I have been wanting to do this thread for a while as it ties...

I have been wanting to do this thread for a while as it ties together the potential gold price trajectory as we move into a multipolar world as well as fleshing out the production potential. I have named it after St Ives and Stuart Mathews. A few high level comments.

• Gold Price, A$8,000/oz is based on Michael Oliver forecast of US$8,000/oz and is benchmarked against higher forecasts in the US$10-15,000/oz. I have also assumed a weakening of the US$. Clearly this is either a huge forecast or simply estimating the direction we are heading with a multipolar world, a more dominant BRICS and a move back towards sound money. Will these forecasts eventuate, who knows, its just a forecast, an upside forecast in my mind for gold. It helps keep me centred.
• Mining Production - I rely on the new strategy kicked off last year where the focus moved to underground. On the back of Pauls comments that he is targetting at least 2 new underground mines. Given that Norseman has the benefit of existing declines and underground infrastructure I have sequenced new mines as 400ktpa additions. I count PNR as having 3 already, Scotia (2 declines), and OK. Mainfield and Viking are likely to be next followed by another, I have assumed either Princes Royal or Gladstone. The bulk of the near term Open Cut tonnage will come from Gladstone, circa 2.5Mt. This will help in building the stockpiles ahead of the Mill expansion.
• Grade - A 4.2g/t assumes realistic grades for underground with some Open Cut top up diluting the overall grade delivered to the Mill. A similar Overall Gold output could be achieved with smaller Mill/s and a greater focus on underground, again this is just a scenario.
• Gold production - I have followed Company Guidance to 2028 but consider that the extra cash they have now could set them up over the next 2-3 years to continue the growth trajectory to a production rate more equivalent to the amazing resource endowment they have at Norseman. The total production to 2040 is only slightly higher than the current resource base, at 5Moz.
• Capex - I have ramped up the capex to allow for Mill expansions/new Mill
• Opex - I have allowed for higher opex to take into account cost inflation, even though economies of scale will help mitigate these.
• Valuation - The valuation lifts from $4.66 to $5.06/share on a CF multiple basis compared to my previous base case. On a DCF Basis it lifts from $8.79 to $20.09/share. By 2030 the valuation between the 2 metrics normalises at circa $29/share. If you assume flat gold prices the valuation basically halves to circa $14/share.
• Summary - We have a tiger by the tail here. Management have had their fingers burnt with the initial focus on Open Cut. They are now debt free, plenty of cash in the bank. They have heaps of drill rigs on site with a generous budget. The Underground operations are delivering to plan and the refurbishment of the first of the Mainfield areas is underway. They also have Stuart Mathews on the Board who has overseen the growth of St Ives to similar output levels. The question you need to ask is why wouldnt they follow this type of growth profile. They have cash in Bank, Gold price is strong, Paul has his shares. To me it is the most likely path that they could follow. By way of background I am not a total nube as I started my Equities career as a Gold analyst with Deutsche Bank in 1995. I moved out of Gold into Infrastructure with a tanking gold price. It was circa US$250/oz at this time. How times have changed. I have not done this to influence anyone, it was for my own investment purposes. Good luck Punters.
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