Q&A... I was asked some reasonable questions abour GGN over on the SGN board. Questions and my resopnse below FYI. I don't profess to know the answers to all these questions but they are my answers based on what I know and have read re: GGN over the past few months. My opinions only. JMHO.
Thoughts?
red911
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Belgie24 questions:
Thanks Red, I took a look at the resource and read thru the MD&A filed recently. The positive is going towards production and producing gold and silver. I came up with some issues maybe you can comment on:
The ore grade seems low, .02 OPT on the 35 million tons of measured. To me this indicates a lot of ore will need to be leached to produce product, possibly leading to increased cost per oz. Upon seeing this, I want to know what the recovery rate is, as I want it to be high to offset running so much ore thru. In the MD&A, I found that 199,000 tons of ore were placed on the leach pad, containing 6223 oz of gold. However, then it is stated they expect to recover only 2800 oz of gold from this. When I compare this 45% recovery rate to the 65% that Scorpio is attaining with their operation, I am disappointed, to say the least. Again the cost per oz will be high, because of this. For comparison purposes, Scorpio Gold processed 387,000 tons grading .066 OPT with a 65% recovery rate, leading to costs per oz of $670 or so.
Next the 5% NSR royalty owed to the owners of the property and the $7 million paid to them in the form of cash, shares and debt, would seem to be a drag on the bottom line in reaching any kind of profitablitilty. Scorpio made a big deal out of paying off an 8% NSR outright on Mineral Ridge, as being critical to the project going forward. Adding uncertainty, I found a lawsuit filed for breach of contract on royalties on 1/31/12 by the owners.
The CEO resigned on 2/3/12, another unsettling event.
What do you think, are these valid concerns?
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My response:
Great post Belgie24. For someone who supposedly didn't know GGN had a NI 43-101 resource you have, rather quickly, processed a significant amount of information re: GGN. Amazing. Re: Grade... They are currently re-leaching and did have some startup issues. 45% recoveries on re-leach is quite standard and as planned. Post-startup issues, which are now resolved, costs for re-leach are very low which make up for low grade. Right now they are scooping up existing heaps and dumps, crushing, and placing on leach pad... very cheap. Pre-feasibility estimated costs per oz of 400 for this stage. As I have said after their first month of real startup production they are cash flow positive. Quite the accomplishment for processing heaps and dumps IMO. All other oxide resources are at or near surface and grades are quite economic. Several other oxide targets identified to drill that should dramatically increase near-surface oxide resource in short order. The real story here concerns the sulphide resource. See previous Graben intercepts... 76m of 0.44 oz/t for example. There is technology to process these high-grade sulphides very economically. FYI GGN is now quite possibly internally funded to explore this entire property. BTW recoveries are expected and will increase significantly when they move to mining operations... likely well beyond 65% SGN is currently achieving.Re: NSR... 5% NSR is quite standard and the cash and shares issued to achieve it have largely been incurred. Nothing out of the ordinary here. Although it hasn't been formally announced by GGN according to Waterton website, the recent debt deal was completed to satisfaction of landholders. This senior secured deal would not have been possible if litigation still hung over their heads. The landholders have always been cooperative and this has been resolved IMO.Re: CEO resignation... FYI his son was GM of the mine. Apparently they did have startup issues last year and CEO and son had to pay the price. Some have speculated this was a setup etc. Either way they are back on track and their new CEO has a reputation for his heap leach expertise in Nevada.GGN is a gold producer generating cash flow that will finance drilling to expand resource. They already have almost 2.5M oz Au and many have speculated Borealis could easily be a 5? 10? M oz deposit. There has been very little drilling beyond that which was required to outline existing 2.3M oz Au yet there are several targets some of which are several times larger than known gold bearing structures.>