a good company oversold?, page-3

"Gold won’t fall below $1100 imo as too many producers become un-profitable and they wont let this happen."

Funny thing Leroy, I was just discussing that point with someone this morning.
If you believe what former Assistant Treasury Secretary Paul Craig Roberts (my post this morning) and others are saying- that physical metals are in very short supply, then it won't be in anyone’s interest to kill the supply from mines.
If they do that and metal becomes even scarcer, then at some point the price will take off again.
Easier to manipulate the price down to kill sentiment and increase supply from investors bailing gold backed ETF's but not enough to kill mine supply.
By bringing the price down moderately only, they keep the mine supply and get the temporary supply from investor selling.

If they can manage to hold gold around $1300-$1400 for a while then there are few producers I am interested in right now.
When gold recovers above $1500 (no idea on timing) then most producers should have 50% upside. 100% with gold back up to $1700. High leverage works both ways.

If the average “all in cost” per oz is around $1300/oz then the higher cost producers will already be thinking of scaling back operations if POG doesn’t recover and there will be very few new mines going ahead.

As a comparison to the average all in cost, Ord Minnett’s initiated research on ABU a couple of days ago estimated an “all in cost” for ABU of $825 per oz (life of mine average). That included royalties, admin, exploration depreciation and amortisation- i.e. everything. (They assumed a cash cost averaging around $660 over the first three years compared to the scoping study $510 cash cost inclusive of royalty so there is room for their estimate on costs to come down).
While some producers with market caps of half a bill and higher might report next to no profit if POG stays at $1300, ABU will have a very strong $500/oz margin at around $1325 gold- using Ord Minnetts all in cost.
At full scale production of 300ktpa, they should produce 90ktpa at 10g/t. Indicated resource in the top 30ms grades 12.15g/t and that’s top cut so 100koz may be more likely (allowing 11g/t).
If all in costs are $825 and they produce 100koz then reported profit would be $47.5mill.
Not bad for a company worth $110mill and compare to companies with 5-10 times that market cap that will report lower profits on almost no profit margin.
First year will not necessarily report that sort of profit though as it will not average 300ktpa -it will begin at 150ktpa before expanding to 300ktpa. No guarantee the expansion occurs within the first year but no reason why it won’t. Management anticipates a rapid expansion (based on results to mimise risk). However the first year will have some big advantages to offset a lower average throughput.
GH very high grades to blend in with OP so less throughput with higher blended grades can still produce a lot of gold. If grade averages 16g/t and throughput averages 200ktpa (150ktpa expanding to 300ktpa later in the year), you still end up with 95koz.(GH includes a high grade component of 34kt averaging 45g/t for 49koz to indicated status).
Further to that, the first 30ms will be much cheaper to mine with much lower strip ratios than the deeper ore.
There is clear potential for the first year to be the highest profit year even at a lower throughput but that will likely depend on timing of expansion to full scale.
While this POG is a big problem for mid range cost producers (and their sp falls are understandable at this POG compared to their all in cost of production), it will not be a problem for ABU.