1. "The drilling assays aren't that impressive. And metallurgy with an average grade of 2.39g/t? I know many with better hits and better head grade"
- Have you heard about Ernest Henry, one of the most profitable and lowest cost mine in Australia? It has an AISC of negative 500$/oz. So for every ounce produced at the current gold price EVN is earning 2200$ after cost! It has an average grade is just 0.6g/t much lower than the average grade of underground mines which is 5.33g/t.
- Newcrest Mining’s Cadia Valley operations with an AISC of $174/oz and grade of also less than 1g/t.
- Anyone remember Newmont Yanacocha one of the largest and lowest cost open pit gold mine in Peru? Head grade of only 0.9g/t. More than 40Moz of gold mined. 3.5Moz produced in 2005 alone.
- On the other hand, DTR a few years back released a series of announcements about hitting gold with grade of 250g/t. And "visible gold at surface". SP was pumped to 4c. Later on, reality punched grade hunters hard in the face, SP fell into a blackhole and capital raise was done at... 0.4c. Now sitting at 0.2c.
- Well, I can tell you endless stories of low grade miners that succeeded and high grade ones that failed. But please DYOR.
2. If grade is not king then what? And how do you know TSO has them?
TSO has ticked all the boxes of a
high grade, open pit, large scale & low cost mine.
Orebody Size & Thickness. - The scale of the operation is important, which generally relates to the ‘geometry’ of the orebody. Smaller operations are generally higher cost than larger operations.
- TSO is a district scale system with strike length of >5km
- Ternera: proven mineralization >750m, from top to bottom, open in all directions.
Metallurgy:
- Low CAPEX
- 95% gold recovery is considered GREAT. TSO has up to 99% recovery rate.
Strip ratio:
- High-grade gold contained in narrow veins that can only be mined by excavating shafts and hoisting the ore to surface via low tunnels
- For example a typical quartz vein that is 0.5 meters wide. At minimum another meter must be added to the vein to mine it. The width is now 1.5m. But logistically, in order to drill, blast, and muck the ore, the vein width must be stretched to 3m.
- This means the deposit, first estimated at 10 g/t, is now only 5 g/t because the gold has been “diluted” by the waste rock
- Dilution can drastically affect the economics of mining the deposit. Rock that was originally estimated at $420 a tonne is now worth $210/t – cutting the internal rate of return (IRR) and the net present value (NPV) in half.
- TSO might have a super low strip ratio. Please see image below.
Location & infrastructure:
- Tier 1 location, tier 1 country
Proximity to surface:
- Mineralization from near surface
Refractory ore:
- Chesapeake Minerals has 18.5 million ounces. However its ore is refractory. Breaking the gold free requires both physical (ultra-fine grinding, autoclaves) and chemical processes that are energy-intensive and very costly.
- If this price of gold is $1400 and the AISC is also $1400. A deposit of even 100Moz would still not be feasible.
- In contrast, the simplest most inexpensive method is gravity recovery. TSO will be using conventional gravity and CIL processing method.
3. Chile? No I don’t want to put my money there. Is this a 3rd world country with poor mining infrastructure and high sovereign risk?
- Latin America attracting more exploration capital than any other region in the world.
- According to S&P Global, Latin America received 28% of the total global mining exploration budget.
- $74Bn will be spent in Chile in the coming years.
- According to the US Geological Survey, Chile has the world’s largest reserves of both copper and lithium and the seventh-largest silver reserves. Mining makes up roughly 15% of Chile’s GDP.
- The Fraser Institute is a Canadian think tank that publishes a global ranking of mining jurisdictions. It judges both the mineral endowment and the policy framework to score the overall attractiveness for investors. Latin America and the Caribbean was the standout performer in the latest report, with the region’s median investment attractiveness jumping 16% in 2018, more than any other region. That’s even more impressive considering the negative weighting of disaster cases such as Venezuela, Nicaragua and Guatemala.
- Chile is the best performer in the Fraser list, followed by Peru and Mexico.
4. Why Zeff and others keep on comparing TSO with those super mines in Tintina. Aren’t they too far away? I only believe in comparision with those in proximity.
Fenix Gold, Rio2, also in Atacama Region of Chile
- Also focused in only 1 project
- 7000m drilling campaign.
