St Augustine PFS confirms ‘world-class’ potential of Kingking project with $4.2B value

Shares of St. Augustine Gold and Copper (TSX: SAU) rose at market open Thursday following the release of an updated preliminary feasibility study (PFS) for its flagship project in the Philippines that showcased its potential to be one of the world’s largest copper-gold producers.

The Kingking project, located in Pantukan, Davao de Oro, is projected to produce approximately 4.4 billion lb. of copper and 6.9 million oz. of gold over a 38-year life, according to the new report. Average production in the first five years is expected to be 284 million lb. copper and 333,000 oz. gold.

Michael Regino, chief operating officer of St. Augustine, stated in a press release that the PFS represents a long-awaited milestone for the greenfield project, especially in the context of recent changes to the Philippine mining regulatory structure, which he says “have paved the way for a world-class project development.”

World-class mine

The first five years of production would make Kingking “one of the top 25 worldwide gold producers” and one of the “top 10 copper producing mines” on a copper-equivalent basis, Regino said.

The gold-rich porphyry copper deposit has previously been listed by the Philippine Mines and Geosciences Bureau as one of the nation’s top priority projects. Its total reserves available for milling are estimated at 849 million tonnes grading 0.26% copper and 0.36 g/t gold, plus another 111 million tonnes grading 0.23% copper for leaching only.

Based on its production profile and prices of $4.30/lb. for copper and $2,150 for gold, the PFS estimated a post-tax net present value (discounted at 7%) of $4.18 billion and an internal rate of return of 34.2%, with a payback period of 1.9 years. The initial capital estimate is $2.37 billion, giving the project a benefit-cost ratio of 1.8.

Project director Andrew Russell said with the new PFS, the company believes there is an opportunity to move the Kingking project through the definitive feasibility process, and production can soon be realized.

In comparison, its previous PFS showed a mine life of only 22 years and a lower NPV of $1.8 billion, based on lower production. However, those estimates were completed more than a decade ago.

“This project will produce copper net of by-product credits at one of the lowest rates of any operation worldwide. The tradeoff studies and recommendations provide a clear path to improved efficiencies, levelized production, and operational excellence,” Russell said.

Permitting status

The Kingking project was initially slated to enter production around 2016-2017, but had faced delays due to a combination of regulatory restrictions, including an open-pit mining ban that was lifted in late 2021, and operational disruptions caused by the covid pandemic.

At the time, St. Augustine had secured the project’s environmental permit, which remains valid to this day, but its mineral processing permit has since lapsed. The company said its management is actively working to complete the requirements to secure a renewal of the permit.

In May, the Canadian miner doubled its ownership in the project by acquiring another 40% stake from Nadecor.

Shares of St Augustine Gold and Copper surged to a near 52-week high of C$0.56 during the early hours of trading, before pulling back to C$0.48. The company has a market capitalization of C$583 million ($420m).