Spartan, Good questions, but a bit off with your math. First of...

Spartan, Good questions, but a bit off with your math.

First of all I am interested in Cash costs not the AISC. The difference between these is mostly the depreciation of past capital expenses such as removing the overburden. As such the AISC includes the capitalised expenditure on stripping from the last few quarters. Each quarter with high capital expenses increases AISC for future quarters mining the ore underneath, even if there is no further capital spending required. As such, in the best case (which is what I was considering - not the expected case) with minimal further capital expenditure, it is the cash cost that determines the cashflow.

Take the price of gold sold subtracting the cash cost, multiply the result by the oz for each quarter. Let us say this represents the current quarters operational performance of the mine (not true though)
Take the cash balance each quarterly less the debt to get net cash.
Subtract the previous quarter from the current quarter to get the change in cash.
You need to remove from this any finance changes such as capital raising, share issue, dividends (laugh)

Compare this cash change with the quarters operations cash flow, the difference is (very approx) the capitalised spending and exploration. For BLK this figure has been very large because they are mostly mining waste and overburden and faffing around underground. Unfortunately they do not get this for free, because the total costs over all the quarters mining in this orebody are then amortised over the life of the ore body, and added to future cash costs, and other stuff to get the AISC.

Spartan you are mistaken using the AISC in your calculation, and also since you are including all the mining expenses in the cash outflow, but also including it again when you say they will loose another $10M or break even. You need to way the expenses against the INCOME not the change in cash balance, and the AISC has nothing to do with this. You have pointed out the projected cash outflow next quarter is $44M including loan repayment and all other expenses. According to my best case scenario, they produce 25koz as forecast and sell it at $1650 /oz. This would see their receipts from customers as $41M, leaving them only short $3M or a cash balance of $7M with no additional loans. You really need to be very careful studying and working out these figures if you are looking at high risk speculative stocks.

In short I think now their AISC is going to be stuck at a high level for this ore body because they have so much capitalised costs to account for. On the other hand, the cash cost basis could go down IF they no longer have to do so much stripping because they need to do less mining each quarter to get the ore.

What I was looking at was what was the best that could happen for BLK if they met guidance, and the price of gold did not change, what was the MAXIMUM upside based on the value of the cash flow. The fact is there are a lot of risks such as their financing which could easily make their MINIMUM value zero.

The drop today again caught me by surprise, wondering if there was some spanner in the works with the financing, the loan agreement. Maybe my assumption they were fully aware of the current state of production was not correct and they have changed their posture based on the latest quarterly. As to who would buy, well at the current price I am thinking on it. The financing is a big unknown, but I see that they have more money to make if BLK succeeds. They will hopefully insist on paying close attention to the operations week on week, if they buy at current levels I would too.

This is only ramping if you do not understand statistics and weighting. It is like saying the maximum value of your lottery ticket is the $1 million first prize, and the minimum value is zero. For the lottery the odds are against you, but you have a weighted value of the ticket which is likely to be less than 80% of what you paid for it not a good investment. (As an interesting aside there was a state lottery in the US where the expected value of a lottery ticket would sometimes be significantly greater than the cost of the ticket due to the jackpot accumulating and there were some maths geeks that made a lot of money over several years buying thousands of tickets each time this happened - with the full knowledge of the state! Look it up)

BLK is like a lottery on management executing their mine plan, with a jackpot on the gold price. By holding or buying now I am saying my ticket in itself is worthless, but maybe it will pay out fourfold. Speculation is done with smaller amounts than investment. Say I bought $100000 of BLK before, and held as it dropped 50%. The risk of a 50% drop is something to expect buying a small and unproven gold miner. Now the risk has gone up, but even if I loose all my remaining 50% investment ($50000) then it is no worse loss than the original 50% drop. As I said, this speculation is about understanding mathematics and doing a lot of research to get your numbers. Do you own research.

Please no one reading my posts should consider them a buy recommendation, it is more intended to be an education for those who have not considered the figures as I have. Even if you disagree with me it is an opportunity for you to see what those on the buy side may be thinking. I also post so that those who do think and calculate on the same lines as me can poke holes in my analysis before I make any mistakes ...