Yes it can be frustrating sitting on a stock that should go up but seems to take forever to do so while others have big gains, but when you play with fire you can sometimes get burnt.
“I am looking forward to a resource update from ABU soon, and the sooner the better!”
Spoken like a true long term investor :)
Just kidding of course; I am looking forward to it as much as anyone.
I am even more eager for the scoping study update because I believe that will see a significantly larger percentage increase in cash flow forecast than the resource will see a rise in ounces.
How much larger?
The initial pit design was modeled to contain 308koz with 261koz recovered assuming 85% recovery.
If the new study assumes 94% recovery after 97% in test results, then that adds 28koz at no extra mining or production cost.
That adds $46mill pre royalties, or call it roughly $40mill net of royalties.
That’s a big increase even before adding anything to the resource.
After Hong Kong, it looks like $50mill is a reasonable number to use for GH cash flow.
That’s a $90mill increase (35%) after less than a 10% increase in oz’s.
If I assume a 200-250koz increase in jorc, I think around 100koz will be added to open pit inventory (excluding GH) from WL extension, east side vein, heartland veins, OG and in fill drilling. Keeping in mind also that the new veins may allow for a wider deeper pit which will include more oz’s from the maiden jorc (possibly 30-50koz?), so it won’t take much to get to 100koz’s and that could be quite conservative.
That would add another $100mill to cash flow for $190mill.
So as I see it, if we add 200-250koz or up to a 50% increase to jorc, we will likely see a 75% increase to cash flow but only from open pit mining, to around $450mill.
That doesn’t take into account u/g mining which is being studied in this updated scoping study.
If that study looks at cash flow contributions from u/g mining then it wont take much to see a 100% increase in forecast cash flow from a 50% increase in jorc. Let’s hope I’m too conservative on my jorc estimate.
Even before allowing for u/g mining a cash flow of $450mill would stack up very well compared to our mc around $140 mill.
Allowing for u/g mining, it would only take around 200koz to get up to a $600mill cash flow allowing for a $750 cash margin ($850/oz cash costs) or 250koz at $1000 cash costs. Those cash costs compare to $500 total cash costs for open pit mining.
Then there’s Buccaneer’s high grade zones which may contribute to further significant upside for cash flow.
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