signature metals shares rise on gold zone ext, page-5

MangoMuncher

I understand your frustration. I find it difficult to understand the price movements myself.

It's perhaps possible that the Directors are seeking to underpromise and overdeliver.

The numbers are a little interesting and I haven't cut a valuation for the stock myself.

But, and I'm sure others will correct me if I have these wrong:

Initial production is projected to be 20,000oz, which I believe are understated myself, based on the plant's capacity.

If, to be conservative, we work on a gold price of US$1000.

Assume say a cash cost of US$700Oz.

We have a margin of US$300Oz.

If the plant refurb comes to say US$5M, then the pay-back on the stock will be only slightly north of 16000Oz and the plant has been paid back.

If production numbers are higher, then cash costs will comes down. Margin increases. Plant payback falls further.

Would be interesting to cut a stock valuation using these numbers. Perhaps when I have time.

Any production north of that is pure profit. That then brings opportunities to process the refractory material with free cashflow produced from the non-refractory stuff.

If the cash cost is lower, the numbers become better than that again.

For mine, and not meaning to ramp, the project seems to have a lot of potential.

I've asked around as to why the project is valued so low.

Some suggest that it's because others have picked the project over and tried to make it work.

Still others have suggested that there's a lot of refractory material there.

But, from what I can gather, there's also a lot of material that's not refractory and it's very very easy to get at and cheap to get to the plant.

Maybe levels of technical competence, in combination with a much lower gold price at the time, prevented previous owners from making it work.

I'm not saying the project is going to fly, but to me, it is certainly worth the "punt". Capital costs are very very low, and time to production is very very quick.

I guess we'll no pretty quickly whether we're onto something really good, or something that will not fly.

Here's hoping that it really flies. But as usual, no point investing unless your are prepared to do your dough...

Good luck.