Cashken, CAZ acquired the gold leases in Kalgoorlie between 2001 and 2004. The price of gold ranged between 250-400 USD/oz at that time. The low grade of the ore would have, I believed, made mining it unfeasible due to high costs.
However, we now have the situation where gold price is at an all time high (>1500 USD/oz) and rising due to hyperinflation (look at the USD and wait for QE 3, QE 4...). Although the grade of the ore is low, there is a reasonable amount of gold oz in total (261K oz in JORC compliant measured and indicated categories alone). PXG plans to start producing 75K oz/pa in 2 years. At current prices, assuming treatment cost of 800/oz, that is annual profit of 52.5 million per year (on a market capital of 15 mil). I personally don't think that gold is going to be at 1500/oz in 2 years, more like 4000/oz. In this scenario, profit would be 240 mil per year. That is why I predict a 10-20 bagger for this stock in 1-2 years.
I believe that CAZ sold off these gold tenements because they are primarily focused on their iron ore project. THey still have some Kalgoorlie tenements they will probably work on or JV on in the near future.
PXG Price at posting:
22.2¢ Sentiment: LT Buy Disclosure: Held
