Let's not forget GDO have the equiv of 68 million USD value in golliath .
I think some peoples concerns are understandable as the company has taken a step which reduces clarity of returns for people who value gold stocks However,'I think a stumbling block is we have alot of deep value kind of investors in GDO that understand gold , understood the huge margins and understood the other assets and how cheap GDO is.
What's also clear, with the exception of may be a few not many of us. Understand uranium ,'resource value , how it is priced, the premium of long term contracts to spot, and importantly how these projects are funded. I will offer a few points based on my limited knowledge that may assist. I will also suggest those that understand uranium feel free to add as I am by no means an expert but the lack of discussion on the value of the uranium play is deafening. this means we assess the gold value well, the debt issues well, but miss a huge part of the value chain resulting in what I think is an overwstimation of risks and a significant underestimation of value. Uranium is sold in long term contracts and the price is at a significant premium to spot. Therefore any funding decision to build a plant will likely be done with an offtake agreement locking in cashflow and eliminating risks with the debt. In addition locking in the by product revenue locks in Locking in c ash costs for the gold. The point being that the commitment at this stage is the acquisition cost. The uranium plant commitment is likely to occur with a long term contract that locks revenue in so this commitment I don't see at a risk at all.
Another point is the treating of the ore at Harmonies plant which I assumed the charged the jV for was simply transfer pricing which ended up in Harmonies books. This costs saving is equiv To 15% or 37.5 million per annum
On cash costs also important to remember these have been worked out at current ZAR/USD exchange rate. ZAR has gone up with gold as the USD dollar falls. If the gold was to fall, it would be likely to USD increasing thus making ZAR fall. My point is as Gold has gone up ZAR gold has increased by about half. If gold was to fall , the fall in ZAR gold will also be half. Gold would need to fall by alot for the rand gold to be a problem And even if it did, there is nonrequirement for production to continue, so the comment made by some that rand gold may drag the whole company down is simply untrue. If the gold price was the drop, the focus could be to focus on producing gold and uranium and crease gold prod over the short term.
GDO I feel may offload Goliath and focus on what they have claimed is there strategic focus.
GDO Price at posting:
42.0¢ Sentiment: Buy Disclosure: Held
