mining calculations - where is the gold?

Gents,

I hope I can help. I am not a miner, I just have a brain. Help if you can.

I visited the mine for about 2.5 hours back in January. CT wasnt there that Friday hes gone to Brissy. I went underground for about an hour and a half, after usual safety stuff . Mr John Foord was the escort. Mr Towsey had business in Brisbane (this was the Friday before the Monday...ooops we lost some ounces this month -like about 80% of the predicted amount). A big pow wow on how to spin things. I assume someone was eating carpet somewhere.

I met Mr Towsey a year earlier before his permanent move to the mine. Seems decent. Did you know that the CEO Mark Lynch is not a resident of Australia...or at least "lives" in Dubai? I thought someone with his "mining experience" would attend to the mine. In fact I assumed he lived at Charters Towers, but a part time CEO, possibly only allowed 6 months in Australia at a time? A question for the next Annual Meeting. Anyway, I am underwhelmed with Mr Lynch who I think had dreams of a $1.40 share price by March 2010 ... when I suppose he believed the market finally realised CTO's true value. He was right, as usual, and wrong. No $1.40, but the market has realised the true value.

What I saw down mine was 5m x 5m drive, well graded roads, lots of safety stuff in the form of vertical shafts to extricate staff, and to me the rock looked harder than diamonds and other than perhaps an odd rock falling on the noggin' no chance of a collapse, and also highly unlikely it would ever flood in a cyclone either.

The stopes looked about 35-40 degree, about 15 m or so stopes, 20 m tops. So that gives about 20m of ore per pass. The seam looked about 1m wide.

The work crew seemed pretty decent guys, and its a very simple operation - blast and dig, rock bolt the roof, grade the roads and water down the dust. The gold seam stands out like dogs balls, though you can't see gold, just narrow crystalisation/mineralisation threaded through the seam. Looking up the stope it looked as clean as a whistle and ore does break cleanly away.

From quarterly reports they mine about 800m/quarter - half in ore, half in development roads. The mill grade needs to be in the 5-10g/ tonne range. So assuming thats what is achieved I work it out as roadway (400m x 5 x 5) + stope(400m x 1 x 15) = 16,000 m3/qtr. Assume a worst case delivered mill average of 5 gram/t and rock density of 3 (I can't multiply by 2.8) and 30g = 1 ounce. Recovery is 95%.
(The actual diagonal ore body would be 15m stope plus the about 5m roadway diagonally across the drive = 20m per drive, and the inclusion of drive waste may drop the average hauled from the mine from 14g to 10g/tonne consistent with what they say).
So:

16000(m3) x 3(t/m3) x 5(g/t)/30(g/oz) x 95%= 7600 ozs/ qtr.or 30400 oz p.a. The 50,000 oz might be possible if they average 8g/tonne...YIKES..that is the typical average mill grade. Is this the EUREKA moment and my numbers stack up? Is this the Rosetta stone for turning gibberish/flimflannery/spin to English?

The conclusion is that the pod is not making 14g/t. Why? Because they are only getting 5500 oz. This would mean the average is not the lower mill operating value of 5g/t but nearer 3g/t.

This cant be happening surely, as the mill recoveries would be bad wouldnt they? The only alternative I can think of is that only the stoped ore and "some" of the roadway ore is sent to the mill. The stope represents 40% of material and the roadway 60%. Conclusion, a lot of roadway ore is piling up some where. Is it? I dont know enough to solve this riddle.

The latest attempt to dig some sheckles out of my pocket I believe is just they regret not having asked for more cash last time to establish a bigger cash buffer. Does the Board think we are stupid (Yes I am prone to rhetorical questions). The stupidity is, they could have gotten a big cash buffer the previous time because the response was very strong, but they erred (again) using hope, not prudence.

I can not believe the total lack of strategic and risk planning. Unless you are in the Australian cricket team, it is simply not possible to have such bad luck, a seriously long run of outs and ducks and still keep playing. For goodness sake this is a Gold MINE. First up the Board needs to go, and Lynch retired to the clubhouse and a more experienced and gold mine experienced Board needed. Take a look at the crew doing Crocodile Gold in NT for example, so the people are around.

A catalogue of errors follows. The attempts at shotcreting are a typical example of a lack of focus, its dallying around the edges...mine the bloody rock instead - and fast. Waiting around for power to be connected and loosing production was another example of "sleepy Charters Tower time". And waiting for a replacement mill motor was dumb. The motor is a strategic/critical item so when it blew up more time and production was lost. They should have had a spare in stores. And what in heavens name was the waste of effort in buying Gateway Mining shares all about. Even these have dropped by 50%!!! Why waste effort and dilute shareholders on this side track???? Even worse expect GWL to run out a request for money and CTO has to stump up. Of course it wont happen and Gateway could die. Ill conceived again.

The commitment imposed on Towsey and Foord to move full time to the mine was long over due. Just need to move the Board into the Brisbane River, or maybe just permanently into the Queensland Cricketers Club at the Gabba, lock them up and lose the key.

So, my observations at the mine, and the rough calculations give some credence to the earlier 50,000 oz p.a number if the gold was actually in the pod. Said another way, if the gold is not there, all drives must be in ore, not development roads to meet the (now dropped) production target. If they must do development then maintaining 50:50 means 25,000 oz pa thats it.

What is galling is that there was no justification of why now is the time to start planning for the new mine opening, no time line, no budgets. We do not even know what quantity of ore from existing operations taken to surface is, so I assume there is only a minimal stock pile at surface but as I said above it could be a lot lying around. Sounds all seat of the pants and hand to mouth.

Lastly, the in hole measuring they are doing to identify more mineralised areas is nice to have, and could be really handy BUT for now they have no option but to steam ahead as fast as possible and get some cash in the bank..oh and maybe reduce Lynch's salary by 50% to match his hours.

A really radical thought is that this whole hypothesis of pods is a complete nonsense. The mine could be a randomly distributed series of gold rich streamlines.

Would an ore sorter help? Of course, but for whatever reason the payback economics arent working else they would have one pronto. Why not? Because after they sorted the rock there isnt the concentration of gold to make it pay. Anybody got another reason?

There has been absolutely no positive surprises from this endeavour. I wet dream about a rich patch to give the coffers some cash and kick start over the hump. At the moment CTO hangs by a threadwith management hoping the average mine grades hold and the gold price spikes. (I asume they hope that because its all I'm doing). THEY HAVE ONLY $1.1M CASH BUFFER BETWEEN MINING AND NOT MINING (thats how I read the quarterly)

My significant real losses have bought me the right as an owner to say what I want about this share holding.