Fiendish, I think management might by under notice to move the project forward now, so one way or the other I believe we WILL be seeing a truer valuation for Paron reflected in the share price before too long.
It's certainly been a long & frustrating wait in such a strong gold environment.
Just to remind people...
(From the September Quarterly, pp 2-4):
A detailed financial model of Paron was undertaken as part of the pre-feasibility study. This study was based on the following operational parameters:
• Heap leach operation • Treatment rate of 3,000 tonnes per day (1.06 million tonnes per annum) • Mine Life of 6 years • Diluted head grade of 1.6 g/t gold and 7g/t silver • Gold recoveries of 80%, silver recoveries of 40% • Annual Production rate of 43,000 ozs gold and 92,000 ozs silver • Waste to Ore ratio of 1:1 • Capex of $US30 million (includes a 25% contingency) and a company owned plant and mining fleet
Based on this financial model and a gold price of $US800/oz the Paron project has an IRR of 43.4%, a net present value of $US33.4 million (using a 10% DCF) and it is estimated will return an EBITDA of $US17.1 million on an annual basis for 6 years.
Cash production costs were estimated at a gold equivalent $US223/oz ($A269/oz) and total production costs (including all capex) at a gold equivalent $US324/oz ($A390/oz).
The pre-feasibility study confirmed the potential of the Paron project to be a highly profitable gold and silver operation with considerable upside through higher metal prices and a significantly lower capital cost through the use of contractors, rather than a self owned and managed mining fleet and infrastructure. There also appears to be potential to achieve much higher metallurgical recoveries in an actual operation than projected in the pre-feasibility study.
The Category Two permit was awarded in late July 2009 and this is regarded as a major achievement for the Company. This permit effectively allows all required activities up to commencement of mining and has added significant value to the project.
In addition, Latin Gold has pegged additional claims near Paron to provide alternate sites for the proposed treatment facilities. This new site is distal to the local farm areas whilst still being proximal to the actual Paron deposit. The use of this site is expected to marginally increase the cost of production through the addition of trucking costs, but could reduce capital expenditure by 10-15%.
Latin Gold owns 100% of the Paron project. Work completed to date indicates that the project has significant potential to be developed as a gold and silver operation with very attractive financials.
LAT Price at posting:
3.7¢ Sentiment: Buy Disclosure: Held
