. KPI are all ESGs, and we have available with them up to about CAD 300 million if needed at very competitive rates. We have the DFI available. We have our own cash flow. All the off-takers would like to put up also a prepayment. We haven't decided exactly how we are going to do it.
We are going to make a final financial decision in Q2 next year to close the financing, like have the CAD 500 million available. CapEx will be CAD 450, so CAD 500, and then we will But we are already starting.
Yeah, it is great to hear, and there is de-risking associated with the fact that you have been there and done that. You have already financed Zgounder. Those paths are well worn. You are repeating them. I see here we have probably time for one quick question from the audience. If anyone has a question, please raise their hand. You know, well, maybe not-
About the food in Morocco, or?
Marrakech, yeah.
Or the biking in Morocco? Great biking.
So, well, maybe in closing, what's the one thing the market misunderstands about Aya?
Well, first of all, when we meet funds, they always say, "Yeah, but permitting is going to be so long." That's always like, say, "No, we're permitted." "Uh, okay. How's that?" "Well, that's the way it is in Morocco." So that they don't understand. And the industry's giving us 25% value of the base case NAV because it's a PEA, and it's normally five years away from construction. So they're giving us a very low value on the NAV of Boumadine, and they're giving us the proper value on Zgounder. But if you look at it on a cash flow basis, by 2030, we will generate net, net CAD 1.1 billion of free cash on a CAD 4 billion market cap, so 25% yield in two and a half years. So it's a 25% yield cash on cash.
At one point, there'll be a readjustment, for sure, because there's got to be the average of our industry is around five, so I think there's a re-rate of about five times. And all of that is de-bugged, de-risked. There's no more geological risk. There's no permitting risk. There's no financing risk. There's a construction risk, which we manage. Government is on side. And the government today announced the new. The palace, the king announced the new government today. A young lady who was the mayor of Marrakech and took Marrakech from a developing city to Ibiza on steroid. And she was now named today the new prime minister. First time ever, a lady lawyer, speaks all the languages, is now the new prime minister to execute the strategy from the palace.
Okay. Well, Benoit, we really appreciate all the extra color here on Zgounder, the jurisdiction, and the growth pipeline. Thank you very much for joining us.