"If I want to maximise my return from selling Kings shares, I wouldn't spook the market with such big figure at one go.
I will break my sale up and drip feed it into the market. But I may do it if I intend to buy more shares cheaply and put a lid on the share price or even encourage the price to go lower"
On Sedar's (Candian Securities Administrators) website (www.sedar.com) you can search for all of the relevant company documents including past lodgements for SNN (and now KMN).
There are many interesting snippets in there, not least of which is the "Technical Report Preliminary Assessment for the Cerro Del Gallo Project", dated 16 April 2010.
At page 107 of the report you can find the economic analysis of the project. As with all analyses of this nature we find ultra conservative (i.e. bankable) estimates.
This is a requirement for obtaining finance - the finance houses demand ultra conservative inputs to offset risk.
Given that we are looking at gold and silver credits for this current mine plan (i.e. copper is not in the mix right now) the projections used are as follows:
GOLD: $900 per ounce (current kitco quote $1389.20) SILVER: $15 per ounce (current kitco quote $26.53)
Even using the 'underwhelming' $900 gold/$15 silver projections for the PMs the project's economics are robust as evidenced by the statement on p.108 of the report:
"The base case metal price evaluation (US$900/oz gold, US$15/oz silver) generates a pre-tax operating cash flow of US$259 million, with a payback period of 2.13 years for the initial heap leach development, a 37.1% IRR, and a net present value of US$118 million at a project discount rate of 10%, over the 14 year mine life. Project direct cash operating cost after by-product credits average is US$422/oz Au."
So what do you think the REAL WORTH of this project is when you factor in today's metal prices...?
Check out the IRR sensitivity analysis on p.109 to get some idea of the significant leverage that this project has to the prices of gold and silver!
The P+L Statement figures (Table 19-15) on p.111 will have takeover merchants positively salivating at the prospects for this mine at current precious metals prices and beyond...
Also ask this: Where do you think PM prices will be in, say, 2-3 years time when this is being profitably mined?
We've just seen QE2 - will we have seen QE3, QE4, QE5, or even QE6 by then?
What of competitive currency devaluations and increasing fiat currency interventions?
Cheers, BS2
KMN Price at posting:
13.0¢ Sentiment: LT Buy Disclosure: Held
