old pirate upside

One possible contributor for the poor sp reaction to the jorc;
In the presentation of March 20th 2012, on page 14;
Trenching results reported 726m combined strike length with 799 square meters of vein exposed for sampling.
704 samples averaging 3.96kg each for a total of 2.79tonne at ave 24g/t gold.

If the overall grade of this widespread sampling was 24g/t, I wonder if the sp managed to continue dropping after the Jorc maiden resource came in at 8g/t or 10.5g/t uncut because perhaps the market was disappointed as they expected better grades.
There is nothing to be disappointed about though.
The veins are still very high grade and the lower grade of the jorc arises from the fact that barren rock between tightly stacked veins brings the average expected mined head grade down.
However this also produces much wider mining widths at still very high ave grades leading to a much deeper pit with lower mining costs than otherwise.
Perhaps the market needs a little time to understand this.
To show how high our vein grades are; consider another comparison of Old Pirate to Dorays Andy Well.
Comparing grades of the veins rather than the average grade of the jorc resource would show Old Pirate is the higher grade system with veins as indicated by surface sampling averaging 24g/t compared to Andy Wells’s high grade Wilber Lode which contains 331,000oz at a much lower (but still very high) 15.1g/t.
Our jorc tells us our mined grade will likely be between 8 and 10.5g/t-mostly open pit- compared to an expected head grade for Andy Well of 12.3g/t-mostly from u/g mining. U/g mining is more targeted at the actual veins. Our u/g mining has a very good chance of producing ore at higher grades than what Doray will achieve. Probably lower grades through mining dilution on our narrower veins but better grades overall as our average widths are similar to Dorays 1m.

Working on the numbers as reported, ABU looks significantly undervalued on the maiden resource of OP with around 100% upside on my estimates from the current EV - ignoring all other assets inc Buccaneer. That is on an NPV which assumes no corporate tax paid on the mining of the jorc resource thanks to large tax losses held.
Looking at the likely resource upgrades to come this looks much more undervalued again.
Slide 12 of the latest presentation shows just how small an area the current resource takes up over the mapped area containing mineralized veins.
The veins in the resource zone are stacked closer together than elsewhere on this map so we should not expect as big an increase in the resource as a glance at the map might imply (e.g. a 10 fold increase), but the upside is still very large. Just the small area immediately to the RHS of the main body of the resource could easily add another hundred thousand ounces-if not much more.
Much of the rest of the map shows veins as interpreted by the company. Many of these veins are not as tightly stacked as they are in the resource area so we should expect less ounces per square meter of surface area and narrower mining widths and therefore shallower pits (before moving to u/g mining) -although probably at higher mined head grades, compared to the zone of our indicated resource. Higher grades because in these areas where veins are typically more widely spaced, there will likely be much less mining dilution (inclusion of barren rock between closely stacked veins in the ore to be processed). Mining in these areas may be more comparable to mining at Dorays deposit- shallower pits followed by u/g mining with overall higher grades of ore. These extra ounces should still have very low cash costs and should lead to a very strong boost to the NPV.

With the resource only taking up such a small percentage of the area containing mineralized veins, it is difficult to imagine the resource not increasing in size substantially along strike. There certainly appears to be ample potential especially when including potential depth extensions. Potential we do not need to pay for considering the company trades at a heavy discount to likely valuation based on the Old Pirate maiden resource alone.
Even this large mapped area most of which is not part of the jorc is not exhaustive. Announcement on 15 Nov 2010 gives drill results of [email protected]/t (inc. 1m@32g/t), 3ms@ 6.39g/t, [email protected]/t, [email protected]/t, and these results come from an area 1km north of the current resource (well outside of the limits of this map).

I also see good potential for the current resource to grow as a result of infill drilling. Drilling appears much less thorough than surface sampling and drilling very often misses the target unlike the trench surface samples which gave us 24g/t average grades.
Drilling results contribute to the jorc estimation and if further drilling defines the veins better and proves continuity and depth extensions there is room for the ounces to increase from infill drilling.

Further potential upside; mining may reconcile grades at closer to the 10.5g/t uncut as often happens when nuggety deposits have top cuts applied.
Especially so if drilling has understated the potential continuity as well as possibly average grades.
My NPV estimate is based on what should be a conservative 9g/t.
This strong exploration potential on top of what is already defined is why I believe Old Pirate will be a company making deposit.

RBgould2008 mentions 2mill oz.
I see no reason to consider this too optimistic.
A doubling or much better seems a very reasonable early target and at these grades that is a company maker.
1 mill ounces with cash costs of $3-400 is much better than 2mill ounces with cash costs of $8-900 which is typical these days.
Not only are the margins and therefore operating profit better, but capital costs are far lower as grades of 10g/t only require a plant with one fifth the capacity of a plant being fed 2g/t to produce the same amount of gold. Cap costs of $55mill as for Dorays recent study compared to say $205 mill means $150mill benefit to your NPV (all else being equal).