@TwoAceFoldEmPut your ear on the track and listen…PH indicated they have been putting ore on the stockpile for the last few months. According to PH: “The grade is higher than what they had originally planned. They have been delivering ore essentially to plan. The amount of ounces is about double the original plan by mid-September being driven generally by the higher grade material.” Interview here: https://www.kereport.com/2023/10/04/lion-one-metals-tuvatu-construction-update/ What did they originally plan? Looking at the plan presented at the Denver Gold Forum might help us out there. This information is from September 2022 and presumably follows the plan from the updated PEA from April 2022. In this plan, see picture below in yellow. The plan was to stockpile high grade ore from the start of mining by the end of 2023. This is described at +10g. We can see that they planned to be milling at 11.2 g/t. We know they beat that plan as they already started mining in early April. We also know the original planned lateral and vertical development as well as the mined mill feed per month, see pictures below. Realize that this original plan from 2019 will change a lot as this is only based on the ounces knows at that time. But it might still be fairly accurate for now as they start at the upper levels first. What we can see is that the mined mill feed seems to be close to the 158 tonnes per day mentioned by @Pdono above.So, the original plan was 10+ g/t and we have double the amount of ounces while ore has been delivered essentially (important) to plan and the increase generally being driven by higher grade material. I already increased my original assumption on grade from 11,2 g/t (original plan) to 14 g/t based on the August 2 update (KE Report update QH here: https://www.kereport.com/2023/08/02/lion-one-metals-wall-sampling-results-yielding-higher-grades-at-the-tuvatu-mine-what-does-it-mean-for-future-mining-expansion/ ) where QH called grades considerable higher, following on the April 26’th update. Not only is the grade higher, but as the veins are not as narrow as expected (the fractures extend well below the lodes) there is a lot more ore available than was planned, which could have a significant impact on the mineralized tonnage in QH’s words. QH: “The channel samples are almost universally coming back as 10+ g/t gold. This is in the wall, next to the material that was mined.” So we have tonnage at planned grades next to the material that was planned to be mined. QH mentioned that the grade control drilling has given the company extraordinary comfort in April already. The underground access has enabled the company to go from wide spaced drilling from surface to tight spaced drilling from underground. QH estimated a significant boost versus the updated PEA of 20/30% improvement in grade and an improvement in width, see https://www.kereport.com/2023/04/26/lion-one-metals-high-grade-results-at-the-urw1-lode-at-tuvatu-continuing-to-guild-initial-mining/ around the 6:30 mark. But now, as we’ve come a long way from those April remarks (and had lots of infill drilling!), we seem to be looking at close to a double of the grade. So I will stick to my high teens assumptions I made earlier just after the last PH interview and will bump the initial grade up to 17,5 g/t which is more than a 57% increase from the initial grade planned.What is now interesting is to see how this will impact the economics of the project. I will refer back to the numbers from the updated PEA. Rember this was published April 29’th 2022.At this point in time, a lot of the equipment for the now completed plant had already been ordered. So I wonder how much cost overruns we will see versus these estimates. Keep in mind that the mine plan above is different from the plan we are now following. At 1,000tpd and 90,4% availability (new PEA number) we get about 330,000 tonnes mill feed. But we are not starting out at 1,000tpd but at 300 tpd. From an NPV perspective that negatively impact the plan because we’ll be getting more ounces later in the minelife instead of earlier. This seems to be compensated for by grade and mine life in spades. By mid 2024 we’ll be at 500tpd and where the original plan had a grade of 7,42 g/t we’ll see more than double and should be above the Year 1 target on an annual run-rate. Important here is that the pick-up in grade will very likely allow for a considerable pick-up in revoveries from the 87% that was in the original plan, see my comparison with Macasa and Fosterville that are both just under 20 g/t grade and above 95% recoveries.But have a look at the after-tax all in cost of USD$915, which includes the initial capex. This will come down as the mine amount of gold mined will be a lot higher than 381k oz. Other costs will come down as well because the grade is simply turning out so much higher (as it seems). After my analysis above I actually wouldn’t be terribly surprised it they are able to beat those AISC and all-in costs because the leverage those grades have is huge in my opinion. Ask yourself what will have a bigger impact here, cost inflation since the new PEA or the increase in grades, consequently leading to increased revoveries and the potential multi decade mine life?Have another look at the yellow box. They were originally planning 15 g/t for 2026/2027 to recover 71k oz each year with the 500tpd. I estimate that once we reach 2026 we will be at 750tpd, based on the current fast-tracking of the 500tpd to mid 2024 (Confirmation to reach full plant design by mid 2024, begin 500tpd. Only parts needed for the upgrade are floatation plant and third ball mill with a couple million dollars all-in still needed versus the 10-15M CAD budget). Look at the grade estimate which was based on all that infill drilling SC has been doing. They were going for the high-grade top parts of the system for those two years. These are turning out to be even higher grade. If I model 750tpd at 20 g/t, which is a smaller increase than the increase from 11,2 g/t to 17,5 g/t and more inline with the high-end of QH’s April estimate, and increase the recoveries to 94% which is considerably below Macasa and Fosterville at equal grades, this “small operation” is making more in net profit than it’s current market capitalisation on an annual basis. I have not even taken the four year tax loss carry forward into account.Is your ear still on the track? Can you hear it coming…?
