The AISC scare & an estimate of forward earnings.

So ...a rarefied selection of posters have been urging caution regarding potential AISC (all in sustaining costs), quoting possible AISC of between $900 and $1,400.  Now caution is fine and dandy when appropriate ...however the evidence shows that in the case of a high-grade underground mine, a low ASIC can be expected.  

For those not familiar with the history of this metric, it came about because miners were reporting mining costs, but not the more indirect costs involved in sustaining those operations.

Fortunately for this exercise, Sam Ulrich et al, in this paper presented to the 13thAusIMM Underground Operators’ Conference 2017 have compiled awesome graphs succinctly illustrating the issue at hand:  
http://www.aurumanalytics.com.au/pdf/Sam_Ulrich_UGOPS_Presentation_16_Oct_2017.pdf

Now this appears to be a PDF of the Powerpoint presentation so there is scant commentary  -but the graphs are self-evident for our purposes.

This first graph shows AISC for Australian Undergound Mines in Q2 2017 (quite recent):



The second graph is shows average feed grade / head grade.  I note here that (on this graph) Fosterville appears to be the only UG mine in Australia in the same ball park as our Cascavel:


The next graph shows underground gold mines -overall grade-cost relationships: Grade v ASIC (Jan 14 to June 2017).



There are differences when comparing these results to Cascavel, because they are recent but not current, but the important issue is understanding (accepting?) that high grade mines generally have low AISC.

For more recent results, the following graph shows AISC results for Q4 2017:



  Interesting to note that even in Q4 2017, 4 mines had a AISC reported lower than $500.

The following highlights the mines that are closest to us in terms of likely tonnages with low ASIC (although our grade is likely to be much higher as indicated by multiple historical and recent assay results):



The main difference between Australia and Brazil would be the lower wages reducing AISC in Brazil, but if we are conservative and ignore that, the other important factor that differentiates us from the reported results here is that our feed grade is suggested by all reports to be much higher.

As a results of this information, I expect our AISC to be lower than $500 (perhaps much lower), and although I can't claim this with any certainty (because we don't know exactly what the costs are), but it appears to be plausible, feasible and likely.

So as a result, the following are my calculations for OGX Market Cap Valuation (with sensitivity analysis for grade) estimate assuming a target of 6,000 Oz/month by the end of the year (our management aspirations), using an ASIC (ball park) estimation derived from the info above.



I think this is conservative, but it is only designed as a guesstimate ...assuming we can ramp up to management aspirational production.  Of course this doesn't include the multiple, diverse and highly prospective remaining tenements often referred to.

It doesn't include the Cartesian payments ...for a maximum of 3 years (or until the minimum target is reached), we pay Cartesian 20% of our gold up to a maximum of 8,800 Oz / annum -anyone is welcome to do the calcs.   

Which ever way you look at it, it is very hard not to see scope for an imminent increase in SP / MC /EV (even if the figures are massaged lower).

Comments and calculations welcome ...but lets not make it a downramping spamathon.  I don't really want to hear about a mosquito threat or anything else irrelevant.

Very excited anticipating trading open today and for the next few years too

All the best holders,

SJB