Here are a few facts that you might want to consider when valuing this stock;
Check out Note 12 in the FY17 annual report and understand what implications this has for your understanding of real costs of production during FY17 and subsequently. Compare timing of amounts capitalised to when commercial production was declared. What amounts to capitalisation of losses is a risky precedent.
Stripping ratios are a function of mine scheduling. As open pits approach depletion stripping ratios reduce. When that particular pit is depleted, stripping ratios have to increase again (dramatically in the case of narrow vein resources). Matilda has a number of pits. Understand what pits are in production and nearing depletion and when new pits (or pit extensions) will be active. This will dramatically alter rate of cash consumption/ oz, unavoidably.
When grades milled in the next period is different to that reported stockpiled on the ROM in prior period, it points to a discrepancy between the reserve/ resource grade (which is ultimately an estimate) and the milled grade (which is reality). The difference is due to an overestimation. Understand what this means for mining costs/ oz and the entire resource estimate. When resource grades are regularly overestimated that means that the ore resource needs to be restated.
Reserves need to be calculated with a reduced level of uncertainty than resources. Estimates based on resources either have not been drilled sufficiently or have not been assessed for economic viability by applying estimated costs of mining and processing.
Considerable ore at Matilda is refractory meaning more complex and higher costs to process. Any issues with recovery may be an indicator that a mill capital upgrade is required to process or otherwise suppressed recoveries maybe ongoing.
Fact is, sometimes it rains and there is lightening. Mines which have invested in good road and infrastructure can normally resume production soon after weather events.
Hope this is of some assistance.
BLK Price at posting:
8.5¢ Sentiment: None Disclosure: Not Held
