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34.5¢ red 5 limited

$10k a linear meter seems high , I had guessed it would have...

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plough

34,168 Posts.

1887

27/02/16

10:09

Post #: 17132109
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Originally posted by Holdonman ↑

I thought it worthwhile to discuss how RED might finance this UG concept and what the estimated costs might be. As an engineer I know that almost anything can be engineered but at a cost.

Firstly the decline into the UG workings. I have been researching decline costs for another company that provides fruit here. Roughly a 1:8 6x5m decline ramp will cost $10,000 per metre of advance. Since the ground as described by RED is so mushy I can’t see the angle of the decline being any steeper than 1:8.

Do the math and to get down to say 400m then: 400m x 8 x $10k = $32m excluding services such as power, clean water, ventilation, communications etc.

To drain the water in advance of the working face (and the orebody at each level on the way down) they will need a substantial number of additional water bores. If they can’t keep the water from flooding the base of the pit now with 8 water bores and additional in-pit sump pumps let’s say they need another 16 water bores (or their equivalent) to keep the working face relatively dry. Note the word “relative”. Cost per water bore circa $0.5m each = $8m.

The development tunnels from the decline to the ore bodies are also a capital cost. With major levels at say 40m vertical spacing and sub-levels at 20m a 400m deep mine (from the top level of the UG ore) will have up to major 10 levels. Tunnelling out from the less mushy decline rocks to the really mushy rocks of the gold ore is probably going to need tunnels each of 100-200m at least. At about $4k minimum per metre of advance = $8m give or take.

Add services, ventilation shafts, equipment, etc at an estimated $12m the total is about $60m without mining equipment and drilling units since I have assumed this would be done with contractors. With a pay as they proceed basis there would be something like $20m upfront cost (vent shafts, services, water bores, etc) plus at least $10m per 100m of vertical advance. The contract would need some commitment for the whole of the job (less default clauses). This estimate excludes the cost of the ‘new’ tailings dam that has been promised for almost three years (things have gone quiet on that front).

Given RED has spent about $40m in the past 18 months on some minor additions to the processing plant (the thickener, paste plant and liners for the tailings dams) it’s easy to see a dollar estimate for such major UG works being much higher.

So with an estimate of $5.1m in cash at the end of this quarter based on RED’s announcements (last cash flow report and the production guidance) they would need at least another $30m ($20m + $10m) to commit to the first 100m of advance. I can see at least a $50m CR or a bank loan is on the horizon. I think a bank loan too risky since a hypothetical IM#3 UG would be curtains for these guys.

I seem to remember one poster extolling the virtues of RED’s cash management. If their $20.5m estimate for cash outgoings for this quarter blows out by the same percentage as last quarter (+37%) then the curtains will come sooner. And to think the estimate is provided to SH’s one month into the reporting quarter. Makes your mind spin.
No. On second thoughts the CR is probably coming sooner rather than later and that may be the reason for the “manipulation” colincj has recently suggested.

Good luck to the indoctrinated!

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$10k a linear meter seems high , I had guessed it would have been $6K , as guessed the rock would have been soft enough to use a road header for cutting out the drive , but a perched water table (guessing as there is a river above the mine ) is going to be an issue , also probably need closer bolt spacing and does it need shot crete lining ?
When you state sublevels between levels how would that work given their trackless machinery (LHDs Jumbos) are probably of a uniform size for mucking out and drilling ?
Guessing the company has done test bores to determine expected water ingress flows .
Current company cap seems very high considering probable forward cashflow
Just an observation and I have no UG mining experience

RED Price at posting: 8.2¢ Sentiment: None Disclosure: Not Held
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