Rox has a huge resource (MRE), but the Scoping Study and PFS demonstrate that identifying gold that can be profitably mined is a challenge. That’s the Rox story over the past five years.
There is a lot of gold, so investors are attracted, but not enough has been economically viable to mine, so the share price stagnates.
All that glitters at Youanmi has not been viable to mine.
The market hasn’t realised it yet, but the soaring price of gold will change that story.
New CEO Phillip Wilding is conducting a review, and the outcome is likely to be transformational.
Rox will change from a junior with a big but mostly unviable MRE to one with a lot of gold that can be profitably mined.
A huge cash flow will follow if Rox can move fast.
The Scoping Study had an assumed gold price of $2,450 oz, and the PFS assumed $3,100.
The current spot gold price is over $4,010 oz and heading higher, likely much higher.
In the new price environment, shallow oxide gold at Youanmi is becoming much more valuable.
Just the gold in the 3 open pits in the Scoping Study is 35kozs @ 3.3g/t.
That produces a quick $66m cash flow, more than the market valuation of the entire company.
We could see a major change with Youanmi becoming a 2-stage project with only the first stage in the DFS.
A Stage 1 DFS targeting oxide gold can be completed quickly. It gets Rox into production fast with a standard CIL mill.
That funds the Stage 2 UG refractory development detailed in the PFS.
The current UG model loses its relative advantages in the new gold price environment.
Deep DD drilling is slow and expensive. (Where the hell are those drilling results from 12th August, Rox?).
Against this, the UG grades are higher but not as high as expected in the PFS.
If the overriding consideration is to get into production quickly to take advantage of the high price of gold, oxide gold mining is the way to go.
In the Scoping Study, the shallow oxide gold in the MRE was 552 koz with another 453 koz inferred.
With an assumed gold price of $3,800 Rox should be able to identify a Reserve of 500- 700 koz of near-surface oxide gold at around 1.7 g/t
and likely a much higher grade if they include oxide gold from United North (currently being drilled) and Currans.
That oxide gold would be in the DFS mining plan.
The oxide gold has a recovery of 95% versus underground refractory at 92%.
CAPEX is lower as oxide ore can be processed with a cheaper CIL mil without an additional circuit for refractory ore (added later for Stage 2).
The Scoping Study data is somewhat dated but the AISC margin on the oxide gold should be around $2,000 oz.
A big advantage of a Stage 1 oxide project is that production ramps up quickly.
The UG refractory mine in the PFS produces just 15 koz in year 1.
If Rox takes advantage of the price of gold to mine its oxide gold first, we will see a new round of shallow (inexpensive) RC drilling,
But for the share price to re-rate, Rox has to demonstrate competence, move quickly and keep investors in the loop.
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