re: Ann: Quarterly Production Report - Decemb...
Yes - the key to any mining operation is grade/metallurgical recovery.
NGF has the attraction of a large amount of sunk capital in the 3 million tonne per year mill and operates at an average of 1.5 g/t to produce gold at a forward C3 cost of ~$A1,300/ounce.
There is a $35 million two year exploration program that has now been initiated. Reading the report it was of interest that in their leases only 6% of exploration holes were drilled below 100 metres and no exploration above production hand to mouth stuff has been undertaken since 2007.
There are two scenarios - the first is a call on rising gold prices as each $A100/ounce rise translates to $15 million per year extra cash - with a market cap of ~$A170 million this equates to a Cash/Market Cap of 11 per $A100 thus $A200 gives a cash effect of 5.5 - this is the potential of an unhedged low cap high ounce producer once they are cash positive.
The second is a higher grade discovery that increases mill grade towards 2 g/t this creates a 200,000 ounce producer. The important benefit is that any discovery can be quickly turned into money since the production infrastructure is in place.
I suppose the sugar hit is if both these scenarios happen.
NGF Price at posting:
19.5¢ Sentiment: Hold Disclosure: Held
