This announcement confirms the views of some posters that the...

This announcement confirms the views of some posters that the resource/reserve model used for the DFS was over-stated with the main issue being the actual ore grade. I suspect that even now with the 8% reduction in grade announced that this downgrade will prove to be too low and that perhaps the average grade turns out to be only around 0.9-1.0 g/t.

Last month they processed ore at around 4.8mtpa on an annualised basis, and they believe they could improve plant performance to around 5.5mtpa. If the ore grade turns out to be around 0.9-1.0 g/t and the gold recovery rate is say 93% then perhaps in the first 6 years production could be in the range of 130,000 - 164,000 ounces per year. Since they reported that they were generating some useful free cash flow over the last 2 months I take that to mean that they will be able to generate some profits, but the extent of this is unclear until costs have firmed up over the coming quarters.

Their half year production estimate is in the range of 75-85k ounces, which works out at around 13,000-15,500 ounces per month for the remainder of this period, at an AISC of USD1175-1350/ounce, but I suspect that they could still be a bit optimistic about achieving the higher end of the production range at present.

Fortunately TIE does not have a lot of net debt and ought to be able to meet these obligations. Debt should be around $AUD 45m (it would have been lower but the AUD keeps falling), while cash/bullion keeps building and is now around $44m, and if this trend continues they should be net cash positive positive by the end of the quarter. I will be interested to see the half year report to find out whether their 31 December 2022 accounts payables has grown from its then $46.4m, an amount which did not seem excessive.

I think we now all recognise that the ore grade estimates in the DFS were wrong, but we do not know if that will prove to be terminal for the company in the next few years. Given the current free cash flow being generated I can not see the company becoming insolvent in the near term, but (all other things being unchanged) if grades were to drop to a much lower level then TIE could get itself into serious financial trouble.

There have been a few warning signs of possible issues, such as the failure of the mooted loan from Taurus, constant grade underperformance, and the recent departure of the CEO, who nevertheless has retained a link with the company via his contract (I wonder what he is getting there and if he has sold his millions of shares now that it would not need to be reported).

As I said in a previous post, TIE needs to do a lot of exploration to ensure its longer term viability, and I would like to see if there is any real life in their leach heap project.

At this point I do not see a reason to panic out of the company, but I will sell if the gold price looks like tanking, costs become excessive or the ore grade drops off even more. My average of around 50 cents/share is not looking too flash now. The next monthly and quarterly updates will be interesting, and a USD POG of $2,500 would make me happy, but its unlikely to arrive in the next 18 months.

GLA.

loki (ouch)