Mark, I respect that it is your opinion but you really need to recalibrate your definition of "special" and what it takes to be economical in the modern world. Sure, some might agree that there is nothing special about the company - the usual mix of West Perth money miners and luck. But dont under estimate the degree of luck they have experienced. The discovery is genuinely exceptional, even if the company is just a bunch of run of the mill but highly experienced spruikers.
The best analogue I have for Hemi is Lake Cowal which is also refractory. Until they put in their Float Tail Leach system they averaged 80% recovery, now they are a touch below 90%. Hemi is looking like better than 90%.
1.8g/t - compare that to LOM 1.0g/t at Cowal and current head grade of 1.3g/t. Cowal AISC is sub $1000/oz, in Aussie dollars, not USD. Translate that to 1.8g/t and you're looking at AISC for Hemi of maybe $750, or US$500/oz. That sort of margin covers a lot of pre-production capex. EVN run all their reserves at AU$1450/oz too, not the current $2500 or more.
Hemi capex was always going to be in the order of $0.7-1.5 Billion. Myself and others have been saying that for months. It doesnt scare me.
If Hemi comes out with a resource of 5Moz, most likely that translates to a reserve around 3Moz and AISC AU$750/oz in the first few years. With a production rate in the order of 300,000oz/yr that will more than cover the capex.
Most likely scenario is a 50/50 JV of some sort where the JV partner covers most of the capex, so hypothetically you're looking at 50% of 300koz at $1500/oz in margin on maybe $250M in actual capex -> payback = 1 year and then free carried. That's pretty special. Assuming a conservative 10 year life, 3 Moz, 50% JV interest and discount rate of 8% gives a free cash flow of $2.25B and an NPV of $1.17B. That's without all the satellite deposits, residual cashflow or further discovery.
Of course that NPV is in 2024 dollars, which is how long this thing will take to get to construction. If you spend say $30M a year from now and $150M in 2024 for production commencing in 2025 then run the same parameters you still get a 2020 NPV8 of around $920M. Assuming you need to raise the $250M at 50c/share that gets the capital base up around 1.7B shares, so Hemi by itself, at 1.8g/t and 3Moz in today's dollars would be worth maybe 55c/share and +75c/share in 5 years. Maybe more, maybe less, depending on timing of actual cashflows and what you can raise capital at. But that sort of ballpark. Without assigning a value to any of the other assets.
I'm still waiting for the price to drop lower before I get back in, as it will, but you'll never see 5c. Your call of 5c/share is ludicrous.
All hypothetical. Not advice, dyor.
DEG Price at posting:
75.5¢ Sentiment: Hold Disclosure: Not Held
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