The last few days have yielded some interesting discussions on the HotCopper forum together with some potentially game changing information from the AGM.
Looking at the viewing figures for the threads, I think there is certainly an increased interest in ABM Resources, so for the benefit of new readers as well as the 'long timers', I have tried to gather together some of the outcomes of recent discussions and developments into one thread.
If I have missed some information, please feel free to add it in.
First up, trial mining.
Well the trial mining and processing (10000 tonnes) albeit somewhat later than originally slated, is almost complete. 90% of ore was extracted and stockpiled or processed as of Wednesday 20th and completion expected early December (Thanks to BobMiner talking to Darren Holden (MD) at the AGM). Processing was just over 50% complete as of 11 November (ASX release) and with the plant now working double shifts and processing an estimated 200 tpd, processing should be completed around week beginning 9 December by my calculations.
Recoveries as of 11 Nov average 91% using gravity only with all tailings contained for future processing. As a comparison, the grade of the tailings is higher than some larger mines use for head grades. Not great, but the tailings gold is contained and can be profitably reprocessed later on.
Feed grades average 14.7gpt which is slightly above expectations.
All gold processed is being sold to Perth Mint. Normally a trial mine of this nature has to hold product in escrow until the full mining licence is granted. This cashflow has paid for most if not all of the costs of the trial mine.
Final results of the trial should be known in Jan 2014 once the plant has been stripped down and all gold in circuit extracted.
Plant and equipment
Plant is fully expensed and at its current rating, capable of around 200tpd (I believe including allowance for breakdowns and maintenance) which equates to approx 75000 tonnes per annum. Major parts of the plant can already handle double that and with minor upgrades estimated by Chuk (http://hotcopper.com.au/post_threadview.asp?fid=1&tid=2138068&msgno=9917849#9917849) as $2-3m max will upgrade to 150000 tpa.
Based on head grade of 15gpt and 90% recoveries, this equals output of 65000 ounces gold @ say A$1250/oz means revenue of around $80m pa.
Costs per oz are not confirmed at this stage, however a conservative estimate of all in costs of $700 is probably in the ballpark.
Cashflow and Capital Raising
In recent weeks, there has been much discussion on whether a capital raising will be required before ABU reaches full production.
BobMiner confirmed from Darren Holden at the recent AGM that no capital raising is planned prior to commercial mining beginning.
ANZ have provided a low interest loan of up to $10m for additional capital should this be required. Documents have been completed and signed (AGM presentation) and the loan is available for drawdown on completion of trial mining.
Cash at bank is $2.8m (again thanks to BobMiner) with I would guess at least another $1m from sale of gold to come. No doubt there will be some completion costs for trial mining, mainly running costs for plant, however the balance should increase from here.
This should leave plenty of cash to see ABU through to end of financial year if needed.
In addition, there is plenty of scope to 'cherry pick' from the extremely high grade veins should a quick cash injection be required utilising the existing plant with no additional capex.
Share price
In the last two days, share price has gone up from 2.3c to open today at 2.5c. Against a backdrop of falling gold prices and yesterdays general fall in goldies, ABU is certainly going against the grain at present.
Chuk calculated (http://hotcopper.com.au/post_single.asp?fid=1&tid=2131112&msgid=12552697) that the market capitalisation at 2.3c is $85m. Production from Golden Hind alone will generate profit of around $50m. The balance of known reserves is approx 650Koz in Old Pirate alone for the remaining $35m of MC.
ABU would only need to make $54/oz profit from this to cover the balance of the MC on that basis!
Exploration potential
ABU tenements cover a vast area of the NT.
On page 27 of the AGM presentation, there is a nice graphic showing the vicinity of Old Pirate (http://hotcopper.com.au/post_single.asp?fid=1&tid=2135911&msgid=12595506#.Uo6YlBC3T1g) with many of the known prospects shown.
HC member Helmenesh (http://hotcopper.com.au/post_single.asp?fid=1&tid=2135911&msgid=12582670) believes that there is a large 'source' somewhere underneath this region which over millenia has generated the ore veins around the region and that there are very likely to be many more veins to discover. In addition, drilling in the region has shown that the ore bodies are open below 200m and with the source believed to be 6-7000 metres deep, there is huge potential for high grade deeper discoveries in the future.
ABU signed an agreement with Independence Group (IGO) (ASX 21 August 2013) to explore the vast Lake Mackay region as a partner. IGO have a track record of finding high grade minerals and bringing mines to production and also bought out the DeBeers mineral database some time ago. This database contains details of prospecting across Australia dating back many decades. Whether there are details on Lake Mackay is anyones guess, but it would certainly give a head start if so.
Other ABU tenements with highly prospective gold and copper discoveries include the Hyperion and Kroda regions.
So in summary, ABU is a highly prospective company with tenements over a large area of NT
- Should be in commercial production by end of current financial year - Plenty of known high grade resources - Low extraction and processing costs = high margins - Owns the processing plant - No debt and sufficient cash in bank to last until end of current financial year if needed - $10m ANZ loan secured with low interest rates should additional capex be required - No plans for capital raising - Plan to organically grow the business based on cashflow from mining operations - Excellent management who I believe are truly interested in developing the company and arguably more importantly, are also looking after all shareholders interests
ABU Price at posting:
2.5¢ Sentiment: Buy Disclosure: Held
(20min delay)