Desert Gold Ventures (TSXV: DAU) is proposing a modest project compared to peers in junta-led Mali to build on smaller costs and scale.Named after the Senegal Mali Shear Zone it sits on, the open-pit SMSZ would cost $15 million to start mining part of the resource, according to a preliminary economic assessment (PEA) released Thursday. SMSZ has an after-tax net present value of $24 million and the after-tax internal rate of return would be 34%. SMSZ is about 460 km west of the capital Bamako.“With less that 10% of the SMSZ project’s gold resources incorporated into this study, there is tremendous opportunity to improve project economics and materially grow this operation over time,” CEO Jared Scharf said in a release.“We have intentionally designed a mining solution that is both modular and flexible from a processing perspective giving us maximum operational optionality as we move forward.”Optimism despite politicsSMSZ may be just small enough to slide under the military government’s radar for taxing and extorting. Over the last year, the regime has detained executives of Barrick Mining (TSX: ABX, NYSE: B) and Resolute Mining (ASX:RSG) amid payment disputes, while Barrick’s gold has been seized. Barrick has taken its case to international arbitration.Desert Gold shares were down 13% to C$0.07 apiece in the early afternoon on Thursday in Toronto, for a market capitalization of C$18 million.Desert Gold hasn’t been affected by any of the junta’s policies, “other than headline news hurting our share price, which is admittedly very frustrating,” Scharf said in an email to The Northern Miner.“We have a valid mining permit and our intention is to move forward and start producing gold asap,” he said. “Jurisdictional risk is cyclical and there will be better times ahead in Mali. We’re going to be playing the long game and wait this one out. Not walking away from one of the best land packages in West Africa.”SMSZ could produce 220,000 tonnes per year over more than a 17-year life at all-in sustaining costs of $1,352 per ounce. Total payable production would total 97,600 ounces.Modular developmentThe mine plan consists of two stages, starting with open-pit operations at SMSZ’s Barani East and then at the Gourbassi deposits. A modular gravity and carbon-in-leach plant would be commissioned at Barani and then moved to Gourbassi. That strategy helps keep costs lower and avoids duplicating infrastructure, the company said.The Barani East small mine permit allows for up to 36,000 tonnes of ore per month.“This means we have the ability to double production from the current PEA plan of [18,000 tonnes] per month,” Scharf said. “Given the numerous brownfield exploration targets within close proximity to the Barani starter pit, management believes there is a high likelihood of growing this operation materially over time.”SMSZ hosts 11.12 million measured and indicated tonnes grading 0.94 gram gold for 336,800 contained oz., and 27.16 million inferred tonnes at 1.01 grams gold for 879,900 ounces, according to the PEA.
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