production estimates

I bought a few parcels of AAM today. The start of ore treatment operations signals the way to gold production in two or three weeks. It might not seem so from the market reaction today, but the risk profile of this company improved substantially with today's announcement. The company is using well established technology, startup so far has encountered only minor problems and most importantly, all licensing is now in place.

My estimate for initial production, uses the following data most of which is derived from public information.

Grade estimate 5.7g/t. Estimated reserves grade at 4g/t but the company is sorting ore into high and low grade. If their selection process is 70% efficient they will be upgrading ore to this level. Low grade ore may be stockpiled and only used when mining activity is restricted. It is unlikely that much low grade ore will be run through the plant over the first few weeks.

Plant availability 50%. I expect they will run two shifts but will need to tweak their system over the next few weeks. Even when they get it up and running, The best I assume is only ever 70% plant availability unless a company shows they can do better.

Gold recovery rate 90%. One advantage of lower throughput will be an improvement in overall leaching of gold. This recovery level is realistic provided plant design is well matched to ore characteristics.

Plant capacity 300kt/y. I am using the quoted capacity here and assuming the plant will run for 3 weeks leading up to the gold pour (ie 3/52years)

My production estimate or the initial pour is: 5.7 X 0.5 X 0.9 X 300,000 X 3/52 = 44,000g (rounded down to the nearest 1000g)

I expect they won't pour this amount first off. Some of the gold will be coarse. It is likely to settle in the cyanide tanks where it will leach over time. Some will build up on the inside of the ball mill and in other parts of the plant. Only when the plant is cleaned up will this gold be recovered.