The following was posted by Uranium Bull on another forum. I found it interesting.
Hi Aussie Joe, There is a little known thing about AGS that can be read in an old Annual Report. When Gandel took over Alliance for a few cents a share and saved it from bankruptcy, part of the deal was the Arkaroola Tenement, Maldon, AND A COMMITMENT TO DIG THE DECLINE. So the decline is actually part of the initial purchase agreement.
The decision to dig the decline was made due to the nuggety nature of the gold. The cost of drilling is similar to the cost of the decline and if there was gold there you still have to dig the decline. When drilling you could hit the only gold nugget for 10 metres in the drilling and came back with 10000g/tonne or if you drilled 20cm to the left you might have got 0.5g/tonne.
Historic figures at Maldon revealed over 2000g/tonne is common along the reef.
How much is down there? We shall never really know until they do some trial mining, the drilling means very little except that the reef is present and there is gold in the reef. The true grades will not be known until trial mining begins.
While AGS will not comment on how much gold could be down but from historic workings we could be looking at over 2M oz.
So look at the decline as an exploration program rather than a mine development program.
Way back in the Dim Dark Ages Gandel paid I think around $4m? which got him a big chunk of Alliance, which included around $30M worth of useful infrastructure around the mine. And it was thought approximately $9M? was needed to dig the decline.
If successful there is potentially enough gold to mine 30,000oz for 10 Years. But the full potential of the reefs below Maldon could be a few million ounces and this was the big prize that Gandel was looking at all those years ago. Until they get down there and trial mining we will not know what the grades really are or how good or bad things are.
Maldon is a very worthwhile project, but it is not without significant risk.
Numbers waived around have been a cash cost of mining of around $250oz Meaning on 30,000oz Production per year they would have earnings of $20m per year
The bigger picture is they have the potential to produce 100,000oz per year and have 2Moz If all goes well that maybe still 5-7 Years away.
AGS Price at posting:
0.0¢ Sentiment: Hold Disclosure: Held
