I wonder how many people noticed the $US1,800/oz pit shell?? Not many from all the comments. Mining a $US1800/oz pit when the Gold price is $US1700 is a way to lose money on average with every tonne of ore mined.
An extra resource of 1 million oz is great providing it is profitable to mine, so at least this new resource should underline a base value depending on where the price of Gold goes. It would also give a base value for those looking to do a T/O gambling the price of Gold will rise over time.
What they didn't give was a new reserve, the economically viable part to mine, so a new LOMP would be a great thing to have, with the upgraded reserve. Beware though the new LOMP will also include a new cost guidance taking into account the huge increases in diesel prices and all other inputs. I'm expecting this to be a lot higher than the $US1,124/oz in last year's LOMP.
Remember looking at the Perseus results today, the AISC is a lot lower than total cost. They had $US952, Gold sale price averaging $US1,683, produced ~494k oz so had $US361m or $A515m in 'gross profit', but net profit after tax was only $A280m. So lots of costs come out above AISC.
If our AISC is forecast to be around $US1,400/oz, then mining the average grade of 1.38g/t (allowing for 5% dilution) X 4Mt/a X .9% recovery gives ~160,000 oz/a. Using shareholder 80% ownership = ~127,000 oz.
At current Gold price of $US1,723 gives a gross profit after AISC of $US1,400/oz of ~$US41m = ~$A58M
Perseus is trading at about 4.27 times their 'gross profit'. If we had similar multiple of gross profit of 4.27 times 'gross profit' would equal a value of $A247M. Add the LLL shares and we get ~$350M or just on 30c/sh as a conservative baseline, which of course depends upon how much cash is needed to get to full production.
My understanding, because of the amount of time in suspension is that we will need full disclosure to raise funds, as in a PDS. It is also my preference to have a PDS with independent experts going through known costs and be displayed in the document. With a PDS then existing shareholders are not limited to the $30k of a SPP, and can be given preference in any cap raise. Also the market overall would have better confidence with a PDS instead of a quick dirty Hartley's et. al. cap raise (which I believe is not possible anyway).
If they gave a deep discount to existing shareholders and for example needed to raise $100M just for arguments sake, not my suggestion of how much needed, then a deeply discounted 3 for every 4 shares held at say 12c/sh should easily get up with existing shareholders getting the benefit according to their holding. This would create just over 2B shares on issue, but using the baseline, plus cash in bank a value of ~17c/sh that would be trading again.
Hopefully they don't need anything like $100M and the AISC is a lot lower than given above, but providing the mine is still profitable and the reserve pit is based on a lower cost than the resource pit to get the 3.5M oz resource, then there is still life in the old mine.
FFX Price at posting:
20.0¢ Sentiment: None Disclosure: Held
