Coming off a yearly high of 81c, down to 33 cents at one stage, probably due to the delay in funding, and some other factors.
There are a few things with this one that don't seem to add up.
Estimated production to be 240,000 ozpa for 10 years, at a US$950 AISC, and yet the IRR is only 25% and the NPV is only $600m, and the payback period is 3.7 years (when others like TIE have a payback period of 9 months to 1 year), and recoveries of only 88%, when others often have between 92-96%, and the underground component only grading 3.5 g/t average, when at least 4 g/t is usually considered a necessary minimum for a profitable underground gold mine development.
Something doesn't add up here with their financial figures, maybe it's because of the taxes. With the government free-carry and taxes and royalties, it looks like they are being heavily slugged, to the effect that they are only going to keep about 47% of production revenue once the Tanzania government has taken all their cut (for various reasons).
There needs to be some incentive tax breaks in the first 5 years granted to these guys in order to make the project worth developing.
The funding banks also seem to be asking questions about profitability, and doing much more extensive long term due diligence before providing funds, so clearly it would also appear that something doesn't seem to add up for them either. It's interesting that banks around the world aren't throwing money at these guys, given the production profile, interesting indeed, when stocks like WAF are having 20 banks at a time almost begging them to take funds for Kiaka. There has to be a reason for this !!!
I'm not sure these guys really want to build a mine in Tanzania either, perhaps they'd like a takeover after all the permits are granted.
I think there is still some nervousness and trepidation when dealing with the Tanzanian government and their tax and royalty and free-carry regime.
Is there really enough profit in building a gold mine in Tanzania, given all the work and effort and funding required, perhaps the profit margin will simply be too small at the end of the day to make it worth the effort. The Tanzanian government need to come to the party if they want further mining development.
ORR need $500 million to build this mine, when others are building medium scale African gold mines for $300 million, hence the reason they are looking at multiple funding options, including streaming. It looks like Barrick and other large gold miners are preferring to build in countries like Canada now, countries with low sovereign risk and with many tax incentives and tax write-offs. Some African and South American countries seem to be now pricing themselves out of development project, simply through excessive greed and bureaucracy and corruption.
The future for this stock will be interesting, who knows how it will all play out.
Gw
ORR Price at posting:
35.0¢ Sentiment: None Disclosure: Held