LLO Price at posting:
$1.10 Sentiment: Buy Disclosure: Held
So, the original plan was 10+ g/t and we have double the amount of ounces while ore has been delivered essentially (important) to plan and the increase generally being driven by higher grade material. I already increased my original assumption on grade from 11,2 g/t (original plan) to 14 g/t based on the August 2 update (KE Report update QH here: https://www.kereport.com/2023/08/02/lion-one-metals-wall-sampling-results-yielding-higher-grades-at-the-tuvatu-mine-what-does-it-mean-for-future-mining-expansion/ ) where QH called grades considerable higher, following on the April 26’th update. Not only is the grade higher, but as the veins are not as narrow as expected (the fractures extend well below the lodes) there is a lot more ore available than was planned, which could have a significant impact on the mineralized tonnage in QH’s words. QH: “The channel samples are almost universally coming back as 10+ g/t gold. This is in the wall, next to the material that was mined.” So we have tonnage at planned grades next to the material that was planned to be mined. QH mentioned that the grade control drilling has given the company extraordinary comfort in April already. The underground access has enabled the company to go from wide spaced drilling from surface to tight spaced drilling from underground. QH estimated a significant boost versus the updated PEA of 20/30% improvement in grade and an improvement in width, see https://www.kereport.com/2023/04/26/lion-one-metals-high-grade-results-at-the-urw1-lode-at-tuvatu-continuing-to-guild-initial-mining/ around the 6:30 mark. But now, as we’ve come a long way from those April remarks (and had lots of infill drilling!), we seem to be looking at close to a double of the grade. So I will stick to my high teens assumptions I made earlier just after the last PH interview and will bump the initial grade up to 17,5 g/t which is more than a 57% increase from the initial grade planned.What is now interesting is to see how this will impact the economics of the project. I will refer back to the numbers from the updated PEA. Rember this was published April 29’th 2022.
At this point in time, a lot of the equipment for the now completed plant had already been ordered. So I wonder how much cost overruns we will see versus these estimates. Keep in mind that the mine plan above is different from the plan we are now following. At 1,000tpd and 90,4% availability (new PEA number) we get about 330,000 tonnes mill feed. But we are not starting out at 1,000tpd but at 300 tpd. From an NPV perspective that negatively impact the plan because we’ll be getting more ounces later in the minelife instead of earlier. This seems to be compensated for by grade and mine life in spades. By mid 2024 we’ll be at 500tpd and where the original plan had a grade of 7,42 g/t we’ll see more than double and should be above the Year 1 target on an annual run-rate. Important here is that the pick-up in grade will very likely allow for a considerable pick-up in revoveries from the 87% that was in the original plan, see my comparison with Macasa and Fosterville that are both just under 20 g/t grade and above 95% recoveries.But have a look at the after-tax all in cost of USD$915, which includes the initial capex. This will come down as the mine amount of gold mined will be a lot higher than 381k oz. Other costs will come down as well because the grade is simply turning out so much higher (as it seems). After my analysis above I actually wouldn’t be terribly surprised it they are able to beat those AISC and all-in costs because the leverage those grades have is huge in my opinion. Ask yourself what will have a bigger impact here, cost inflation since the new PEA or the increase in grades, consequently leading to increased revoveries and the potential multi decade mine life?Have another look at the yellow box. They were originally planning 15 g/t for 2026/2027 to recover 71k oz each year with the 500tpd. I estimate that once we reach 2026 we will be at 750tpd, based on the current fast-tracking of the 500tpd to mid 2024 (Confirmation to reach full plant design by mid 2024, begin 500tpd. Only parts needed for the upgrade are floatation plant and third ball mill with a couple million dollars all-in still needed versus the 10-15M CAD budget). Look at the grade estimate which was based on all that infill drilling SC has been doing. They were going for the high-grade top parts of the system for those two years. These are turning out to be even higher grade. If I model 750tpd at 20 g/t, which is a smaller increase than the increase from 11,2 g/t to 17,5 g/t and more inline with the high-end of QH’s April estimate, and increase the recoveries to 94% which is considerably below Macasa and Fosterville at equal grades, this “small operation” is making more in net profit than it’s current market capitalisation on an annual basis. I have not even taken the four year tax loss carry forward into account.Is your ear still on the track? Can you hear it coming…?
(20min delay)