cash flow from pearse gold deposit

For those who may be doubting the benefits of the GMR $80+ million cash to KBL due to the discount on copper sales (and for my benefit in case I missed something as I am trying to understand why the share price has not moved), I thought I’d do a rough calc on the cash flow from the Pearse Gold/Silver deposit, being one of the deposit at Mineral Hill.

The sources of this analysis include:
1. AGM presentation from announcement on 23 November 2011

2. Drill results announced on 21 December 2011 (including 14m @ 25.5g/t Au and 51m @ 9.8g/t Au plus silver and comments re production)

3. http://www.kimberleymetals.com.au/projects/mineral-hill/deposits/pearse/ which has a general background of the Pearse deposit.

The Pearse resource contains 300,000t @ 6.5g/t Au and 80 g/t Ag for 60 Koz Au and 700Koz Ag (AGM slide 15). Production is expected from mid 2012 and is expect to provide 20Koz Au and 135Koz Ag per annum for 2.5 years being a total of 50Koz Au and 337 Koz Ag (AGM slide 16). At $1,500 an oz for gold, revenue would be $75M plus another $10M for silver at $30 an oz which means approx $85M revenue over two and a half years.

I don’t recall seeing any cost estimates, but even if we assumed a higher than average $1,000 an oz cost of gold production, costs would be $50M and net cash flow would be $35M over 2.5 years, even more if cost of production less than $1,000/oz.

On top of this, production of Copper, Gold and Silver would continue from the existing Parkes Hill Underground, with other known deposits ready to come on line as others finish plus further exploration potential at Mineral Hill such as Pearse North.

Add all this to the $80+ million form GMR and Sorby Hills lead silver project in WA and I struggle to see why the market cap is only $50M.

If I've missed anything, please let me know. Otherwise, I remain bullish on my view of KBL.