I see they are still talking about this scoping study, which has...

I see they are still talking about this scoping study, which has been going on for quite some time now. I expressed some doubts about it quite some time ago and since they haven't actually produced anything of interest in months, here's my half-hour take:

The study is for open cut mining the top 150m of Hobbs #1. According to the published figures the contained resource to a depth of 150m is 600kt of Indicated oxide at 0.9g/t for 18k oz, plus 3.0Mt of Indicated primary at 1.0 g/t for 96k oz, plus 2.0Mt of Inferred primary at 0.6 g/t for 39k oz. Note that the announcement of 27 December 2013 actually says the Inferred is 0.2Mt, but this is clearly a typo.

The total resource in the top 150m is therefore approximately 5.6Mt at 0.85 g/t, assuming the whole resource is treated as ore and the Inferred all actually exists. Now, the current gold price is $1525 AUD. So, each tonne of ore has on average 2.72% of one ounce (0.85 / 31.10348), or $41.50 worth of contained gold. Unfortunately it's not quite that simple, since metallurgical recovery is never 100%. The oxide portion should have a high recovery, probably over 90%, but the rest is refractory and is likely to be lower. I haven't seen a figure, but I'll assume 90% overall metallurgical recovery. So now each tonne contains a recoverable 0.76 grams of gold, or 2.45% of one ounce. For those playing along at home, that's $37.35 worth of gold.

The mining cost for each tonne of ore might be say $5. But, to get to a depth of 150m, we're going to have to move some waste. My actual guess is about 3:1 waste to ore overall but I'll be generous and say 2:1. So our tonne of ore costs $5 to move, and if the waste is a bit cheaper at say $4/t, he has to pay for $8 worth of waste shifting. So now we've got $37 - $5 - $8 = $24.

Now, hands up who reckons you can process refractory gold for less than $24 a tonne, unless you've got some really big efficient milling gear? Well, I kinda doubt it. Not to mention that you've got to pay for all that capital works to build the plant in the first place. What about sending it somewhere else for processing? Yeah, you could, but $37 dirt won't travel very far before the transport cost is a killer.

Look, I'd be happy to be proved wrong and you might argue I'm bitter because I did some dough on this so I should be ignored, but as it stands I can't see how this 'mine the top 150m' story stacks up.