Very few companies get to sample such a large number of their veins at surface so thoroughly. This is the only company I know of that has done so. Drilling has produced 1,152 mineralised intersections. That's actually quite a few hits for a vein system. Average grade NORMALISED out to 1m widths is 9.9g/t and weight of drill samples is 2.1 tonne. That was enough to come up with an inferred resource. In fact drilling was sufficient for GH and some deep parts of the WL to be classified to indicated status. However trenching is what decreases the risk by a large factor. Compared to the 2.1tonne from drilling, trenching has produced 23.3 tonne of mineralised samples and with the greater sample size comes a higher grade of 12.9g/t. This grade is also normalised out to 1m and the trenched grade result is a 30% greater grade increasing confidence in the resource grades at depth and the grades at depth may actually reconcile higher than resource grade estimated by drilling. For those not sure what normalised means; Our veins vary between .2m and several metres wide. A vein at 0.2ms and 80g/t would have the grade reduced by a factor of 5 to 16g/t over 1m to allow for mining dilution. If they can reduce the dilution, they get a higher head grade. It's possible that we see head grades averaging in excess of 10-13g/t, especially over the first year when GH is blended in.
Another GH style very high grade vein discovered in a years time could extend blending very high grades to OP's 10g/t material by another year. One more a year later and... I think you get the idea. This is a very high grade system barely touched at depths below 200ms. Who knows what lies beneath. I'm still waiting for more thorough deep exploration once the cash balance builds. There has been no need for it to date as we have still been discovering gold at surface and for now even that is only very light exploration to conserve cash until the mining begins. We have enough for a number of years mining so ne need to discover more until the cash flow begins.
Many years ago I liked the potential for RMS below their open pit resource. I gave up waiting after the MD told me he had no plans to drill deeper at the time. I sold but around a year or so later they drilled deep, discovered a much larger underground mine and the stock went from 10c in 2006 to around $2 as the resource grew. Similar story with Andean which went from an open pit near surface vein system of around 600kozs at 3g/t to a much larger underground discovery in much larger very high grade and wide veins nearby containing both gold and high grade silver. That went from 6c to $7 on the larger underground discovery.
Considering the wide spread very high grade veins at OP and nearby lower grade but much larger and different style deposit of Buccaneer, I see good potential that ABU has much more to discover both in the vicinity of OP and regionally. You can't put a price target on what is yet to be discovered. We have seen downside risk play out through the POG but we are well insulated by grade. We are yet to see the upside risk play out and I'm not just talking about a move from 3.5 to 6 odd cents that we saw last year. We should see better than that from here even without new discoveries.
We still have short term POG risk but fortunately we don't have forced insto selling brought on by investor redemptions from funds and nor do we have very high leverage to lower POG to be stressed about. Yesterday PRU reported all in costs will exceed $1100/oz and their costs are in $US. Not good with gold at $1280 with risk it may still go lower short term. How much in excess of $1100 will their costs be? Our costs are estimated in AUD and with AUD POG up at $1380 we should be on a very wide, very comfortable profit margin. That profit margin will expand if over the next few months, the AUD starts to catch up to the falls in POG.
We also now have an end to tax loss selling and first gold probably just a few weeks away. Time not to panic sell.
ABU Price at posting:
2.4¢ Sentiment: Buy Disclosure: Held
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