Heritage Gold Talisman prospect looks glittering

Peter Atkinson says the Talisman prospect has a net present valuation of $193 million. Photo / Richard Robinson

Heritage Gold's Talisman prospect on the Coromandel Peninsula is looking like a major commercial discovery, based on figures showing the mine breaks even at A$1000 ($1284) an ounce for gold, well below current gold prices.

The findings follow a review of a scoping study review for the Talisman resource. It concluded "a potentially very robust and highly profitable gold mine" exists at the undeveloped site.

There is "potential for a considerable increase in the geological resource" as further investigation occurs.

The company has 5754ha of exploration and mining tenements close to Newmont Gold's mines at Waihi and the Talisman project is long-awaited.

The Talisman development still requires feasibility studies which won't be completed until early next year.

The Heritage share price rose 16.7 per cent to 2.1 cents on the NZX after the result for the dual-listed company came out shortly before close of trade in New Zealand.

At current gold prices of US$1657.10 ($2012.56), the project offers an internal rate of return of around 70 per cent, Heritage said. Gold prices reached a historic peak at a little over US$1800 an ounce last September.

The project will require environmental and heritage considerations, which the reviewers said was "pivotal in realising the potential in the resource", which may require contracting of a company expert in underground mining.

"The review found that, for the assumptions made, and a 7.5 per cent discount rate, the project has a net present value of A$150 million," Heritage managing director Peter Atkinson said.

"This includes a 25 per cent contingency on all operating costs.

"Overall, the review showed that the project is robust in the price range of A$1200 and A$2000 per ounce of gold and has a break even gold price of under A$1000 an ounce."

Gold has been on upward price trend for more than a decade, stalling in recent months.

"Using the base case assumed gold price of A$1600 an ounce and a silver price of A$30 an ounce (close to current values), the review gives an internal rate of return of over 70 per cent," Atkinson said.