The rules around economic extraction within JORC's appear to be...

The rules around economic extraction within JORC's appear to be tightening up. For at least a few years there's been Australian operations in Australia releasing JORC's that haven't been pit constrained while similar deposits over in Canada did have pit constraints. Pit constraints basically create 3 categories of ore:

1. The ore that is known to exist but falls outside the pit constraint
2. Ore that is within the pit constraint but its marginal profitability means its doubtful it will be mined
3. Ore that is within the pit constraint and profitable to highly profitable

There's been no mining and additional extension drilling between the last JORC and this JORC. Clearly some of the 258kt oz in the last report has fallen into category #1 so that the new JORC is lower at 227kt oz.

The first and most fundamental question - is there $10m of discounted profitability within this deposit? If there is, then the share price should go up. If there isn't, the share price shouldn't improve. There would appear to be well in excess of $10m of potential discounted profitability within this deposit.

Considering just the Laterite.
There is negligible over-burden because its at surface so strip ratio considerations don't apply. The average grade of 0.76g/t will be being pulled down by the cut-off choice of 0.35g/t so there may be a smaller volume sub-set that contains most of the profit noted below.

There is 759kt @ 0.76g/t for 18,740oz of JORC modelled. If all of this were mined with a 92% recovery rate there's $89.7m of revenue @ A$5,200/t. I know I should include a recovery scale down, but why are you going to not mine material that you have modelled and is at surface? I should include a dilution factor but is it really 10%, is the mining at surface on flat ground that inaccurate? For the laterite, I'm going to ignore dilution/recovery issues and just add a wad of contingency costs. The noted costs below are $1.6m of mining costs (759kt * $2.14 - which feels light) and $50 of processing costs ($38.0m) and $4m of royalties. Its the sort of volume and depth (<10m) that could be done quickly if the toll processor had the capacity so discounting isn't a major factor. The net margin on that is $46m before missing/hidden costs.

Hopefully being conservative and adding 50% to costs for hidden/missing costs (other than royalties) you get $89.7m revenue, $63.4m costs for $26m of profit. The laterite alone if mined quickly more than supports the current share price so it becomes an issue of whether TG6 can execute mining quickly.