Kangan

The following is an extract from The Hedgeless Horseman’s latest article on Egina.

“Remember the following grades that came out of the large scale bulk samples:

• Within swale: 1.7 g/m3
• Swale margin: 0.6 g/m3
• Outside of swale: 0.3 g/m3
• Average: 0.83 g/m3
• Global average for such deposits: 0.2-0.3 g/m3

Given the amount of  orange or better MAK samples I could argue that the average indicate grade over the samples areas within the Egina Mining Lease could be around 0.8 g/m3 and that it approximately covers around 3 km2 of ground. Now what could the theoretical cash flow be from this “tiny” 3 km2 area of lag gravels which is just found within a subset of a subset of the Greater Terrace area?
Example Assumptions:

• Area: 3 km2
• Thickness: 1.5 m
• Grade: 0.8 g/m3
• Operating Costs: A$15/m3 (Double Barron’s estimate)

… Which translates into a net operating profit of A$239 M on an undiluted basis. This should be doable by a single continuous miner in one field season I think. Sumitomo will of course get up to 40% of that assuming they keep earning into the Egina Project (which includes the Egina Mining Lease).”

The PIO Kangan tenements cover 268km2. If Novo only found 3km2 as per the above example the pre tax profit attributable to PIO would be $71.7m (30%) which is roughly 4 times the current PIO market cap. A 30km2 area would be $717m, 40 times the current market cap.