Upcoming Quarterly and Beyond

It’s been abit quiet in here so here’s a new thread for us to share some thoughts andtheories until the quarterly comes out at the end of the month. I’ve distilledmy thoughts into this rather long missive, so my apologies in advance.

Mining at theGreenfields open pit has largely been a disappointment in terms of both tons,and grade, falling short of the mine plan from 2022. By my estimates 40Kt wasmined in April, plus 60Kt stockpiled from the previous quarter for a total of100KT through the mill at around 1.15 g/t. This comes to about 1150Kt mined Vs1830Kt in the mine plan (30% miss). Recovered grade I haven’t calculated, butsuspect it would be closer to 0.9g/t Vs 1.1g/t in the mine plan (20% miss). Themining rates appeared quite slow with the pit running 3 months over, so perhapsthe contractor (sacked in January) may be responsible for some of the dilution,but the MRE may also have been overly optimistic.

They aremining Alicia and Dreadnought concurrently from May at 400K BCM per month,which equates to over 3Mt per quarter, which is much faster than Greenfieldswas mined. I can’t find a reference for the strip ratio of these pits, sounless it’s greater than 10:1 these pits should be able to keep the mill filled,perhaps even start building a stockpile, as BVUG ramps up and starts making ameaningful contribution later this year. We can perhaps also infer that we haveenough of our own ore to fill the mill going forward, from the fact that bothAWJ and HRZ who have toll milling parcels going through our mill (AWJ)currently, and (HRZ) October, have had to send future parcels further afield tothe Lakewood mill for AWJ, and to the Paddington mill for HRZ. I also note thatLEX is struggling to find a processing slot for its ore, post its 80Kt parcel goingthrough the FMR Greenfields mill next door to us in February.

BVUG had600 metres of development by the end of last quarter, and over a 1000 by theend of May, implying rates of around 200 metres a month. I understand industrystandard is around 250-320 metres per jumbo per month, so maybe it’s justreally hard ground slowing them down. They state in the AGM presentation that developmentis ahead of schedule so we have to assume all is good on that front. Wetherefore should have over 1300 metres of development by now (if still only 1jumbo) and should be down to the lowest points in the development plan, whichties in with the planned drill drives going in this month. I’m looking forwardto seeing what some more drilling at depth can add to the inventory and minelife. The mine plan proposes mining at 40Kt per month when fully ramped up, I’massuming we’ll require mobilisation of a second and possibly a third jumbo tomine at these rates?

Prior to the most recent June quarter the mill has been running above 1.2Mtpanameplate for 4 consecutive quarters, with greatly improved recoveries above92% for the past 2 quarters, and hopefully they’ve been able to continue thatreliable performance into the June quarter. My production guestimates for thequarter are 100Kt Greenfields @ 1.15g/t, 75Kt Alicia/Dreadnought @ 1.10 g/t(conservative grade - should improve with depth), 30Kt of BVUG development ore@ 3.0g/t, and maybe up to 150Kt of toll treatment ore from third parties. Theblended grade of our own ore would be about 1.4g/t producing around 8000ounces. If the BVUG/Alicia/Dreadnought component is higher and third party orelower, that improves the bottom line further. 8000 ounces @ $5125 + tolltreatment $$ = approximately $49M total revenue.

The Aprilquarter had OPEX + CAPEX of around $50M, but with some major infrastructurespend completed that quarter (camp expansion, BVUG infrastructure etc), and netinterest expense of over $2M a quarter now maybe positive post the Lavertonsale, this number may actually be lower for the June quarter and we may haveachieved positive cashflow!

If myassumptions about processing 100% our own ore after October are correct weshould be looking at a blended grade of approximately 2.0g/t when fully rampedup, and throwing off $30M in free cashflow per quarter at a conservative $4300per ounce, or $50M at spot!

As percapital management, I was also thinking along the lines of us purchasing the Burbanksdeposit from HRZ, but I’ll credit @stumpytrunks for mentioning it a little whileback. This would give us another large low cost open pit with an undergroundcomponent to further diversify our ore sources. Combine these multiple oresources with a mill expansion to 1.6-1.8Mtpa and we’d be seriously profitable.We should be net cash at least $50M currently, so Burbanks @ $70 per ounce =$35M, and the mill expansion another $15M - $30M (help on these costings please),should be easily achievable from existing resources and mine cashflow withoutneeding to raise any further debt or equity. Sorry, I’m probably getting wayahead of the game here!

With themill reliably exceeding nameplate, and open pit mining rates apparently sufficient tofill the mill, my biggest concerns going forward would have to be gradereconciliation of the open pits particularly, and less so BVUG as I’ve modelled it 20% below reserve grade, and any development /ore body complexities at BVUG slowing the ramp up to full commercial production.

I’m happy to be corrected by others more knowledgeable than myself. I just wanted to summarise where I think we’re at, and would be interested in others thoughts, numbers, opinions and wild assumptions, as you’ve just spent a couple of minutes of your life you’ll never get back reading mine!!