Hounde's up front costs at over $300m is a big hurdle for an explorer such as AMX to meet. At its currrent share price there would be massive dilution to shareholders to raise the funds so the returns to shareholders would be very poor. AMX's project simply will not go ahead until the POG is consistently higher - say USD1600/ounce. And once that happens the upside would be limited for years because they would need to hedge production over an extended period to cover their loans.
IMO EVR will not go ahead with Hounde in the near term. They will get all the approvals in place and need to wait several years to pay off their existing high net debt (around USD180m). EVR is barely covering all of its outlays (excluding the Agbou mine construction) from its existing three mines at the current POG. They urgently need to get their costs down more. However, I note that their costs are well below what PRU is achieving because it has a much higher average ore grade across its mines.
We need to be realistic about AMX. It is in trouble and there is a question mark about the ability of its management team to steer it successfully in the low gold price environment. I have strong doubts about it. If I was an AMX holder and wanted to invest in a BF explorer I would be shifting my money to GRY or OBS which seem safer, but also have their own issues.
loki (I do not hold any shares in the above companies)
AMX Price at posting:
9.8¢ Sentiment: None Disclosure: Not Held
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