AISC came in lower than expected (>$1,200/oz) at $1,124/oz – very healthy margins.
Initial production guidance of ~150kozpa has been beaten with 160 – 200kozpa.
LOM already extends for 10 years!
So much additional upside hinted at that should be considered:
“hardly started drilling” – no drilling has been completed at Morila yet, and everywhere we drill at our satellites turns up more gold. We also have dozens of virgin targets awaiting drill testing in our 685km2 elephant country tenement.
“looking for repeats of ultra high grades from when Morila was in production” – these grades exceeded 5g/t – see table below for the implications of this:
I am very confident that FFX will deliver upgrades to the resource inventory, extending LOM to 20 years.
Within these upgrades, with some luck we’ll see some grade improvements & upgrades to plant throughput to boost production to 250kozpa as per the director’s incentive target
Only 4Mtpa throughput is planned, when we know that the plant can do 4.5 – 6mtpa. With additions to the mining inventory, and perhaps some upgrades to plant bottle necks, we may see throughput increase to >5mtpa which will result in significantly increased annual production.
Increased production obviously results in much higher earnings but will reduce AISC further.
Grade will lift on the known resources with infill drilling improving confidence, increasing annual production and further reducing costs.
POG assumed as $1,750/oz – current gold price is higher and rising.
This is a fantastic outcome. The study demonstrates a very robust initial operation, a decade long cash cow, with very realistic scope to improve in all areas.
This should de-risk the project sufficiently for institutions to be able to take positions now.
If FFX can increase the current 2.43Moz resource to ~5Moz at 1.6g/t, we’re looking at a 20 year LOM, with production up around 250kozpa and AISC ~$1,000/oz.
A project with these metrics results in an NPV of ~$2B ($2.35/share).
Blue sky extends far beyond this valuation, as the board have stated many times that 1 mine is boring, so will be on the hunt for acquisitions.
(20min delay)