OREA Release IssuesInteresting release, stands to seriously increase the value of Montagne d’Or to OREA in terms of their inground value. Kudos to management for convincing NG to transfer their asset to OREA. NG must have realized their legal challenge for damages against France was dead in the water. Their potential backend payment (US75 mill) looks to be around a 50% premium to their sunken costs.
A recent post suggested how complex and interesting this gold stock is; I agree and suggest that this is now even more the case.
Some thoughts on aspects of the OREA release (my underlining).
Orea Secures 100% of 5 million Ounce Montagne d'Or Gold Deposit “…Orea has now signed a deal to control 100% of that project, and is planning to carry-out updated economic studies with current inputs, to determine what will certainly be a much higher NPV at significantly higher current gold prices of over US$1,700” … Even at US $1,600 that would be a 33% increase on the original BFS. Most recently, we know NG valued their 55% at around US$4.5 bill’. This suggests the entire project has a value of approx., 8+ bill’. NG likely produced this valuation in 2020. It was intrinsic to the NG complaint made to the French court re., their French Russian Investment Treaty case.
These numbers were probably based on an updated BFS that included new gold prices, never released NG infill drill results and the cost savings of the most advanced gold mine design to date, etc. Anything less than an up-to-date databased valuation would have been shot down in the court. So, however you view it, OREA now has some serious P&P gold in the ground.
“…Consideration is entirely at the back-end, whereby Orea will only be obligated to pay Nordgold CAN$100 million, when Orea receives all permits and authorizations, necessary for construction of a mine that produces a minimum of 100,000 ounces of gold per year” … The statement suggests that back-end remuneration for NG only comes if OREA achieves the permits, etc., from France granting the actual mine. However, this raises the question of what happens if e.g., OREA sells the project to another miner willing to take the chance on Montagne d’Or over the much longer run (e.g., after Macron – I am not going into the Macron issue again here)? Or, if France itself agrees to buy the project to hold it at its own behest? Surely NG has factored in these two possibilities, both of which can see the ‘required’ mining permits not yet having been sought or not yet having been decided upon. How would NG's remuneration be impacted? Likewise, how would the royalites that PT outlined come into play in such scenarios' (FG production taxes would clearly have no bearing in these events).
Further, are OREA shareholders to assume that NG has, in fact, given over all its IP regarding their new project valuation data/reports, etc., for Montagne d’Or, including the new mine design? This transfer is not mentioned specifically in the OREA release. However, I think this must be the case and I refer to the words
"current inputs" included in the first quotation.
Otherwise, we are talking both very serious money and time for OREA to produce all such required mine permit application and design documentation; all of which must be submitted to France for permit consideration. NG submitted zilch.
“…Orea also reports the departure of Rock Lefranois, President & CEO. Mr. Lefranois recognized that the foreseeable months ahead for Orea would be focused on legal engagement and government matters, rather than on the geological and mining endeavors that he can provide more value on”... Another concern, the CEO is leaving. This type of management change often happens in small explorers. However, the issue is in relation to the CEO’s leaving; it seems OREA agrees with his perception that the company focus for the “foreseeable months ahead” is now on legal, etc., matters; not geological and mining activity.
OREA is already out of Maripa to focus on Montagne d’Or in FG. What is to happen to the Suriname project which is all about exploration activity? Will OREA drop this project, continue it, despite the sentiment in this release, or will we see a move to spinoff Suriname, maybe with the former CEO involved? Again, an important question for those with a longer term view of OREA.
Again, I agree that OREA is an intriguing gold story; more so now and with no doubt more surprises to come.
GLTA -
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