Payback of 2.2 years indicates that the project can cover all it's capital development costs from the profits of the first 2.2 years. The longer the life after that, the more profit is able to be returned to shareholders or fund additional growth. In reality, usually companies don't pay off the loans until they are due and can report profitability once the cashflow is positive. Any additional potential tonnes for the project from new discoveries would add cream to the pfs figures.
It's not all about grade, as has been mentioned here, and 2+ g/t is not considered low in todays gold mines. Resolute ran the mine at similar grades and with a gold price hovering around the $300 level, and closed in the early 2000s. For example, an underground operation will generally have significantly higher mining costs per tonne than open pit, and therefore needs a higher grade. A low strip ratio open pit mine can be extremely profitable at low grades as the cost per tonne of ore is low.
Cost per ounce produced is King! It's the best comparative measure when taken into consideration with the capital development cost.
PVM Price at posting:
87.5¢ Sentiment: None Disclosure: Held
