Simple answer is that I don't have the level of expertise to be able to work out whether your calculations are on the money or not.
What I can contribute includes:
(1) I have asked some mates who do have expertise in this area whether BDR / MACA pass the 'sniff test' on being able to shift c. 29mtpa based on the latest equipment assessment - they have kindly provided me with some eye wateringly complex calculations and yes, it should be feasible if they are efficient and prepared for the next wet season.
I think at a strip ratio of 12.7 : 1 BDR was dreaming if it thought it could produce 170-190k oz p.a. but a strip ratio of 7.5 : 1 over the LOM (ignoring the stockpiles) could result in a 170-190k oz p.a. production at the current grades, mill throughput and recoveries.
(2) I have talked to people with geological expertise about the Tucano tenement and BDR's exploration prospects and resource / reserve conversion possibilities and I personally think that there is material upside to come from this component - i.e. they are going to convert a lot of their resources to reserves and they are going to find a lot more gold to increase the LOM.
(3) I have talked to the CFO / CEO and they confirm that the current guidance of USD $810 - 890 is still valid (which you'd expect given there is no announcement to the contrary!). Where it actually falls within this range for 2015 will, in part, depend on production levels and the BRL.
I am now, however, ignoring the 10/3/2015 announcement as 'puffery' given the subsequent lack of change in AISC guidance.
In terms of longer term prospects note that next year BDR schedules c. 209k oz production which, I would imagine, will keep the AISC low(er) as this relates to feeding the plant higher grade ore.
Longer term who knows, but with possible high grade lodes (e.g. Duckhead extension, Gold Nose, Urucum U/G) I would think a higher feed grade than the current open pit reserve is at least possible.
Also note that Urucum West and MTL are flat, shallow ore bodies with low strip ratios that assist the mining metrics and are sizable (and still open I believe). Note that in the 31/12/2015 R&R Report these ore bodies largely contributed to the addition of 285k oz of resources so they are not insignificant sources of future open pit gold.
Additionally, I would use the open pit current reserve grade of 1.77g/t and make the assumption that MACA will be able to feed the mill from this source with the low grade stockpiles only used if mining is temporarily halted (being optimistic here!).
(4) When I talked to PB late last year I asked when the plant would be hooked up to hydro and was told that it already had been. Prior to my conversation with him I had been pretty thorough with my research (it was the first conversation with PB) and I certainly hadn't seen it announced anywhere, so take that which ever way you want - I may have misheard or misinterpreted.
(5) Re the cashflow statement you mention (pg60 2014 AR); As I read it BDR is providing a reconciliation between the P&L and cash flow. As Depreciation is a non-cash item it needs to be added back to the P&L figure (amongst other items) to show the cash flow position: For the accounts you're looking at depreciation of $36.6m that was included in the P&L (reducing it) and, as it is a non-cash item, it needs to be added back to the cash flow statement.
What interests me here is that the plant will have a far greater operational / functional life than it is being depreciated over. BDR are required to match the depreciation of their plant / infrastructure with the LOM - currently only 6 years based on reserves. In this situation it is far better looking at the cash flow vs. the P&L to see the "real profit" level as it certainly isn't costing BDR $36.6m in sustaining capex to keep the plant maintained / operational each year.
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Unlike many here I am not a specialist in any of these areas, more of a generalist that has learnt some very expensive lessons that I am trying not to repeat!
My simple view of BDR is that within a sector that I believe has a lot of upside alpha for investors, I think that due to the reasons we've discussed at length BDR can deliver additional alpha if it can (i) operate to guidance, (ii) find more gold, (iii) when appropriate, become a multi-mine mid-tier operator or (iv) become prey for someone else.
Cheers
John
BDR Price at posting:
20.5¢ Sentiment: None Disclosure: Held
