Initial Projections for 2020 reserves. The end of March is only 6 weeks away. It therefore seems appropriate to make initial projections for the new numbers that will be published at the end of March.
The last published numbers were distributed April 2019..... less than 12 months ago. Prior to that we only had numbers from 2016 to work with. At the time I was surprised at how little the 2016 numbers were marked down , especially on grade estimates. However reserve estimates are a bit subjective and the consultants are always under pressure to provide numbers that the client likes. Remember Strathcona / Snowden ???
The 2019 numbers totalled 16 million tonnes , at 12.6 grams per tonne for a total of 6.4 million ounces, or a mine life of 14 years. This 6.4 million was only 80% of the 8.5 million that was reported in 2016 and I am sure Joe O had some very heated discussions with Tetratech before he was forced into accepting the more realistic 6.4 million.
Of course 2019 mill heads were below 10 grams and we have now ben given initial guidance to expect around 8 grams going forward. So if the paper grade was reduced by 20% last year , and produced ounces over the last 12 months was so abysmal, I suggest that a further 30% reduction in head grade is not an unreasonable expectation.
70% . of 12.6 is 8.82 grams. Lets say 9 grams which would then allow for unexpected mining dilution and still allow new management not to overpromise
The previously reported 16 million tonnes must be reduced by the 1.3 million tonnes mined last year. But with POG up from 1300 to 1500, more 5 gram material will be brought into reserves. But offsetting that will be the escalation of costs over the last year and knowledge of practicall logistics that are now much better understood. Lets say 15 million tonnes, but this could go either way.
So 15 million tonnes at 9 grams is 4.35 million ounces or a minelife of 12 years at 350,000 ounces per year.
The bad news is this 2 million ounce drop is not going to be well recieved by institutional investors. But the good news is there is still enopugh ounces to pay of the existing loans
Intelligent counterarguments are welcome but please keep the personal abuse to yourself..