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Ann: Production Guidance for Old Pirate High Grade Gold Deposit, page-10

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JPC123

89 Posts.

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30/09/14

17:13

Post #: 14051362
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Originally posted by bruce13 ↑

Well these twin announcements from ABU have take plenty by surprise I would suspect. Not the announcements we were expecting and certainly they haven't caused a rush of share buying!

The disappointment for me is that ABU is now forecasting only producing 50,000 to 60,000 oz of Gold in the first year. For the last 2 years+ they have been spruiking 100,000 oz+!

So 50,000 oz, at costs of between $690 to $790 /oz with Gold at AU$1390 /oz (today's price) leaves earnings of $30m to $35m. At 60,000 oz produced earnings may be $36m to $42m. So given that the figures may have some inaccuracies, the cost of production may be lower etc. ABU may earn between $25m to $45m, also depending on the POG. Every AU$100 increase in the POG will give ABU an increase in earnings of $5m to $6m per year.

These earnings are well below what I always believed was going to be case, with lower cash costs previously predicted and 100,000 oz being produced, I had expected earnings of $50m to $80!

With 273m shares on issue the eps are 8.6c at $25m in earnings and 10.9c at $30m and 12.8c at $35m.

So then the market determines the share price and hence the p/e ratio. If ABU remains unloved the p/e ration might be as low as 5. If the market likes the story then the p/e ratio might be 10. If the market becomes delirious it might be 15!

So at this stage, taking a guesstimate of ABU's sp next year, from what is know today, the sp might Conservatively be in the range of 43c to $1.28! (based on earnings of $25 to $35m)

Hopefully all goes brilliantly for ABU and earnings of $35m+ are obtained.

The factors affecting the sp in 2015 are:
Market sentiment for ABU
The price of gold
The costs of production
The grades obtained during mining
More Gold found in other areas
More Gold found in the actual mine
Whether other areas are opened up for mining
An increase in ore throughput

Expand

Can anyone comment on why ABU would maintain the use of the minimum 1m widths and the associated dilution rather than incorporating the more narrow widths and resulting higher grades as alluded to. Including the more narrow widths has the affect of almost doubling the grade. Is this a reflection of the actual way the ore will be mined or simply being conservative in their assessments?

Cheers.

ABU Price at posting: 32.5¢ Sentiment: Hold Disclosure: Held
1 Upvote

0 Great analysis

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