Could not have put it better myself. Was only thinking yesterday how the company would look today if it had been run like Silver Lake with Les Davis at the helm. That is...run the operation lean and mean, relocate and refurbish second hand plants at a fraction of new plant cost, start small, be efficient and use absolute prudent capital management at all times, and have the old ,we find it, we mine it mantra.
It is almost like GRY is struggling to transition from the 'old gold economy'. The old gold economy was up till a year ago when gold prices were high and rising above $1800 oz and expected to go stratospheric. African wages and operating cost were exceptionally low. Companies were acquiring land left right and centre to grow their gold mining empire. Boards didn't have to be careful with money because capital raisings were easy and plentiful, share prices and valuations were based on blue sky, and sentiment from investors was blindingly positive. Revenue rather than profit was king. And, junior developers had to build nothing less than a 200,000 -300,000 oz pa plant to be relevant and to be in the gold company ego club.
How times quickly change. All of the above has changed including rising african wages which is negating part of the'west african advantage'. At least the GRY directors have swallowed their pride and faced reality with the smaller plant and associated less capex.
You know, what is the rush? The gold in our ground isn't' going anywhere anytime soon. It will still be there in 10 years time when prices are higher. I would put up with a 75-100k oz pa plant for the first few years if it meant that the business could get up and running with existing cash and maybe tiny debt, generate cashflow and put money in bank to incrementally increase the size, throughput and profitibility of the plant and project in subsequent years. And all still with sub 500m shares or thereabouts on issue. Small and strategic steps for the long term and bigger picture. All without having to spend huge amounts on drilling just to prove up reserves, just to enable loans from banks with crippling hedging and large shareholder dilution through equity raisings. Unfortunately I think we are past the small, high margin, incremental growth option.
And don't get me started on the attention and cash diverting 'investments' in RNS, PIR, TAW and the acquisition of Shield Mining SHX based on a few drill holes and the nearology of the massive Tasiost mine. So far the 30,000m of drilling in Mauritania has revealed zilch in feedback and results to shareholders. Very poor form. Cull and sell all but the highest priority tenements and investments as soon as practicable to enable a norrowing of focus and cash spend requirements would be my advice.
The positives though...
An ace that may advantage GRY is that they have the International Finance Corporation (subsidiary of the World Bank) as a shareholder. This may enable part of the whole debt package being very cheap and on favourable terms to GRY. Also the Banfora project at 5m oz and growing is without question of serious significance in the African space and is the next cab off the rank for development. Banfora will be on the radar of producers such as RSG that are actively looking to replace depleting current mines. I also cannot see the gold price tanking. Not whilst the problems of Europe, Britain and the US are NOT solved. The jury is still out on the China miracle. Japan ratcheting QE to stay above water. India's prediction as the next super economy a cruel joke. Iran and Israel sharpening their poke sticks. And little crazy Kym still waving and grandstanding in North Korea. We live in uncertain times unfortunately, not everything is great fairyland.
Not sure what to think from here at 36c. I was convinced that approx 78c was the bottom, then around 58c, then around 40c. Have been topping up and quick trading a bit all the way down from $1.30. Starting to think that a merger of convenience or low ball takeover offer may have to do. Maybe SLR need a third production hub and an overseas entry point. Heh heh. Can only wish. I have clearly played this hand the wrong way and have had too much faith in the 'story' rather than what the market has clearly been saying. Can't help but believe that mid 30's is an awesome entry point for new investors. But then again........
Other thoughts....?
PS. Hand on heart, swear before god type of all in production costs of any half decent west African miner is approx $1000- $1100 from reports I have read. Superstars may be we'll under. Donkeys maybe well over. But the average is not the $1500 that was posted earlier today.
PSS. Here is a link to an extremely detailed report from BMO Capital Markets on GRY from Oct 2012. Would be interested to get an updated report post-BFS.
