I wasn't a shareholder at the time of release of the scoping study (Sep '23) but there certainly was some good commentary about at the time
Nicholas Reed -
"yesterday's scoping study gave investors their first real insight into the potential of Mandilla and they clearly liked what they saw marking the stock up some 15% to $0.082 cents, giving it a still modest market cap of around $65M and as the respected resources commentator Barry Fitzgerald wrote this morning in his column, the robust figures in the study suggest that Astral’s market cap remains underdone"We are 3X the Mcap now and expecting a pretty significant increase to the MRE due to an significant rise in the price of gold which is shifting the goalpost. Of course operating and preproduction capital costs will go up from Scoping to PFS but the price of gold is up much more and and that significantly increases margins and that cash flow enables many things (one being leverage if so desired).
I'm cutting this out of the Sep'23 Scoping Study - Mark in the corresponding Webinar makes a big point of quality of the MRE.
"The July ‘23 MRE really did set the scene for this scoping study. Theia got to a million ounces in a single open pit and importantly the Indicated ounces jumped 69% and that's really important, because from an ASX perspective, when you're putting out a scoping study it's really important to have that 70% Indicated and 30% in Inferred."Well close enough
This is why I get a little (or maybe a lot) hung up in Measured and Indicated (and not so interested in Inferred).
Let me be clear here - the ASX suggests via
ASX Listing Rule 5.16 (Disclosure of PFS results):
* A PFS must be based on Indicated or Measured Resources to support forward-looking statements on production and financial projections.
* Inferred Resources must not be the determining factor in project economics unless clearly stated and justifiedand
ASX Guidance Note 31 (Reporting on Mining Activities): I'm calling these as "best practice"
* Encourages companies to demonstrate that most of their PFS is supported by Indicated and Measured Resources rather than Inferred.
*
If Inferred Resources materially contribute to the economic assessment,
a disclaimer is required, warning that the results are speculative.Then as far as best practice of category combination 70% - 80% Measured and Indicated (M&I) MRE goes into PFS.But Why?
Because ONLY M&I can be converted to Reserves (Measured to Proven and Indicated to Probable) and "normal course" Project Finance is based on Reserves not Resources.
This MRE update is really mportant. The increase in size is going to be governed primarily by Gold Price but whether the resource can be claimed as Measured, Indicated or Inferred is primarily governed by drilling and one of the primary variables there is drill spacing.
I'm categorizing Mandilla as a "bulk gold deposit". As such, general rule of thumb for drilling density is along the lines of
* 20m - 50m spacing gets Measured
* 50m - 100M spacing gets Indicated
* 100m - 200m spacing gets Inferred
I'm not a geologist ... just going off plenty of reference cases
If I throw out a WAG for an MRE = 51Mt at 1.1g/t Au for ~ 2Moz Au contained and overall 90% Recovery to gold (1.8Moz Au saleable) and 15 year LoM for 120Koz Au annual production ... and with a net margin of $2,000/oz (LoM) that's FCF of $240M each year
then I am one happy kamper man (couldn't resist it).
What's that worth ... PV of 15 years at $240M ($3.6B) discount by 5% (its gold) ~$2,575M. Then there comes the argument of commodity price risk and who knows where that goes over 15 years ... assume someone pays 80% ... cash offer $2,060 call it $2B. And for really round numbers, assume we had to issue about 50% more shares to 2B SOI ... that's still $1.00/sh
I could have made a mistake but its broad strokes. and illustrates the importance of the MRE and Au price.
Having fun yet? Mining is hard. Risk is everywhere.
When I re-listened to the Scoping Study Webinar and what Marc had to say about the (July'23) MRE and the efforts that went into the Scoping study it gives me a lot of confidence about the upcoming MRE and what the PFS will deliver. As a reminder, and this is from Sep'23 (my highlighting)
"We've already started work on the PFS aspects and fundamentally the main aspect is continuing to improve the quality of the mineral resource estimate. We've got three dual rigs on site at the moment. We have a conditional simulation study that we'll be working on in the December quarter to look at how this ore body forms as it goes from Inferred to Indicated and then to Measured. That's going to be an important aspect and even though it's really early days, looking at the debt carrying capacity that this project is likely to deliver as we get to DFS - all of that work is already in the background and happening. Just want to quickly focus on where the additional upside exists as well. We're certainly not naive to what happens in the industry as you go from scoping study to PFS and that potential capital cost creep, but to offset that, we’re very confident that both Mandilla and Feysville has a tremendous amount of upside to actually backfill any creep that we might potentially get in the capex and even before the exploration upside there's some value engineering that we can do within the capital that we believe will deliver some cost savings to mitigate any eventual creep."and
"Kamperman is absolutely a genuine exploration target that has some real potential for the significant high grade which we can then supplement into Mandilla. To put that into context as to why that's so important is, the Mandilla project has feed for 10.8 years but within 3 years of us starting and processing, we start to feed that low-grade material bin. When you look at the scoping study, we've got four grade bins there - high grade, medium grade, low grade, and mineralized waste, and that low grade starts to come into the process plant within that 3rd year. Any high grade that we can find from an alternate ore source will actually have an order of magnitude impact on improving what are already some very robust fundamentals for the Mandilla scoping study."
and finishes with
"Just in closing, we have a high quality MRE and that is the basis for the scoping study. We have a high-quality scoping study itself and the important sections around Mining and Geotech are done to a significantly better standard than scoping - very simple Metallurgy, very simple processing, we've used assumptions for costs and revenue that are realistic - you could even argue that the revenue assumption is conservative at $2,750 for gold price. We are highly levered to the gold price - so that Orange Box in the corner sees what the project looks like at a $3,000 gold price and we're only $10 or $15 off that price today – and you can see that from that an additional $200M of free cash flow. So, very highly levered to that positive movement in the gold price and we will continue to add value with the drill bit. We have added value with the drill bit over the last three years and we certainly plan on keeping that going."
that is why this upcoming MRE is so so important. This is what we have now:
Can we get it to 50Mt+ and 2,000Koz Au contained metal ... only 25% more tonnes and 33% more Oz (the higher grade also) such that the PFS has the optionality desired.
(20min delay)