Getting it out of the ground is easy, doing it for a profit is the problem. MAT did stage1 at Red October and thought they understood the deposit, then almost killed the company in a very short time when they decided to start serious mining.
Forget the excuse of the cost of toll treating, the costs were known ahead of the start of mining. Red October was supposed to be profitable at around $1900Aud, yet it was costing closer to $2800 all up when the gold price was close to $2500.
The company has tried to isolate nearly $800 per oz in costs outside of the aisc to make it look better on paper, then blame the toll treatment expenditure as the reason for the blow out.
By not undertaking adequate due diligence (my opinion), they went in blind and as a result of trying to follow up on stage 1 and the short successful mining of Red Dog, they have significantly damaged the company.
The shares on issue have more than doubled, BNR has been sold off for about the same cost as closing down Red October, there is trade creditors still to pay and 20m LTR that were swapped for a project were sold at around 3cps to purchased mining equipment for Red October.
The above is why the sp is now 6c, down from around 19c before planning to ramp up stage2 mining at Red October.
Amazingly, the company spruiked their credentials at keeping the soi low, then gave everyone 1:10 free shares when the sp was about 25c. Totally unneccesary dilution imo.
Then they planned to pay a small dividend from the Red Dog profit, whilst still requiring extra cash to fund the mining of Red October. Fortunately someone talked them out of the divident payment, which was obviously a flawed attempt to be proactive in rewarding shareholders, as was the bonus shares. Just get the damn sp up, that's the only reward shareholders need until the company is making a steady flow of money from mining.
All of these steps to run ahead when they are still learning to walk has decimated the company and even the plan to build a plant on what is still only quite early stage exploration is crazy. Forget even thinking about a plant until the extent of resources is known and they actually have a large measured resource and an adequate gold reserve in which to plan a mine around.
The scoping study was a waste of money and paper so early in the process. +/- 40% accuracy based on costs that will be hugely blown out by the time a mine is built. It is just to mollify some upset shareholders and to once again look like they are being proactive imo. It's a deflection from what has transpired and the market isn't buying it.
Right now the company needs to keep drilling and hope that results are robust enough to lift the sp so future raisings are not so dilutive. As it stands, more low cost raisings will be required to lift the resource into the measured and indicated categories required to raise debt funding for a plant. Until then it's all just noise from the company, just like today's announcement of having close to 1moz.
They are still well off the 1moz mark, so why try to embellish the story by putting 1moz in the headline? It only reeks of desperation imo. There is 874,000 oz in total, of which 553,000 is inferred, 115,000 indicated and 206,000 oz measured. That is a good resource for a company of around $20m mc, so any new buyers are getting value for money imo.
The losers are those who have back the company over the last few years who have seen the price of gold rise nearly $800 poz whilst the sp has lost around 70% value because of the missteps by management. Or maybe it's all just bad luck!
Maybe the nickel jv will add some value going forward and bring in new interest. To me, the nickel is a free swing for MAT. If something comes of it, well great. If not, at least it hasn't cost the company to find out it's not of any value.
The increase in gold resources doesn't seem to excite too many investors at present, though I think it's because the company is sort of stuck a bit now. They failed at mining so now have to explore agressively to lift their resources to something adequate to justify building a plant, yet don't really have the budget to do it, so small constant dilutory raisings seem to be on the cards, with no more valuable assets to sell off to help ease the pain. And once again looming up on the horizon is the $4m Martin debt due next year unless it is extended again.
Just my view after being here for quite a while now.
Having spoken to Paul over the phone and at a couple of conferences where he was presenting, he is enthusiastic if nothing else.
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