Something else to ponder. MGT have taken the approach of wanting...

Something else to ponder. MGT have taken the approach of wanting to produce a relatively low cost operation that gets them up and running as quickly as possible and turning over a decent profit. When compared to other companies who are planning to mine a ‘larger’ resource with a higher annual output, it could make MGT look like they are the small fish in the pond, and perhaps this is why the share price took a hit, but there are other things to consider.

1. If management succeed to production, it proves that the team is capable of building a mine and builds even more credibility amongst the team.
2. It provides cash flow which is extremely important for the on-going success of the company.
3. Razorback is scalable, with their initial maiden reserve only a small portion of the total resource size, meaning the potential for greater profits down the road.
4. MGT also have Iron Peak, Iron Hill and Muster Dam. Three additional ore bodies, plus unexplored territories.

If MGT plan to mine Muster Dam or the other two bodies in the near future, they have the option of proceeding with a large scale mine and higher output. Something we would have possibly preferred to see with Razorback, but nothing stopping them from doing it with these resources. And with money flowing in from Razorback, they would be in a much better position to qualify for a construction loan and pay back interest etc.

So by taking a ‘low’ capex approach, they are putting themselves in a much better position to getting this project off the ground and paving the way to long term success, and building a company that will be around for a very long time. Compared to going with the high capex approach which may result in MGT going nowhere.