What will the new Younami be like? Much of the discussion here is on grades of gold but you have to discuss grade in the context of costs of production. For example, high-grade gold in refractory ore may be less profitable than low grade in non-refractory earth. The problem with refractory ore is that it prevents the cyanide process working properly resulting in less gold recovery. As the original Younami mine went deeper it recovered 90% of the gold and then 80%. Then they changed the processing to add another stage which led to a higher recovery but increased the cost of production. High-grade gold ore in quartz seams may also be less profitable because you have to excavate the seam and surrounding earth thereby diluting the grade. 10g/t becomes 5 g/t if you need to process the seam plus an equal amount of earth. Shallow, open-cut mines are profitable with a much lower grade of ore than underground mines. 1 g/t mines are doing well elsewhere but they must be open cut which is what the new Younami will mostly be. The shallow generally low-grade areas such as the Plant Zone lend themselves to open cut mining and this area is low in refractory ore. The Younami 'deeps' which is high-grade 10g/t + will encounter the refractory issue but with today's POG it will still be very profitable. Of course, there is always the chance and a good chance imo that we will find another PW. I see the new Younami as a monster shallow open cut mine with grades of around 2g/t average. There will be some underground mining chasing high-grade quartz seams. The ASIC (all in costs) should be around $1200/oz making the new Younami very profitable. Using the refurbished Younami mill with its 600,000/t PA capacity the profits should be around $60m PA.
VMC Price at posting:
17.0¢ Sentiment: Buy Disclosure: Held
