Fundamentals, page-15

Hi All,

Update number 3, What a crazy week. Added Tailings and Cuca components as well as a little ramble on new announcement. I definitely feel we are on the turn-around of 2018 but DYOR always



Thought I would try to consolidate some of the more pertinent information on OGX, lists of positives and risks as well as my personal opinion on why I think Orinoco is an attractive stock to hold. I have a day job so am just doing chapters each night

EXECUTIVE DIRECTORS AND MANAGEMENT

Jeremy Gray (Managing Director): 23 years in mining. Ex Credit Suisse Melbourne, Morgan Stanley London and Credit Suisse London positioned in mining research and equity teams. Various board appointments as well as positions in merchant banking. Of note he was positioned as Global Head of Basic Materials Equity Research for Standard Chartered PLC. Contributed a number of articles for outlets such as Financial Times.

http://orinocogold.com/company-profile/directors-management/140-jeremy-gray


Joseph Pinto (Chairman): Major OGX Shareholder (Approximately 10%). Practicing Solicitor and Barrister of Supreme Court of NSW. Admitted as a Solicitor of the High Court of Australia. Non-Exec at Tyranna Resources.

http://orinocogold.com/company-profile/directors-management/139-mr-joseph-pinto


Richard Crew (Chief Operating Officer. Site based): Experienced in Open pit and Underground mining in Brazil with knowledge built over 30 years. Ex Consultant General Manager for Sao Bento Group who operate 100,000oz/pa Gold mines. BFS management and Process Plant Construction Management Experience. Various Leading Management and Executive positions in multiple Gold Mining Groups.

http://orinocogold.com/company-profile/management/132-richard-crew





PROJECTS

Faina Goldfields Project Overview: The Faina Project lies in the Central Brazilian state of Goias. A number of Major Mining Groups operate mines in the northern Greenstone Belt with total production to date of +5.7 million oz of gold. AngloGold operate the Crixas Mine while Yamana Gold operate the Pilar mine. Orinoco controls the majority of the large southern sector named the Southern Greenstone Belt. Orinocos Project consists of 200km2 of tenements including the Cascavel Gold Mine and highly speculative gold exploration areas Sertao, Antena/Xupe, Eliseo, Espanola and Tinteiro






CASCAVEL GOLD MINE (Current Events focused):
Development started Q2 2015. OGX initially commenced Process Plant
(Name plate 100ktpa - 140ktpa) operations in Q3 2016 but suspended operations in Q4 2016 where upon Operational Reviews by SRK and Mining Plus were undertaken to diagnose low gold return from production. Average gold returns continued up until OGX initiated the full Back to Basics production approach under new management in late December.

Orinoco is the 100% owner of the Cascaval Tenement which include developed Cascaval Lode and Mestre Lode with both targets continuing down dip at least another 300m and strike remaining open. A limited JORC on 125m of strike at 125m down dip was conducted on the Cascaval Lode only with inferred estimate comprising 4500t @15.4g/t grading (note this is a relatively small area of the lode and general extrapolation could indicate a resource exceeding 22,000oz plus. Company exploration target for the Cascaval lode and part of the Mestre lode is 23,000 - 24,000oz from down-dip sources.

The Back to Basics Strategy backed by OGX utilises Hammer Mills to break down ore to powder size for easier extraction of gold. The pilot system was first put in practice in December 2017 with initial and subsequent results announced below.

“Corporate and Operations Update” - 18/12/17
https://www.asx.com.au/asxpdf/20171218/pdf/43q81z36bbmznj.pdf (Board and Management replacement update including overview of the ‘Back to Basics’ strategy and results from the Hammer Mill setup including sample as high as 149g/t)


“Spectacular Gold Grades Continue from Pilot Hammer Mill” - 28/12/18
https://www.asx.com.au/asxpdf/20171228/pdf/43qhfczl92gm4n.pdf (Results averaging 38.9g/t)


“Mestre Assays Show Bonanza Grades Up To 265g/t” - 17/01/18
https://www.asx.com.au/asxpdf/20180117/pdf/43qw099x2bd2wk.pdf (Title self explanatory)


“Further High Grade Processed Through the Hammer Mills” - 24/01/18
https://www.asx.com.au/asxpdf/20180124/pdf/43r0fl3yg3srmr.pdf (Results averaging 25.33g/t and Surprise Sample of 15.42g/t returned from Stockpiled Waste Rock)


“Orinoco Confirms Outstanding Grades of Gold in Tailings” - 31/01/18
https://www.asx.com.au/asxpdf/20180131/pdf/43r5mchvvvx7xy.pdf (Results of 5x1t old Tailings samples returning an average of 9.27g/t)


“Mestre Assays Show Further Bonanza Grades up to 185g/t” - 02/02/18
https://www.asx.com.au/asxpdf/20180202/pdf/43r8ybkbjgwc80.pdf (Results of further High Grade samples from the Mestre Lode