- Best grade 192m @ 0.81 g/t Au and 124m @ 0.77 g/t
- PFS: Head grade 0.49g/t Au at 1.4 Moz
- Current market cap: $98 millions
Last week, Amarillo Gold, Brazil updated its feasibility study due to current change in Gold price
- Mine life of 10 years.
- Gold productionof 102,000 per year in the first four years, average annual gold production of 84,000 ounces.
- After-tax net present value 5% (NPV 5%) of $183 million,increasing to $360 million using current market rates.
- After-tax internal rate of return (IRR) of 25%,increasing to 50% using current market rates.
- All-in sustaining cost (AISC) of $738 per ounce,decreasing to $656 per ounce using current market rates.
- After-tax payback of 2.6 years,decreasing to 1.5 years using current market rates.
- Initial capital cost of $145 million,decreasing to $125 million using current market rates.
- Gold resources of 1.2 million contained ounces, grading 1.1 grams per tonne (g/t).
5. So how many Moz you think TSO has? I know a few with with MRE of 1-3Moz sitting at below 60mil market cap.
I won’t tell you how much Gold in these mountains because I don’t want to see your jaw dropping. But please look at the work/calculations of some posters here (hint: it is a number when you flip it upside down it becomes lower in value).
Besides, please check if your deposits tick all the boxes like what TSO did, then we'll talk:
- Low altitude, close to roads, ports, water and electricity.
- Accessible all year round.
- Close to cheap, skilled workforce
- Potential to extend the current resources much much more.
- District scale gold system.
- Metallurgy: 99% Gold recovery.Cheap Capex/Opex
- Exceptional strip ratio (1.1 or lower).
- High grade, low cost, open pit mine.
- Worldclass mining region with pre-existing facilities & equipments to facilitate the construction of a mine.
- Low sovereign risk and is supportive to junior explorers & miners.
- Mining giants in close proximity (takeover chance).
6. I dont like the SP movements. Too much manipulations. Short rally then falls back.
- Yes. I agree. But does it matter in the long run? Our mountains of Gold aren’t going anywhere (please look in google map, they are still there!). If you are an investor, you should not bother with daily or weekly fluctuations. If you are a trader, sorry my thread is about investing, not trading.
- Alex Black, CEO of RIO, when being asked why it has a market cap of only $90 millions (even with 1.4Moz of gold in PFS and many more oz in reserve), he replied “Look, if you are looking for the quick 10%, 15%, 20% increment in share price, because of drill holes or drill results or exploration results, that’s not us. We are actually in the process of getting a project ready to turn into a mine. It took a lot of time to get traction in the market, for people to understand and believe the story”. He gave example of his previous company: “Alto started off as a USD$12M company when we acquired La Arena, and on the take out with Taho Resources, we were USD$1.2Bn”.
- I think Zeff is the same, they preferred to deliver value to long term holders, not traders.
7. Should I buy now? I have no idea what is TSO fair value.
- I know it would be an insult to some experienced & educated TSO holders/researchers if I say we have 1.5-2Moz in Ternera alone. But I would prefer to be super conservative at this stage.
- PAC partner evaluations of TSO at 1Moz equal to SP of 16c (after dilution by the recent CR). This evaluation is purely resource(ounces) based. It ignored all TSO superior advantages such as metallurgy, feasibility, AISC and potential reserve. So it’s like buying a car basing on its top speed only.
8. I hear what you say but it still has some risks at this stage. I want to be very very sure. I would like to wait for the MRE and PFS first.
- The Human race has a survival advantage to other species because we have abstract reasoning and logical deductive skills. By analyzing the known we can visualize the unknown. With the data we already had and by comparing TSO to its peers we can come up with an exceptional risk/reward ratio. Yes, you can wait and be very sure but you might need to get in at 5-10x current SP or completely miss the train.
9. Why should I care about gold and gold stocks now? The American economy is stronger than ever. The stock market is at all time high and still rising. Fed is still pumping trillions and buying shares from market. People still love shopping and having more debts, just look at the buy now pay later sector... No need of a safe haven as Covid19 is now gone for good and there is absolutely no tension between nations and races..
Well, God helps you Sir!
