extract from The Gold Report.....TGR: Can you give us some names...

extract from The Gold Report.....

TGR: Can you give us some names in the Survivor category with market caps in the $200M range?

BA: We don't have many at that market cap. The closest would be Teranga Gold Corp. (TGZ:TSX; TGZ:ASX).

TGR: Teranga recently acquired Oromin Explorations Ltd. (OLE:TSX; OLEPF:OTCBB). What are your thoughts on that merger?

BA: It was long overdue. At a $1,000/oz gold price, Oromin's project should not proceed on a standalone basis. It makes good sense for Oromin to blend with Teranga and use its infrastructure to process the Oromin ounces. The merger is accretive by any measure and is a good move by Teranga and Oromin.

Of course, there will be issues to deal with, including the other joint venture partners in the Oromin joint venture group.

TGR: What are the cash costs?

BA: We haven't seen those yet, post-merger. The whole dynamic will change.

All upfront capital costs will be avoided, in the range of $350 million. There is no need to build a mill, so upfront capital costs will trade off against the costs of transporting the material to the Teranga mill. Overall it will be positive.

If I were to speculate, it might mean slightly higher than average operating costs compared to the Oromin feasibility study, but upfront capital costs will be limited. No matter how you cut it, the overall economics should be substantively better.

TGR: How about with Survivors with a market cap below $1 billion?

BA: Primero Mining Corp. (PPP:NYSE; P:TSX) is an example. Its rate of return on the newly acquired Cerro del Gallo project drops below 10% on an internal rate of return basis. Primero would have to restructure and/or rethink its project development at Cerro del Gallo. Its San Dimas mine would operate fairly well at $1,000/oz gold, but developing Cerro del Gallo would stretch the balance sheet in the short term.

TGR: Would the Cerro del Gallo project have similar cash costs to San Dimas?

BA: Unfortunately not. That's part of the issue. San Dimas is largely under control and operating quite well. But the capital burden of a new project at a low rate of return is on the cusp at $1,000/oz gold price. Ten percent is not enough to go forward. That's a heart-wrenching decision

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