what is happening on tsx to drive tgz?, page-9

Daytr

I based that assumption on the guidance they provided last year for a revised mine plan - see

http://www.asx.com.au/asxpdf/20130920/pdf/42jgz3psxd19g2.pdf

The plant they currently have can process 3.5m tonnes of hard rock ore or around 6 million tonnes per annum of soft ore.

The OJVG ore is of significantly higher average grade.

The extra ore from the OJVG will give them more scope to mix their ore sources and thereby achieve greater ore throughput at higher average grade and hence more ounces. This is what will drive average cost per ounce down.

We will know more once they have provided a revised mine plan that incorporates the OJVG ore reserve about cost parameters, but I believe given the higher level of gold production they should be able to achieve AISC a bit below USD1,000, even when accounting for the 22.5k ounce royalty for the first six years.

In the September 2013 quarter they produced 36,874 ounces at an AISC of USD1289 where the ore grade was only 1.41 grams/tonne. They would increase production by around 42% just by milling an average grade of 2 grams/tonne (ie 52,300 ounces), and this would bring the cost down to around USD910/ounce, assuming all else being the same. If you add on top of this further cost reduction from producing more ounces because of softer ore than I think they could easily go under USD1,000/ounce even when you include the new royalty payment.

However, TGZ has promised a lot in the past (especially on the exploration side) and failed to deliver. They have been more of a survivor than a thriver in the past.

I suppose The market will wait to see improvements before the share does much, unless the POG rallies.

loki