Economic Gold Grade

Hi All

There has been quite an amount of discussion about what grade is required. Obviously this is a very loaded question as it relates to many ways to look at it and many things that the grade needs to pay for.

The reason I started this new thread is twofold, one is that a new thread is a good positive forum, and second is to clarify prior disagreements in other threads driven by poorly defined posts.

So, there is economic cutoff grade, aka the operation doesn’t lose money, any that has been variously cited as circa 4-5g/t. But profit shoud be made on top of that. And the company should have a cash buffer to mine nuggetty deposits because some weeks they get no gold and some weeks they do very well.

I for one also want to make extra money to explore for and then develop to both new mines in the tenement package and the MStar deeps. We used to have C1, C2 and C3 costs, we can also speak about upfront capital cost that must be depreciated on operating cost. All In Sustaining Cost AISC is a cost per ounce to sustain the operation but not counting the initial capital cost.

Then there is drilled grade Vs mined grade and that multiplier uplift idea that is known by historical correlation after the fact. Mass balances of plant recovery are also used to back calculate actual head grade. Confused yet?

So my point is to answer some prior discussion about either 4.5g/t or 10g/t and what I think is the correct number and why.

I want the operation to run at nameplate capacity fully debottlenecked. We are told by both A1 and MStar people that about 4.5g/t is break even (with current gold price at A$1600/oz).

I want better because I want exploration and development growth, buffer and profit.

You can believe me or not but each of those 3 extras adds 2g/t each and I leave it to you to calculate at nenameplate capacity how much extra dollars each of those adds and then guess if that’s enough to get what we want.

Quick piece of assistance - nameplate capacity of operation is currently limited by 80,000tph process plant x 2g/t = 160,000g / 30g/oz = 5,300oz x $1600/oz = $8.5mill.

So let’s say $10mill extra cashflow per 2g/t above say  5g/t break even. That’s enough to explore so now we are at 7g/t.

What about profit? 2billiones / $8million doesn’t do much for the SP does it.

So we need a big new find or a much bigger plant etc.

 

But don’t dispair, back to the multiplier between drilled and mined grades - it’s historically 2.5 at Mstar so if they drill average 4g/t then the JORC could be 10g/t.

So, when I supported the statement that a head grade of 10g/t was needed, then I was focussed on company longevity, self fuded non diluted SP appreciation and acceptance of a 4g/t drilled grade.

As I stated in those other threads everyone was saying the same thing but no one was thinking holistically.

And, I firmly believe that the ops team will end up drilling 10g/t and mining 15-20g/t once they either get back to the deeps or explore the tenements and locate the second and third MStar and the detailed justification for that will come in perhaps a later topic post.

And I will buy when they start announcing a review of the tenement package

Krum