"Equally Simberi is at decision time. Not that I think its a tough decision for them to make - 100M$ CAPEX decision to add 8 years of Sulphide ore into the mine plan (130 K Oz per year). Simberi management team has demonstrated that they are capable of executing the plan - so the next step with Sulphide seems secure."
Perhaps I may have misunderstood the situation, but my understanding is that the current figures do not justify proceeding with the development of the sulphide project at Simberi unless they first find a lot more ore reserves.
Slide 21 headed "Simberi Sulphide - potential long life mine extension" from the Diggers and Dealers presentation indicates to me that:
1. capital cost of USD100m
2. preliminary AISC estimate is USD930-990/ounce:
2. annual expected production in 130k ounces over 8 years;
3. the gold would be sold as a concentrate for which they estimate to receive 90% of the gold price - I presume they would sell it to the Lihir mine (ie NCM).
Given the current gold price of USD1200, that implies selling the gold for USD1080/ounce, which would only provide an operating margin of USD90-150/ounce or total net operating cashflow of $11.7 -19.5m pa, ie over 8 years USD93.6-156m. On that basis I think you would agree that SBM is not going to develop this project at a cost of USD100m, but will wait for a much higher gold price and/or a much bigger ore reserve to extent the projected mine life.
Simberi has two more years of full operations and then it has one more year of processing low grade stockpiles, so there is some life left but the share price of SBM should mostly reflect the value of Gwalia and their cash level.
loki (I sold out too early at $3.75 and am waiting for a retrace.)
SBM Price at posting:
$4.25 Sentiment: None Disclosure: Not Held
(20min delay)