“Operations Update, Bonanza Gold Grades Continue at Cascaval” - 20/02/18
https://www.asx.com.au/asxpdf/20180220/pdf/43rr489r4qfbq4.pdf (Further Cascaval results and Announcement of Hammer Mill 3 Ramp Up with High Grade Ore)


My opinion of the results from these announcements is that the very high gold grade nature of the mine is confirmed. Proof of the previous process systems failure to capture freed gold is confirmed via the high gold grade returns from Tailings (this is supposed to be processed material will little to no gold in it yet it returns grades higher that most mines at 9.42g/t). The high grade Hammer Mill results from Cascaval Lode, Mestre Lode, Tailings and the Waste rock tell me that Orinocos process issues are behind them and now are able to fully commercialise on the substantial gold grades found which means strong income and profits due to the expectedly low costs (see public statement on cash costs by MD Jeremy Gray in previous youtube link) with portions of profits going to continuous mine development and other tenement exploration. I would consider the Cascaval Mine a ‘company maker’ in itself however. With a Cash Costs of AU$500 - AU$600 and a Price of Gold of around AU$1700 currently that puts potential profit per Ounce at AU$1100 - AU$1200. As can be seen from recent samples there is potential for an average of one ounce gold per tonne ore. The picture below is a very Basic valuation estimate based on managements own performance targets, I suggest you calculate your own with different P/E etc to see that variations possible.

Update: With the latest announcement advising that the 25t/hr Hammer Mill 3 has completed blunting in and will be going straight to milling of High grade ore I am expecting an announcement relatively quickly on these results. This also indicates (and is stated) there is a significant amount of High Grade material ready for process (Average 36g/t?). I guesstimate based on development records from the announcement 3d modelling images that there could be between 2500 - 5000 tonne of material available









TAILINGS:
On the 31/01/18 Orinoco Gold released a company announcement advising that five of five one tonne samples from the Cascaval Tailings site had returned positive for gold. The samples returned an Average Grade of 9.27g/t Gold. These samples were taken from random locations in the tailings pile from vertical channels and base trenches to a depth of 4 metres and then processed through the 400kg/hr Hammer Mill and associated equipment. The company has advised that a 1000t Tailings trial will begin upon ramp-up of Hammer Mill 3 processing

My opinion is that this is further confirmation that most of the gold processed from ore in previous few years has gone to the tailing as waste which then proves that the previous processing system was not fit for purpose. The fact that the new hammer mill system extracted the tailings gold also indicates that there is substantial revenue source which can be taken advantage of. Below I have shown location of Tailings dump and approximate m3. I believe there to be 40,000 tonnes of tailings @ 10g/t gold which would indicate potentially $Au20m of free dig Gold in the paddock. Most mines would be lucky to get 10g/t from a rich vein yet Orinoco just have it in their back yard.




CUCA:
The Cuca Lode is another highly mineralised vein located approximately 200m away from Cascaval Mine the Cacavel mine. It has recently undergone dewatering to ready for a sampling programme. As announced on the 20/02/18 Orinoco completed panel sampling from the Cuca shaft and has sent the first batch of 37 samples to lab for analysis with a second batch departing this week (21/02/18). Results are expected within 15 working days.


ELISEO TENEMENT:
The Eliseo target is a Conglomerate-hosted gold mineralisation with a potential strike of 16km. Historic exploratory drilling conducted by Troy Resources returns values of 33m @ 4.22g/t Au and 28m @ 3.96g/t Au. More recent surface sampling returned values of up to 22g/t from rock chips as well as values up to 45g/t from Eliseo North and Sierra anomalies related to the same Conglomerate. Company has publicly stated they see this as a “Strong potential for large-scale bulk tonnage open pit-able resources”

“Orinoco Confirms Significant Conglomerate-Hosted Gold
Potential at Eliseo Project, Faina Goldfields Project” - 08/11/17
https://www.asx.com.au/asxpdf/20171108/pdf/43p1lvs4rs6bbb.pdf

For more information on the potential of Conglomerate style mineralisations please follow this link. https://en.wikipedia.org/wiki/Witwatersrand_Basin

My opinion is that the Eliseo Target is a substantial mineralisation and that it would be a ‘company making’ tenement in itself. Low value figures of 10,000m strike, 100m width, 30m depths with average grade of 5g/t brings to me rough estimates around 4.7mOz. I believe this Conglomerate is the main interest for AngloGold also which makes me lean toward my figures being more correct than not. Upcoming sample results will give us a much better indication of the possibilities from this zone.




XUPE/ANTENA:

Next

Remember to DYOR always, Read all the attached announcements and more and 100% watch the Jeremy Gray Interview then better yet call management and get a feel for the company.

GL
OS