closer look at the dfs part 2

Before you question my motives, i will say that i do not intend to buy MYG as i believe it to be overpriced and not good risk/reward. At the right price maybe worthwhile but i won't disclose my target. I am merely sharing my research. It may be wrong or right but it is just mine. Maybe it will be useful for some but i really believe this company is over hyped.

First of all many of you think the cash costs are 600+$/oz. This is right and wrong. Right in the sense that it is calculated the right way. Wrong in the sense that it is not giving a true picture. Let me elaborate.

The above is the numbers from DRM. Notice that they have two cash cost. C1 and C2. C1 is onsite costs, C2 includes all sustaining capital. Some companies take out royalty but i think they should be included. When there is quite a bit of on-going capex, i think it is prudent that companies show both C1 and C2. This is because on one side you have initial capex and then you have the on-going capex built into operating cost. If you just say C1 cost and initial capex it can give the wrong idea as on-going capex is ignored. So what is the true cost? I will get into that later.

2nd issue. Gold price. First of all, MYG is one of the few that uses a 1750$ gold price while peers are using 1500-1600$. They have a 1850$ hedge i understand but that is only 50000oz and realistically this is a small portion of total gold mined. The rest is unhedged. MYG numbers would look drastically different if they used 1600$ gold. In fact 50000oz gold would give them an advantage of 32$ over peers so i tend to use 1632$ to do a peer comparison. A higher gold price makes the IRR% better and NPV better. In fact if you didn't notice the BFS used a gold price of 1700$ while the revised BFS used 1750$. 50$ jump to inflate the numbers. Bet you didn't notice that.

3rd issue
New capex that went unnoticed. Below is table X.

In the revised DFS they said that capex was largely unchanged. Then what on earth is this? Looking at the notes i see the following.

"Development costs for the underground mine are shown separately at $29 million, however, they are funded out
of Operating Cash Flow over the initial seven and a half (7½) year Life of Mine (Table 7) and not part of the
required start-up capital."

Ok then i ask why isn't this added in the operating cost then? If you look at the table X, you will notice that it is totally separate from operating cost.

So what is the true cash cost including royalties, sustaining capital?
The answer is simple. Find out total operating cost and total Au equivalent recovered.

From table X, we get 412m$ but underground development needs to be included so total operating cost is 441m$ while Au eq recovered is 479,685oz.

Total cash cost is actually 919$/oz.

4th issue. Interest payable and non-disclosure of payback period
Interest payable over 5 years is 9m$. Why is this so low? Assuming they get 100m$ finance at 5% finance, this is already 5m$ in one year let alone 5 years. Payback period is not mentioned in the BFS. Why? Cash flow sheet says it won't be repaid till 2018.

A blowout in capex or opex would be disastrous for MYG mainly due to the need of substantial money during the underground stage around year 2-3. 919$/oz excludes interest expense as we don't know the finance terms yet. Maybe this explains why finance is taking awhile.

DYOR. This is just my opinion. Could be wrong. You be the judge.