The Phillips River gold project is not likely to be cancelled if the resource super profits tax is implemented in its current form, according to Junior gold and base metals explorer Tectonic Resources.

The $125 million project near the West Australian town of Ravensthorpe, from which the Perth junior hopes to yield 370,000 ounces of gold over 7 1/2 years from 2013, would not be rendered unprofitable by the RSPT, a problem KPMG said would occur to typical gold projects.

Managing director Steve Norregaard said it was projected to gain profits above the long-term bond rate (of about 6 per cent), and would therefore be hit by a greater tax burden, but "we don't believe this will adversely affect our project to the extent we can't get it off the ground. This will be confirmed in modelling to come."

"Tectonic is in a unique situation in that we have significant tax losses which in part mitigate the tax effects early in the project life, which therefore doesn't affect the payback period dramatically."

Based on a November 2009 scoping study, Phillips River is expected to produce $823 million in gross cash over its life for net cash of $283 million.
Tectonic said it has overcome metallurgical issues at its Trilogy deposit and is pursuing a definitive feasibility study by the end of August.

The scoping study showed cash costs of $440 an ounce after byproduct credits, but the managing director said these could be improved by using the renewable resources of the windswept southern WA coast. Tectonic wants to have Australia's first mine to be powered by wind energy.