OGX value est. (for discussion)

As promised I have had a crack at the potential company value and what I have arrived at is both very encouraging and hopefully also cause for some constructive discussion.

Hi blackscarib, I think your metrics are a bit on the optimistic side, but I don't think that matters when looking at just how much upside there is on receipt of a positive announcement for OGX.

So for this valuation exercise, I have researched announcements and broker valuations and a host of other data for the last few years.  In addition to the following spreadsheet,  I have attached a document where I have dumped research that might be relevant including some peer comparisons.  In this spread sheet I present a range of head grades 15 g/t, 20 g/t and 25 g/t.

This research is my personal work and is meant for discussion, not to persuade anyone to purchase OGX, so please keep any response in that light and hopefully constructive.  I'm not an accountant and may have made errors which I will be glad to amend if confirmed.

So lets get to it:



So the main points (as I see them):

-  I think (at least) 60,000 tpa will be achieved without too much fuss because:
   a) There would no need to build a plant capable of 100,000 tpa if we were not planning to use it (Mark P quote).
   b) The March 30 2015 Report by GMP: "Assuming the minimum dimensions of the vein, it is likely that between 80 and 120kt of ore exists in the 125m x 500m area. With a minimum mining width of 1.5m, the initial mine will likely move approximately 250kt of material at a diluted grade in excess of 10g/t Au." . This suggests at least 4 years ore @ 60,000 tpa at that time (at least 16 months ago -prob 18 months).  Since that time the gold resource has increased with new discoveries (all though not yet quantified).

  -  20 g/t is estimated (Breakaway Research 15/05/16), but even 15 g/t provides a great outcome assuming a viable JORC reserve.

  -  Cash costs have been estimated at AU $600 /oz.  I have used this figure with 15 g/t, because: a) It seems reasonable when considering peer comparisons.  b)  Previous cash cost estimates have indicated this.  c)  There are multiple reasons to suggest that mining and processing costs will be comparitively low:
i.  mine very close to the mill saving haulage costs;
ii. mine commencing from surface (short haulage for first few years at least);
iii  no CIL process or cyanide process needed (reducing OpEx);
iv  labour costs low in Brazil.
v   Approx 90% gold recovery  

-  As I have based cash costs for 15 g/t; higher grades will have a lower cash cost ( reflecting mined tonnage). NB I believe that these costs may be even lower -but best to be conservative.

-  OGX have pre-sold 8Mil worth of gold (could be considered a debt) and should be taken into consideration.

-  OGX have commenced production, have an initial stockpile of lower grade material (from main ramp drive) to chew through but are also intending to process high grade ore for accurate grading (hopefully commenced).

-  Lower grade ore will be used to bed in the mill and processing plant and also ramp-up in production quantity planned from Jan 2017.

-  Plant able to be upgraded to 200 mtpa for AU 2 Mil when needed.

-  A number of other gold targets some already understood reasonable well and some unknown (some close enough to be feedstock for the mill)

-  In addition OGX has Tinteiro IOCG prospect with very high silver drill results considering farm-out.

Following is a sensitivity analysis for different gold prices (based on reasonable long term valuation IMHO).



The essence of this estimate to me is that there is a likely upside of multiples of the current MC / EV and therefore SP even with moderate news.

I predict that announcements of head grade and resource size etc will result in a significant re-rate and be preceded by a trading halt.  This is probably why the current Ann. is taking longer than expected.

All IMHO,

Cheers,

SJB

Rough workings and some info referred to in attached PDF: