Ann: Quarterly Cash Flows Report - September 2023, page-10

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armenroo

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04/11/23

12:10

Post #: 70726230
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Originally posted by Arh0070: ↑

The issue of underground mining of higher grade reserves is being brought up.The best example of how this works is Malartic ,Canadas biggest gold mine in Quebec owned by Agnico.They have been mining lower grade reserves via open pit for about 10 years or so .This produces cash flow (its a very profitable mine) .Agnico has then explored and drilled around the open pit and found higher grade reserves which they are now beginning to access .The open pit is gradually being depleted ,the existing plant is upgraded with cash flow and it also pays for the work to access the richer underground deposits .This is costing an additional Billion Dollars or so .So accessing deeper richer underground reserves occurs MULTIPLE years after the start of open pit mining ,no mining company even one as profitable as Malartic/Agnico can afford to do this without cash flow.
So provided that DEG manages to build the plant ,it will need to use cash flow first to pay off the debt (Likely 1.5 billion dollars by then),then it will need to fully drill up the underground reserves and use cash flow to build access and upgrade the plant (another Billion dollars plus ).This is all a long process ,it would also presumably want to reward shareholders ,this probably wont occur for 10-20 years .
As I have said before the numbers dont add up very well for DEG going forward in terms of share price appreciation.
Let us assume the plant gets successfully built within budget and on time (a big assumption)then at that point in time 3 years from now the market value of the reserves at Hemi plus the plant will be about 3.5billion US (assuming a constant gold price)this is what Detour lake was bought for by Agnico (it had a 500000ounce producing plant and 35 million ounce reserve).Current value ofDEG is around 2 billion ,when the plant is producing it will have about 1.5 billion in debt ,so the potential profit in DEG 3 years from now provided all goes well is about 30% or so (related to the premium of the US dollar versus the AU dollar).

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https://www.investing.com/news/stock-market-news/title-de-grey-mining-emerges-as-potential-takeover-target-amid-rising-gold-prices-93CH-3221491

DEG Price at posting: $1.15 Sentiment: Hold Disclosure: Held
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Ann: Quarterly Cash Flows Report - September 2023, page-10

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Ann: Quarterly Cash Flows Report - September 2023, page-10

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