Why would SL choose to rush back into mining with sentiment in the toilet, labour shortages, once in a generation cost inflation, tight lending conditions and a shortage of cheap low strip at surface base load options?
How much time and capitals required to prepare these current deposits for mining? How many mineable tons can realistically be extracted within the first year (ramp up)?
We must remember that ramp up is the riskiest stage for starting / re-starting a mine. As @speculator101 said there are plenty of recent examples where capital has been destroyed during the ramp up phase. The two miners to successfully ramp up (CMM/BGL) invested significant capital into the drill bit before commencing mining.
SL currently has 4 obvious deposits.
NN OP NN UG Gilbeys OP Gilbeys UG
NN OP is a smallish pit that will probably contribute roughly 500k ton per year. NN UG still needs a portal, ore drive, paste plant, ventilation, several levels of development and will need to be drilled out from UG to allow for a more precise mine plan, NN UG (LHOS paste fill op) will probably contribute about 300k ton at most in its first year. NN OP will require significant cutting back to access a wide enough bench to allow it to contribute maybe 800k ton over the first year. Gilbeys UG could be years away from first ore.
IMHO the best case scenario for year 1 may be only 1.6mtpa dirt, maybe 2mtpa if they chose to mix in the 0.35gt stockpiled dirt. All of this development will take time and money, the more they can define the individual domains the confidence they will have when it comes to planning and execution. The only ore source that doesn't require large scale development is NN OP.
Why drill and not develop???
Finding another one or two low strip at surface ore sources will be a game changer as it will allow SL to partially fund mine development and waste stripping using cashflow generated from these easier to access deposits.
The size of the prize! If NN joins up with Gilbeys we have the opportunity to bulk mine a huge underground deposit, a deposit that may large enough to largely fill the mill on its own for several years.
Targeting cheap mineable ounces!!!
Why rush to mine in poor market conditions?
Mill will 100% need upgrading when fresh rock is its primary ore source. The plant capex requirement adds another reason why SL should continue to build a 10 year plus resource base with a rock-solid plan for extraction.
SPR Price at posting:
51.0¢ Sentiment: Buy Disclosure: Held
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