RSG (ASX) Whats Wrong

Originally posted by eshmun ↑

Syama UG mine extends at depth and Nafolo can add to reserves accessible from the current development, then Tabakoroni will prove to be a mineable sulphide reserve in its own right (maiden UG resource expected this quarter). There will be no problems feeding the sulphide circuit beyond 10 years even with a much higher scaled capicity IMO.

The problem for Copler is feeding their hungry oxide circuit. The DFS study shows very flat levels of production for life of mine from the oxide. Cumulative cash flow in the DFS from the oxides is shown as declining after 2018 and becomes zero around 2022 (see figure 1.4 page 31 of the original DFS).

Syama as mentioned in my previous post has more balanced processing capacity when referenced backed to their levels of oxide and sulphide reserve mix. Copler oxides will suffer from under utilisation if they don't find significant and cheap to develop sources of oxide ore. Syama's sulphide processing capacity is also far less capital intensive using a conventional roaster and sulphide circuit (with upgrades) that is pre-existing. The costs at Syama , as mentioned, are largely in the UG mine development and automation of the UG mining fleet. Once the development is advanced enough to reach steady state production the mine goes cash flow postive. Once the low carbon roaster and power station are built by 2020 the free cash flow from the sulphide circuit alone at base capacity of 2.4Mt/annum can be around $140 million/annum at current gold prices. The limited debt that RSG carry is nothing in comparison to what this mine will be consistently producing annually if all things go well.

Up until recently you weren't really aware of the differences in the stages/paths of these two project developments, as you thought Copler was also being developed as an UG mine, which it is not.

Maybe when you get up to speed and are honest with yourself you will see that Syama is a better mine, with cheaper installed capacity, better balanced processing capacity relative to its mix of available ore reserves (ie oxide and sulphide), and Syama has a higher sulphide grade and sulphide processing capacity once in steady state production from in-situ sulphide ore sources.

A project that goes into debt to pre-mine high grade ore over 3 years just to have have the debt extuguished once that ore is exhausted after 3 years of processing doesn't make much sense to me. The market likes it because it falsely believes IMO that the initial cashflows will last forever but they don't. All you are left with once the debt is paid back is a processing plant for which you have paid an exorbitantly large price per unit of capacity, that's if the plant successfully pays back the debt without any hitches. You do realise that the slurry (post grinding and floatation) that goes into the autoclaves needs to be heated by steam in a number of stages before the oxygen is added into the mix. Too many "moving" parts for my liking and not enough redundancy built in to the processing circuit. Roasters have been around for a long time and behave well as they are good at temperature regulation. Good luck with it though. You can probably make money riding the market wave on AQG based on the market misunderstanding the actual nature of the LOM cash flows, ie the cash flows won't last forever and also carry risk of failure to materialise should the circuit breakdown. Esh

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And since the DFS was published years ago, AQG has discovered fresh oxide reserves/resources that will keep the oxide plant very busy for years to come. This year alone the margin from the oxide plant will be $US57.5mil(100% basis) and Ardich could turn into a monster deposit when fully drilled. I have no doubt they will also discover more sulphide resources on their permits.

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Last 82.5¢		Change 0.025(3.13%)		Mkt cap ! $1.761B

Open	High	Low	Value	Volume
81.0¢	83.0¢	80.0¢	$15.00M	18.30M

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