Blackham invested $20 million this quarter in the future getting the pit at Williamson ready and building the tailings dam for Stage 1 & 2 Expansion. The Williamson investment will provide the Company with 18 months ore at a stripping ratio of 6 and very little capital work required with the free milling ore for the next 6 quarters.
With BLK it’s all about cashflow (refer to the table on page 13 of the Quarterly). They are not purporting to be a Northern Star or Saracen-style gold producer of 25-50koz free milling ore per quarter at an AISC of A$1,000.
What they are saying is that for the next 18 months they will do this:
- Produce 17,500 oz per quarter at an AISC of $1,750/oz
- Create operating cashflow 17,500 ounces X A$850 (A$2,600 POG minus AISC) = circa $15 million per quarter
- Minus normal costs of $3 million/quarter per quarter for admin, cap ex, etc = EBITDA of $12 million per quarter
This $12 million per quarter allows Blackham to do:
- More drilling to covert resources into minable reserves in the Stage 1 & 2 expansion mine plan – focussed particularly on the potential >11M oz of high-grade ore under the head frame at Wiluna
- More exploration – there are 4 world class gold systems within the massive 16,000km2 tenement package
- Fast track studies for Stage 2 where the Company aims to be producing 250,000oz and creating a sulphide gold concentrate to send to Polymetal Group (who have already purchased the 70% of the con)
- Fund any cap ex requirements for Stage 1 & 2 expansion
Blackham are debt free and have $38 million in the bank as of yesterday.
Compare this to De Grey (DEG), Bellevue (BLG), Capricorn (CMM) and even Red 5 (RED). They all have market caps of around A$400 million, roughly 4 times BLK’s. They don’t make a cent (other than RED), are 2-3 years off production (might be longer with COVID), and are going to have to find $250-$300 million to build what we have a Wiluna in terms of plant, power stations, tailing dams, camps, air strips etc AND don’t have resources or reserves nearly as large as BLK.
Blackham’s days of being comparable in production and low costs is still to come; it won’t happen in the next 18 months but $12 million per quarter cashflow will.
For investors seeking high production and AISC of A$1,000/oz they should look at the likes of NST or SAR (although being fully priced or close to). For those seeking value and GROWTH, a junior producer pursuing an intelligently staged expansion plan, like Blackham, represents a good starting point for further research.
