Hi Mark. Unfortunately IMO it is you who dont understand. I do this for a living so I hope I have some understanding at least. I agree that the history of the average explorer is to fail, but not when you've got something like what these guys are sitting on. Sure, it is very unlikely they'll realise it's full potential, they dont have that skill set, but hopefully whoever comes in as a JV partner can get to the industry average, which is in my experience about 60-70% of what could have been possible if done perfectly.
I have not assumed 1.8g/t is a recovery grade. I've assumed 90% of 1.8g/t and then gone much more conservative than that. All my figures (admittedly hypothetical and could be very different once all is said and done) are based on equivalent to an existing, operating mine with a metallurgical recovery of less than 90% of 1.3g/t, scaled up to equivalent to 1.8g/t Reserve grade but then treated quite conservatively as if only able to realise a $1500/oz margin. Current margin at spot would be closer to $2000/oz and recovery could be 5-10% higher than Cowal.
Also, the resource grade cut-off will be no lower than 0.3g/t so I dont know how you can expect an average of 0.5g/t - At a 0.3g/t COG, most likely the resource will be around the 1.5-1.8g/t region. Ore Reserves grade will be higher, even after dilution and mining recovery, so 1.8g/t is not unreasonable. My figures are more conservative than that when coming up with a valuation.
It would be just as reasonable to take those numbers and estimate a 15-20c/share pre-tax earnings from 2027 onwards and apply a P/E multiple of 15 times to come up with $2.25-$3.00/share in 2027 and back calculate that to $1.40/$1.90/share in today's money. Or to estimate a dividend of 10c/share fully franked in 2027, discounted at 8% to today for a grossed up 9c/share. Put a multiple of 30 times on that and you get $2.70/share today or $4.30 in 2027. Without any of the other assets.
In practice, smart investors dont care what the dividend next year or in 5 years will be, only this year. Or the NPV for that matter, so long as the share price is stable. It's one of the most common shortcomings of mining company CEO's, the failure to understand how bankers and other sophs think. They worry about stable earnings in the long term when they should focus on maximising earnings in the short term. But that's the way their performance bonus structure works so it is what motivates them. Bankers encourage it because how they make their money is by thinking differently to retail.
Regardless of that, the AISC of an existing 1.3 g/t refractory operation is sub $1000/oz and current margin on that is +$1750/oz. Even if I'm out by miles my figures are reasonable, yours are not.
It will come down to average grade and cost of construction. Even at $1.5B to get to production though, you only need 1Moz to pay that back at $1500/oz margin. If you spend all the capital in year 0 and put an IRR hurdle of 20% on it over 10 years and assume a 100% interest in the project rather than a JV then the Reserve threshold becomes 2.4Moz. A 15% Hurdle requires a reserve of 2.0Moz. They'd go close to that with just the existing Mallina Resource. 3.0Moz has an IRR in the region of 25-30%. For a 50% JV with $250M up front and a 3Moz Reserve over 10 years the number is closer to 60%IRR.
all made up, no more than back of envelope, not reality, not advice, DYOR.
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