Conjecture Valuation

Conjecture Assessment

Hi All, some quick notes on my Conjecture assessment here. I know I said I'd put it on the main thread but it took me so long I thought that it deserved a thread of it's own! All information is taken from the company's RNS releases and I have referenced the dates on each.


Conjecture

The mine was discovered in 1894 and did most of its mining in between 1900-1910 then again in the 1930s and then again in the 1950s when it essentially shut down.
TotalproductionfromtheConjectureMinewas12,663 tonsoforeyielding81,333ouncesofsilver, at an average grade of 6.42 ounces per ton. All of this production was done from no deeper than 500 feet and I assume that the reason the quantity of ore is so low was because most of it was done by hand. After all, BMZ say that they will be able to process 300 tons per day at Conjecture and by that standard it would only take them 42 days to process more ore than has come out of the mine in it’s previous 120 year history.


Assets - Block 1

In the 20th March 2012 RNS BMZ mentioned that there were two blocks of historical reserves – one at the 200ft level of the mine and the other at the 400ft level of the mine.
The Historical Report from the Sunshine Mining Company identifies a block at the 0-200ft level of the mine containing 19,000-20,000 tons at an estimated grade of 250-300g/t silver. This would give an 8.9oz/t grade and when processing at full speed would generate $54,000 per day in cashflow. It would take 70 days to mine out this reserve and it should generate $3,600,000 in cash.

Assuming that the production cost would be $10 per ounce and the silver price is $20 per ounce then this should leave a profit of $1,800,000.


Assets - Block 2

In the March 2012 RNS Black Mountain also mentioned that there was a second block of historic reserves at the 200-400ft level containing 16-17,000tons at 290-320g/t. This would give a grade of 10.4oz/t and when processing at full speed would generate $62,000 per day in cashflow. It would take 57 days to mine out the reserves and should generate $3,500,000 cash with a profit of $1,750,000.


Assets - Block 31

In the August 24th RNS the company revealed that they had historic data for another block “Block 31” which estimated this block to contain 50,000 – 60,000 tons1 of silver at an estimated grade of 350 – 375 grams Ag per ton1. This would give a grade of 12.5oz/t and at 300 tons per day would generate $75,000 per day in cashflow. It would take 200 days to mine out this reserve and should generate $15,000,000 with a profit of $7,500,000.

From the additional information in the RNS that gave the depths of the drill holes from the diamond core drill program then it looks like these reserves exist somewhere between 100m and 238.6m in depth (300 feet – 800 feet) which is not immediately accessible from the initial mine re-opening but is not too far away.


Overall

Assuming that the information I was told of Conjecture being able to mine for 260 days per year is correct then this would give 1.25 years of mining in three known blocks for a total cashflow of $22,000,000 and $11,000,000 profit.


Additional Historic Assets

In the 29th June 2012 RNS the company also announced that they had appointed Richard Morris as Conjecture’s chief geologist. This is important because it was Richard Morris originally wrote the 1981 reserve report for the Sunshine Mining Company, but more important was the fact that the rest of the RNS revealed the contents of the report – that Morris estimated that he estimated that the historic lower level mining blocks contained 650,000 – 700,000 tons1 of silver at an estimated grade of 280 – 370 grams Ag per ton.
These figures give us an idea of what is still down there without the need for any further exploration and it is fairly substantial.

650,000 tons of ore at a grade of 280g/t (10oz/t) would allow the company to generate $60,000 per day in cash flow for 2,166 days before mining out the reserves. This is over 8 years worth of mining at 300t/d and 260 days per year. In total it could bring in $130,000,000 worth of cash flow for a profit of $65,000,000. This works out as $16,000,000 cashflow and $8,000,000 profit every year for 8 years.

In total, then the estimated reserves at Conjecture, if correct, could be worth $150,000,000 in cash flow and $75,000,000 in profit over an eight year period – just from Conjecture. Since successful production at New Departure should see the share price rise 4 or 5 times it’s current value anyway then we could be looking at an additional 25-50c per share on the share piece once Conjecture comes online.

Obviously, it is all a bit far away at the moment and we all need the company to get funding and then get into production at New Departure before thinking too much about Conjecture but it is nice to know that there is already a second string to the company’s bow that can be let loose as soon as the New Departure production money starts coming in.
The more I look at this share the better potential it demonstrates, but as I have said before – Now we need to get producing.